California’s Climate and Energy Policies: Implications for Utilities Ren Orans, Managing Partner Energy and Environmental Economics, Inc. 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 415-391-5100
Jan 28, 2016
California’s Climate and Energy Policies: Implications for Utilities
Ren Orans, Managing PartnerEnergy and Environmental Economics, Inc.
101 Montgomery Street, Suite 1600San Francisco, CA 94104
415-391-5100
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Energy and Environmental Economics, Inc. (E3)
San Francisco-based firm established in 1993 Electric and natural gas utility sectors Practice areas
Energy efficiency and building standards Distributed generation, demand response and CHP Integrated resource planning Transmission planning and pricing Retail rate design
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Topics
Quick CA-HI Comparison
Update on CA Climate & Energy Policy
Implementing CA’s GHG Law, AB32
Challenges and Opportunities for Utilities
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Greenhouse Gas Emissions by Sector: Hawaii and California
Sources: Hawaii GHG Emissions Inventory, updated May 2007California GHG Inventory, updated November 16th, 2007Note: States’ accounting of GHG emissions are not identical.
1990 Greenhouse Gas Emissions by Sector (% of State total)
4%
34%32%
24%
57%
35%
7%5%
0%
20%
40%
60%
80%
100%
Hawaii California
Non-Energy Sector
Transportation
Electric Utilities and IPPs
Residential, Commercial,Industrial
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Ambitious Greenhouse Gas Reduction Goals in Hawaii & CA Hawaii House Bill 226
Approved by Governor June 2007
State greenhouse gas emissions must fall to 1990 levels by 2020
Creates a ‘greenhouse gas emissions reduction task force’ to oversee implementation
CA Assembly Bill 32
Approved by Governor Aug. 2006
State greenhouse gas emissions must fall to 1990 levels by 2020
CA Air Resources Board over-sees implementation of law
Provides for ‘market-based’ mechanisms starting in 2012 to reduce emissions
California Policies Related to Climate Change
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Key California Laws and Initiatives on Climate Change and Clean Energy AB1493: Vehicle GHG emissions standard (2002)
SB1078: Renewables Portfolio Standard (2002)
Exec Order S-03-05: GHG reduction goals (2005)
SB1368: GHG Emissions Performance Standard (2006)
AB2021: Statewide energy efficiency targets (2006)
AB32: Global Warming Solutions Act (2006)
Exec Order S-1-07: Low Carbon Fuel Standard (2007)
Western Climate Initiative (2007)
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And that’s not all…
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SB 1368: The Greenhouse Gas Emission Performance Standard All new IOU power
procurement contracts over 5 years long: emissions must be less than or equal to a combined-cycle natural gas turbine (1,100 lbs CO2/MWh)
CEC adopted a similar rule for municipal-owned utilities
Coal-fired power plants must have carbon capture and sequestration to sign new long-term contracts with CA IOUs
Combined-Cycle Natural Gas Plant
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Renewable Portfolio Standard target of 33% Renewable by 2020
SB 107: 20% RPS target by 2010
and the Governor has proposed 33% by 2020
IOU RPS Procurement (% retail sales) 2005
Pacific Gas & Electric 11.9%
Southern California Edison 17.2%
San Diego Gas & Electric 5.2%
Source: CEC, RENEWABLES PORTFOLIO STANDARD 2005 PROCUREMENT VERIFICATION, August 2007
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No New Nuclear without Nuclear Waste Disposal Option1976 California state law:
No new nuclear power in-state…
…Unless federal govt. approves a demonstrated technology for the permanent disposal of spent fuel from nuclear facilities
Diablo Canyon Nuclear Power Plant
Source: http://flickr.com/photos/35237093637@N01/11040625
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EPA ruling against once-through cooling affects California 20,000MW affected Retrofits
are not always possible are expensive decrease efficiency and
capacity take units off-line
Significant reliability challenge for CA ISO
Incredible Fact 17 billion gallons of water
used in once-through cooling in the state per day
Generation Affected
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State Energy Efficiency Targets
IOUs have strong financial incentives to achieve aggressive EE targets (~70% economic EE potential)
CPUC adopted ‘Big, bold energy efficiency strategies’ All new residential construction in California will be zero net energy by
2020; All new commercial construction in California will be zero net energy by
2030; and Heating, Ventilation, and Air Conditioning industry will be reshaped to
ensure optimal equipment performance
