The Regional Impacts of a CES
ME G H AN MC G U I N N E S S
R F F C L E AN E N E R G Y S T AN D AR D WO R K S H O P
JULY 27, 2011
THE REGIONAL IMPACTS OF A CES
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About the Bipartisan Policy Center
The Bipartisan Policy Center (BPC) is a non-profit organization
that was established in 2007 by former Senate Majority Leaders
Howard Baker, Tom Daschle, Bob Dole and George Mitchell to
develop and promote solutions that can attract public support and
political momentum in order to achieve real progress. The BPC
acts as an incubator for policy efforts that engage top political
figures, advocates, academics and business leaders in the art of
principled compromise.
THE REGIONAL IMPACTS OF A CES
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The BPC Energy Project
On April 12th, BPC launched its new Energy Project led by former
Senators Trent Lott, Byron Dorgan, former National Security
Advisor General Jim Jones (ret.), and former EPA Administrator
William Reilly.
Project Goals
• Encourage substantive, bipartisan dialogue among key interest
groups and decision makers on national energy goals and
strategies;
• Engage and shape near-term (pre-2012 election) energy policy
agenda.
• Develop consensus recommendations to guide national energy
policy post-2012 elections.
THE REGIONAL IMPACTS OF A CES
The Administration’s CES Proposal
– Achieve 80% of electricity from “clean” energy by 2035
• Renewables, nuclear, coal with CCS, and “efficient natural gas”
– Few details, but includes the following goals:
•
•
•
•
Promote efficiency through complementary policies
Protect consumers
Ensure regional fairness
Promote development and deployment of new technologies
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THE REGIONAL IMPACTS OF A CES
Overview of BPC’s CES Analysis
– BPC has conducted analysis of a CES consistent with the
President’s proposal, using ICF International’s Integrated
Planning Model (IPM®)
• Assumes eligible resources consistent with existing CES proposals
(renewables, nuclear, and coal with CCS), as well as incremental
and new natural gas combined cycle generation at 0.5 credit
• Assumes gradual increase in CES requirement through 2035
• No alternative compliance payment
• Efficiency not included as an eligible resource
– Where possible, treatment of existing generation based on earlier
CES proposals
– Included a sensitivity case that reflects forthcoming EPA
regulations, as well as a low gas price case
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THE REGIONAL IMPACTS OF A CES
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Definition of qualifying resources and treatment of existing
generation has distributional implications
– BPC assumes credits are awarded to technologies as follows:
Technology
Solar, wind, geothermal,
dedicated biomass, and
other non-hydro renewables
Biomass co-firing
Hydropower/MSW
Advanced coal with CCS
Nuclear
Efficient Natural Gas (NGCC)
Treatment Under BPC CES
Existing and incremental/new
Existing and incremental/new
Existing excluded from baseline;
credit for generation from
incremental /new capacity
New or retrofit
Credit for generation from
incremental/new capacity
Credit for incremental generation
(above baseline levels) and new
capacity
Key National Results
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Projected Generation Mix, 2020 and 2030
5000
4500
4000
Other
Dedicated Biomass
3000
Other Renewables
2500
Wind
Hydro
2000
Nuclear
1500
Other Oil/Gas
CT
1000
NGCC
500
Coal with CCS
0
2020
2030
CES_EPA
Reference Case_EPA
CES Low Gas
CES
Reference Case 1
CES_EPA
Reference Case_EPA
CES Low Gas
CES
Biomass Co-firing
Reference Case 1
Thousand GWh
3500
Conventional Coal
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Projected CES Credit Price
8
7
6
2010 cents/KWh
5
CES
4
CES_EPA
CES Low Gas
3
2
1
0
2013
2015
2017
2019
2021
2023
2025
2027
2029
Regional Impacts
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Net Credit Position by Region, 2020
200,000
180,000
160,000
CES Generation (GWh)
140,000
120,000
Biomass
100,000
80,000
Other Renewable
Wind
Nuclear
60,000
NGCC
Biomass Cofiring
40,000
20,000
-
CES Requirement
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Net Credit Position by Region, 2030
200,000
180,000
160,000
CES Generation (GWh)
140,000
120,000
100,000
Biomass
Other Renewable
Wind
80,000
60,000
40,000
Nuclear
NGCC
CCS
