Reducing U.S./WI GHG emissions through the Clean Power Plan:
Over-estimating costs and under-estimating risk.
Gary Radloff
Director of Midwest Energy Policy Analysis
University of Wisconsin-Madison
January 9, 2015
Key Themes
• Today, Wisconsin has highest energy costs
under status quo business-as-usual
• Long-term risks with total fuel switch to natural
gas
• Savings can be realized by using greater energy
efficiency measures starting today
• Savings can be realized by using more
renewable energy starting today
• Clean Power Plan is the best U.S. opportunity
for improved energy efficiency and clean fuels
WI Leads US in nominal increase by Percent Avg
kWh price 1997 -2013 (Lesser & O’Connor Electricity Journal)
Natural Gas is not silver bullet energy
solution and fails sustainable test
• What is the real supply? How does that
balance with the demand?
• What is the cost on the global market?
• Environmental challenges with water and
location. Large Infrastructure investment.
• Even with more sources is it a wise idea to
waste it?
• Remember the US “wasted” its dome oil.
We Don’t Know the Future Costs?
Natural Gas: How much really?
$130 B to $ 210 B Infrastructure Needs
Source Interstate Natural Gas Association of America
Natural Gas Environmental and
Economic Risks
• Methane Emissions Higher Than EPA
Estimates
• Methane Leakage Across the Supply
Chain Higher Than Once Thought
• GHG Reductions Less Than Current
Claims
• Too much water usage and an
unsustainable solution
Recent Studies Challenge Benefits of
Natural Gas to GHG Reduction
•
•
•
•
•
•
•
Miller, Scott. et. al. (2013) Anthropogenic Emissions of Methane in the United States. Proceedings
of the National Academy of Sciences (PNAS) Vol. 110. No. 50 20018-20022.
Office of the Inspector General. Environmental Protection Agency. (2014). Improvements Needed
in EPA Efforts to Address Methane Emissions from Natural Gas Distribution Pipelines. Report No.
14-P-0324. July 25, 2014.
Schneising, O., Burrows, J.P., Dickerson, R., Buchwitz, M., Reuter, M., and Bovensmann, H.
(2014). Remote Sensing of Fugitive Methane Emissions from Oil and Gas Production in North
American Tight Geologic formations. Earth’s Future. AGU Publications 10.1002/2014EFOOO265.
Online September, 2014.
Busch, C. and Gimon, E. (2014) Natural Gas Versus Coal: Is Natural Gas better for the Climate?
The Electricity Journal. Aug/Sept. 2014. Vol. 27, Issue 7.
Shearer, C. Bistline, J., Inman, M. and Davis. S. (2014). The Effect of Natural Gas Supply on U.S.
Renewable Energy and CO2 Emissions. Environmental Research Letters. Environ. Res. Lett. 9
(2014) 09408 (8 pp).
Huntington, Hillard. (2013). Changing the Game? Emissions and Market Implications of New
Natural Gas Supplies. Energy Modeling Forum. Stanford University. EMF 26: September, 2013.
Freyman, Monika. (2014). Hydraulic Fracking and Water Stress: Water Demand by the Numbers.
Ceres Water Program
Efficiency the cheapest energy
resource (Source ACEEE study)
EPA Clean Power Plan
(aka: Section III (d) of the Clean Air Act)
•
•
•
•
•
•
•
The proposed Environmental Protect Agency rule (Clean Air Act) when finalized will
require 30% reductions of CO2 emissions (2005 levels) from existing power plants by
the year 2030.
Under the Clean Power Plan, the U.S. Environmental Protection Agency (EPA) has
set individual goals for each state. To achieve their individual goals, EPA expects the
state implementation plans (“SIPs”) to include a portfolio of one or more of four
“building blocks” to create a Best System of Emission Reduction (“BSER”). The
building blocks consist of:
Building Block 1: Heat rate improvements at fossil fuel plants (e.g., increasing heat
rates at coal plants by 6 percent)
Building Block 2: Displacing coal-fired steam and oil/gas-fired steam generation by
increasing generation from existing natural gas combined cycle (“NGCC”) plants to
raise NGCC plant capacity factors to as much as 70 percent) (the “Re-Dispatch
Option”)
Building Block 3: Substitution of renewable resources and new nuclear facilities,
and extension of life of existing nuclear plants that may be shuttered
Building Block 4: Demand reduction aimed at 1.5 percent annual electricity sales
from 2020-2029
Wisconsin Compliance with EPA
Clean Power Act
• WI ranks 14th Nationally in reliance on coal plants.
• In 2012, coal generated 51% of Wisconsin’s power, compared with a
national average of 37%.
• WI released 96 million tons of Greenhouse gases in 2011, of which
41% percent came from coal plants.
• WI would have to cut greenhouse gas emissions by 34% between
2012 and 2030. The cut would rank WI 23rd—in the middle of the
pack—of other U.S. states.
• In a 25-page WI comment document to the EPA rule, the state
highlights its successful energy efficiency program, Focus on
Energy, as reducing CO2 emissions by approximately 7%, and its
Renewable Portfolio Standards (10% renewable generation by
2015) as reducing CO2 emissions by 10%.
• WI Plan is due to EPA by June 30, 2016
Overview
•
WI must reduce CO2 intensity to 1,203 lb/MWh by 2030 under EPA’s
proposed Clean Power Plan under section 111(d) of the Clean Air Act
•
DNR, PSC and Gov. Walker have all submitted comments against the EPA
proposal citing internal analysis
•
This independent analysis uses WEI’s MyPower model (developed by Dr.
