EPRI PRISM 2.0 Environmental Controls
Analysis with REGEN
Victor Niemeyer, EPRI
RFF Modeling Workshop on Regulatory Impacts on the US
Electricity Sector
Washington, DC
July 19, 2012
Contact Information
Bryan Hannegan
Vice President, Environment and Renewables
Electric Power Research Institute
(650) 855-2459
bhannegan@epri.com
Energy and Environmental Analysis Group
Tom Wilson
Senior Program Manager
(650) 855-7928
twilson@epri.com
Victor Niemeyer
Technical Executive
650-855-2262
Niemeyer@epri.com
Geoffrey Blanford
Program Manager
(650) 855-2126
gblanford@epri.com
Francisco de la Chesnaye
Program Manager
(202) 293-6347
fdelachesnaye@epri.com
Together…Shaping the Future of Electricity
© 2012 Electric Power Research Institute, Inc. All rights reserved.
2
US-REGEN Model Description
Pacific
NE-Central-C
Mountain-N
NW-Central
NE
NY
M-Atlantic
NE-Central-R
California
S-Atlantic
Mountain-S
SW-Central
Texas
© 2012 Electric Power Research Institute, Inc. All rights reserved.
SE-Central
Florida
3
US-REGEN Model Description
Pacific
General
Equilibrium
Mountain-N
Economy Model
NW-Central
Energy Demand
(Electric & NonElectric)
California
Mountain-S
• Energy Markets for Oil, Natural
Gas,
Coal, & Bioenergy
NE-Central-C
• Foreign Exchange
NE
NY
• Landuse (Ag and Forest)
M-Atlantic
• Energy Efficiency across
Commercial, Industrial, &
Residential Sectors
NE-Central-R
• Transportation: Detailed model of
vehicle technologies and
intermodal choices S-Atlantic
SE-Central
SW-Central• CO2 Mitigation
Technologies
Electric Sector
Module
Texas
© 2012 Electric Power Research Institute, Inc. All rights reserved.
• Aggregate Economic
Representation
• Environmental Controls: Air,
Water, Land
• Transmission
Florida
4
Integrated Analysis of Retrofit Decision in Light
of Full Set of Air (non-GHG), Water, Ash Policies
• Full Control policy (stringent control for SO2, NOx, Hg,
cooling, and CCRs, but no CO2)
• Assume asset owner makes single retrofit-retire decision in
2015 based on full mix of requirements.
• Retrofit cost scenarios reflect cost and policy uncertainty
– High
– Ref
– Flex
© 2012 Electric Power Research Institute, Inc. All rights reserved.
5
Scenarios Represent Uncertainty Ranges in
Costs for Technology, Policy, and Escalation
4,000
High
Ref
Flex
3,500
Control Cost ($/kW)
3,000
2,500
High (Current) scenario represents little
technology flexibility, and real cost
escalation driven by demand for retrofits
Flex (Alternate) scenario represents
availability of lower cost technologies
and policy flexibility to apply them,
lower escalation in retrofit costs
associated with extra time for MATS
and Ozone compliance
2,000
1,500
1,000
500
0
0
50
© 2012 Electric Power Research Institute, Inc. All rights reserved.
100
150
200
250
Cumulative Generation Capacity (GW)
6
300
350
Cost to Retrofit Entire Fleet Uncertain but
Several $100 Billions
© 2012 Electric Power Research Institute, Inc. All rights reserved.
Expenditures to Retrofit All Existing Coal
300
250
$ Billions
• Chart show investment cost to
retrofit entire existing fleet (sum
of unit costs input to model)
• Existing coal
– 316 GW
– 40% of electric supply
– 1,100 generating units
– Diverse size/age mix
• Age, size, and market impact
retrofit/retire decisions
• Many units poor candidates for
environmental retrofits
• ~ 40 GW of coal retirements
announced to date
200
Ash
316b
150
Hg
NOx
100
SO2
50
0
Ref
7
Flex
High
Disposition of Existing Coal in Ref Scenario
350
GW Existing Coal Capacity
300
250
Age Retire
200
Retire/Refuel
Env Retrofit
150
Base
100
50
0
2010
2015
© 2012 Electric Power Research Institute, Inc. All rights reserved.