Biomass Cofiring
CES Requirement
20,000
-
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Cumulative Coal Plant Retirements, 2030
20,000
18,000
16,000
14,000
MW
12,000
10,000
8,000
6,000
4,000
2,000
-
Reference Case
CES
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Cumulative Capacity Additions, 2030
45,000
40,000
35,000
30,000
25,000
MW
Biomass
20,000
Other Renewable
Wind
15,000
Nuclear
NGCC
10,000
5,000
-
Coal with CCS
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Electricity Price Impacts will Depend on a Number of Factors
– Electricity market structure
• Cost of service regions: depends on change in production costs
and net credit position of the region
• Competitive regions: depends on impact of clean energy premium
relative to change in marginal cost of generation
– Mix of existing generation resources
– Market and physical conditions for further clean energy
development
– Note that electricity price impacts under a CES will tend to be
equalizing, i.e., smaller changes or decreases in regions with high
prices, and larger increases in regions with low prices
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Projected Retail Electricity Price Impacts
Region Name
Northeast
Mid-Atlantic
Southeast
Florida
Gulf Coast
Southern Plains States
Midwest
Upper Midwest
ERCOT
WECC
California
Total US
NERC Region
NPCC
RFC in PJM
SERC (non-Delta)
Florida
SERC Delta
SPP
RFC (non-PJM)
MRO
TRE
WECC (nonCalifornia)
California
Continental US
Regulatory Status
Mix
Mix
Regulated
Regulated
Regulated
Mix
Mix
Regulated
Competitive
Regulated
Regulated
Mix
Projected Average Rate Impact
2013 to 2020
2013 to 2030
-3%
7%
6%
1%
7%
1%
7%
-6%
-2%
-4%
6%
8%
0%
9%
2%
8%
-4%
-5%
1%
2%
-7%
1%
-7%
1%
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Alternative crediting approaches could reduce regional
disparities
– Remove existing renewables from the baseline?
– Vary percentage targets based on current generation mix?
– Credit more existing clean energy generation (i.e., nuclear or
NGCC)?
– First two alternatives may be seen as penalizing renewable energy
investment; crediting existing nuclear likely to be controversial
Given the CES target proposed by the Administration, difficult to
avoid disproportionate impacts on coal-intensive regions
BPC is conducting additional analysis on CES design and
implications for regional impacts
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Clean Energy Generation Resources by Region, 2009
500000
450000
400000
350000
GWh
300000
250000
Other
Solar
Geothermal
200000
Biomass
Wind
150000
100000
Hydro
Nuclear
NGCC
50000
0
Source: EIA. Clean energy defined in accordance with President’s proposal, including 0.5 credit
for gas
For more information:
http://www.bipartisanpolicy.org/sites/default/files/CES_paper_revised.pdf
Extra Slides
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Relationship between total clean energy goal and CES
Requirement
Year
2013
2015
2020
2025
2030
2035
Total Clean Energy Goal
45%
50%
55%
60%
70%
80%
CES Requirement
11%
16%
23%
29%
40%
50%
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Overview of Scenarios Analyzed
•Reference Case 1: Reference case with most electricity market assumptions
based on AEO 2010. Reference Case 1 contains the Clean Air Interstate Rule
(CAIR) but does not contain any national level GHG, air toxics, or ash and
water regulations. It also contains state renewable portfolio standards and
state air quality regulations affecting the power sector.
•CES: This scenario contains a CES consistent with the President’s targets,
implemented with electricity market conditions as specified under Reference
Case 1.
•CES Low Gas: This scenario is the same as the CES case, except that the
price of natural gas is assumed to be $1.00 per mmBtu lower over the model
time horizon than the projected price in that case.
•Reference Case_EPA: This case expands Reference Case 1 to capture the
potential impacts of forthcoming EPA regulations that will impact the power
sector (CATR, MACT, 316(b) coal ash residuals).
•CES_EPA: This scenario implements the CES discussed above on top of
electricity market conditions as specified in Reference Case_EPA.
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Projected CO2 Emissions
3,000
2,500
2,000
MMt CO2
Reference Case 1
Reference Case_EPA
1,500
CES
CES Low Gas
CES_EPA
1,000
500
0
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029