Paul Meier) and a spreadsheet model based on data provided in EPA’s
Technical Support Documents to compare two strategies
•
Natural Gas Fuel Switching vs. 30% by 2030 RPS
•
Estimate costs, generation mix and associated emissions
RPS Implementation & Fuel Mix
Comparison of 2030 Fuel Mixes
2%
Wood/Biomass
2% 0%
Wind
23%
Petroleum
3%
10%
23%
0%
Purchased Power
17%
2%
Wind
Solar
8%
0%
Nuclear
21%
2%
1%
Solar
Nuclear
Natural Gas
Natural Gas
LFG/Biogas
16%
Petroleum
0%
16%
Wood/Biomass
54%
LFG/Biogas
Hydro
Hydro
Coal
Coal
30% RPS Generation Mix
NG Fuel Switch Generation
Mix
Long-Term Cost Estimates
5.0
4.5
Annual Generation Costs ($ billions)
4.0
3.5
Fuel Switch Stable Prices
Fuel Switch Historical Prices
30% RPS Stable Prices
3.0
30% RPS Historical Prices
BAU Stable Prices
BAU Historical Prices
2.5
2.0
1.5
2015
1.0
2020
2025
2030
Estimate Average Retail Rates
28
WI Average Residential Price (cents/kWh)
26
24
Historical Rate Increase
22
BAU MyPower
30% RPS MyPower
20
Fuel Switch MyPower
BAU Excel Model
30% RPS Excel Model
18
Fuel Switch Excel Model
16
14
12
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Estimate Average Retail Rates
28
WI Average Residential Price (cents/kWh)
26
24
Historical Rate Increase
22
BAU MyPower
30% RPS MyPower
20
Fuel Switch MyPower
BAU Excel Model
30% RPS Excel Model
18
Fuel Switch Excel Model
16
14
12
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Generation & CO2 Abatement
Costs
A 30% by 2030
RPS is a lower
cost compliance
strategy by the
late 2020’s
The 30% RPS also
delivers CO2
reductions at costs
comparable, or
lower, than the fuel
switching strategy
Next Generation Energy Markets
•
•
•
•
•
•
•
•
What is needed in electric markets?
Unlock markets (allow experimentation)
Spur innovation (a continuous cycle)
Harness competition (welcome new partners/Third Parties)
Reward efficiency (Performance-based rates)
Reward clean technology (Performance-based rates)
Allow greater R&D investment (Off rate cases)
Plan for change (Long-Term Plans and Regulatory flexibility)
Time to rethink a public utility?
• Restore the working concept of “public utility” that to make a
effective and efficient transition to a new energy economy.
• A public utility is an “undertaking” a rethinking of public goals and
private industry toward a common sustainable solution. (We are in
this together).
• Utilities can no longer look at the public as a obstacle, but rather as
a source of promise.
• Likewise, the public can no longer see utilities as a obstacle to
markets and innovation to secure a low-carbon energy future.
• An “instrument of the commonwealth” must be built into the notion of
a public utility. It can remain a business with shareholders and
profits, but a refocusing on sustainability and the public good.
•
(Background to these concepts found in Boyd, William (2014) Public Utility and the Low-Carbon Future. UCLA Law
Review.)
Contact Information
Gary Radloff
Wisconsin Energy Institute
University of Wisconsin-Madison
gradloff@energy.wisc.edu
608-890-3449
http://energy.wisc.edu/about/people/radloff
Estimate CO2 Intensity (MyPower)
2,000
1,800
CO2 Intensity (lb/MWh)
1,600
1,400
1,200
1,000
800
2014
2016
2018
2020
BAU
2022
30% RPS
2024
Fuel Switch
2026
EPA Target
2028
2030
2032
Fugitive Methane Emissions
A 30% by 2030
RPS is a lower
cost compliance
strategy by the
late 2020’s
The 30% RPS also
delivers CO2
reductions at costs
comparable, or
lower, than the fuel
switching strategy
Fugitive Methane Calculations
Renewable Cost Estimates
Assumptions
•
Statewide electricity demand (MWh) grows at 0.5% annually
•
Fossil CO2 intensity is based on historical data (about 2,100 lb/MWh for
coal, 904 lb/MWh for natural gas, and 3,758 for petroleum). The MyPower
model uses unit level data for each power plant.
•
Nuclear, hydro and petroleum generation holds at current levels through
2030 (spreadsheet model), while coal, gas and renewables (biomass,
biogas, solar, wind) are increased to meet the 30% RPS.
•
Coal generation (MWh/year) is reduced at a fixed rate to meet EPA’s interim
and final CO2 intensity targets with natural gas units larger than 50MW
ramped up to fill the generation gap
Cost of Generation
•
•
•
•
•
•
•
•
•
•
Coal = $35/short ton ($3/mmBtu)
Natural gas = $5/mcf ($5/mmBtu)
Petroleum = $95/barrel ($15/mmBtu)
Existing Nuclear = $20/MWh
Utility-scale PV = $80/MWh
Utility-scale wind = $50/MWh
Biogas = $100/MWh
Biomass = $100/MWh
Existing Hydro = $20/MWh
Efficiency “Negawatts” = $30/MWh avoided
* Solar PPA Prices from LBNL (link) and GTM Research (link)
* All other generation costs are derived from EIA’s Annual Energy Outlook