2020
2025
8
2030
2035
Regional Coal Disposition in Ref Scenario
Age Retire
Base
Retire/Refuel
100
100
100
75
75
GW
GW
125
50
50
25
25
0
2010
2015
2020
2025
2030
2035
0
2010
MIDWEST
75
50
25
0
2010
2015
2020
2025
2030
2035
2030
2035
SOUTH
125
100
2015
2020
2025
2030
2035
GW
WEST
125
EAST
125
GW
Environmental Retrofit
75
50
25
0
2010
© 2012 Electric Power Research Institute, Inc. All rights reserved.
9
2015
2020
2025
U.S. Distribution of Pay-offs for Retrofits of
Existing Coal in Ref Scenario
350
Continued operation
in question (on bubble)
GW Existing Coal Capacity
300
57
250
2
18
0
8
> 15-year payback
200
10 - 15 year payback period
Retrofits
150
227
100
Strong economics
supporting retrofits
50
0
Retire/Refuel
5 - 10 year payback period with
IRR in first 10 years < 15%
5 - 10 year payback period with
IRR in first 10 years > 15%
<= 5 year payback period
Already in compliance
5
© 2012 Electric Power Research Institute, Inc. All rights reserved.
10
How Much Coal Capacity Might Convert Fuel or
Retire Early?
GW Retired/
Refueled
Flex
Ref
High
If require
NPV of 7%
25
57
61
If require payback
of <10 years
27
66
76
© 2012 Electric Power Research Institute, Inc. All rights reserved.
11
Sensitivity Analysis on Natural Gas Prices
$10
$9
Gas Price ($/MMBtu, 2009$)
$8
$7
+$2
$6
+$1
Ref
$5
-$1
$4
-$2
NYMEX (2009$)
$3
$2
$1
$0
2010
2015
© 2012 Electric Power Research Institute, Inc. All rights reserved.
2020
2025
12
2030
2035
Gas Price Scenarios Show Critical Role of Gas
Price Expectations for How Much Coal Survives
350
GW Existing Coal Capacity
300
250
Age Retire
200
Retire/Refuel
Env Retrofit
150
Base
100
Disposition of existing
coal capacity in 2020 by
gas price scenario
50
0
-$2
-$1
© 2012 Electric Power Research Institute, Inc. All rights reserved.
Ref
+$1
13
+$2
GDP Impacts Show Magnitude of Costs and
Opportunity in Flexibility
GDP Loss 2010-2035 (PV B 2009$)
300
250
200
150
100
50
0
Ref
© 2012 Electric Power Research Institute, Inc. All rights reserved.
Flex
14
High
Note That Total GDP Impacts ~25% Greater
Than Increased Cost to Electric Sector
Flex
300
GDP Loss
Electric Sector Cost
Costs 2010-2035 (PV B 2009$)
250
200
150
100
50
0
Ref
© 2012 Electric Power Research Institute, Inc. All rights reserved.
Flex
15
High
U.S. Electric Sector CO2 Emissions
2.5
Billion tonnes
2
History
1.5
Baseline
Flex
Ref
1
High
0.5
0
1990
1995
2000
2005
© 2012 Electric Power Research Institute, Inc. All rights reserved.
2010
2015
2020
16
2025
2030
2035
U.S. Electric Sector SO2 Emissions
16
14
Million tonnes
12
10
History
Baseline
8
Flex
Ref
6
High
4
2
0
1990
1995
2000
2005
© 2012 Electric Power Research Institute, Inc. All rights reserved.
2010
2015
2020
17
2025
2030
2035
U.S. Electric Sector NOx Emissions
8
7
Million tonnes
6
5
History
Baseline
4
Flex
Ref
3
High
2
1
0
1990
1995
2000
2005
© 2012 Electric Power Research Institute, Inc. All rights reserved.
2010
2015
2020
18
2025
2030
2035
Concluding Observations
• Economic cost of full control policy is $175B to $275B (PV 20102035) with bulk of policy costs near-term
• Cost range driven by ability to deploy low-cost technologies,
which may require policy flexibility and extra time to assess
• Cost impacts greatest in high-coal regions
• Compliance decisions dependent on gas price expectations
• 50 to 100+ GW of coal may retire or convert fuels
• Most of existing coal continues to play key role
• SO2/NOx emissions drop to less than 30% of 2010 levels
• If emission reductions phased in over an extra two years the
relative impact on cumulative emissions is modest
© 2012 Electric Power Research Institute, Inc. All rights reserved.
19
Together…Shaping the Future of Electricity
© 2012 Electric Power Research Institute, Inc. All rights reserved.
20