AB 2021: requires POUs to identify all potentially achievable cost-effective electric EE savings and to establish annual targets for EE savings and demand reduction
Implementing the Global Warming Solutions Act
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California Global Warming Solutions Act (Assembly Bill 32) State must reduce total GHG emissions to 1990 levels
by 2020 (= 427 million metric tons CO2-equivalent, excludes interstate aviation and shipping)
Carbon regulation in CA will begin in 2012
Principal regulating agency is California Air Resources Board (CARB), with input from sector regulators
GHG caps for individual sectors to be determined by January 2009 - utility sector share still uncertain
Implementation architecture to be determined by January 2009 - possible multi-sector cap and trade
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AB32: Global Warming Solutions Act
Case 1, Natural Gas Build-out ~40MMT reduction to
meet sector target
Imported emissions takes up a lot of the cap
Case 1b, Existing Policy Build-out ~18MMT reduction to
meet sector target
Emissions level about flat
California Energy Commission Scenarios AnalysisGeneration and GHG Projections
GHG emissions from imports
1990 emission level
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
1990 1995 2000 2005 2010 2015 2020
GW
h
0
20
40
60
80
100
120
140
MM
TC
O2
Total Generation (left-hand axis)
Electricity Sector Emissions (CARB Baseline)
CEC Scenarios: Natural Gas Build-out, BAU Case 1
CEC Scenarios: Existing Policy, BAU Case 1b
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AB32 Implementation Issues ‘Energy Deliverer’ (First-seller) v. Load-based GHG cap
Energy Deliverer: Power plants are regulated for in-state power production, the ‘deliverer’ of imported power is regulated for imported power. Supported in CPUC’s interim opinion (Feb. 8th ,2008)
Load-based: Load-serving entities (utilities), not generators, are regulated
Allocation of allowances Proposals for free allocation, auctions or sales of GHG permits
Trading Will trade of GHG emission permits be allowed between sectors
‘Offsets’ Disagreement over whether and how GHG reductions from outside the
regulated arena may be used to meet CA GHG reduction goals
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The Big Picture of California’s Climate Policies and the Electricity Sector
CA must bring CO2 emissions back to 1990 levels (~25% reduction from BAU); while adding 9,000 MW of generation;
new nuclear power not allowed until feds develop waste repository;
while retrofitting 20,000 MW of capacity to eliminate once-through cooling.
Agencies want to know how much AB32 will cost the electricity sector…
Preliminary Results from Utility Sector Analysis
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Project Overview Joint California PUC, Energy Commission, Air
Resources Board (ARB) effort to evaluate AB32 compliance options in California’s electricity and natural gas sectors
Model estimates the cost and rate impact of a variety of compliance strategies relative to two reference cases
Main Deliverables Non-proprietary, transparent, spreadsheet-based model
using publicly available data Report on results and sensitivities / scenarios
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Example CO2 Reduction PortfolioReductions from BAU Reference Case
Electricity Sector CO2 Supply Curve
-200
-100
0
100
200
300
400
500
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Tonnes CO2 Reduction per Year (000)(Reference Case - Target Case)
Net
Co
st $
per
To
nn
e
Energy Efficiency
Biogas
In-state Wind
Out of StateWind
CA CSP
Biomass
CA Geothermal
Solar PV
CA Small Hydro
Out of StateGeothermal
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Business-as-Usual Target Case Summary of
resources developed Energy efficiency;
75% economic potential
3,000 MW PV and 5% DR
Conventional adjustment for L&R balance
New Renewable Resources
Resource ZoneBAU Reference Case
(MW)BAU Target Case
(MW)CA - Distributed 900CFE 2163Geysers/Lake 719Imperial 2500 4000Mono/Inyo 243Northeast CA 404 1000Reno Area/Dixie Valley 2500Riverside 2000San Bernardino 2000San Diego 750Tehachapi 4500 4369TOTAL 7,404 20,644
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Business-as-Usual Reference and Target Case Preliminary Results
Summary Results Targets: 85,000 53,120 138,120 Elec Gen CHP Total Elec Gas Total
CO2 in 2020 (kTonnes): 77,705 5,900 83,605 54,523 138,128 Reduction from 2008 (%): 25% 0% 24% 0% 16%
-
20,000
40,000
60,000
80,000
100,000
120,000
2008 2020Ref
Case
2020UserCase
- 0.20 0.40 0.60
PG&E
SCE
SDG&E
SMUD
LADWP
NorCal
SoCal
Subtotal CA
37%
34%
34%
41%
33%
34%
0% 20% 40% 60%
PG&E
SCE
SDG&E
SMUD
LADWP
NorCal
SoCal
Subtotal CA
CO2 Levels
-
20,000
40,000
60,000
80,000
100,000
120,000
2008 2020Ref
Case
2020UserCase
CHP
SoCal
NorCal
LADWP
SMUD
SDG&E
SCE
PG&E
CO2 Intensity
- 0.20 0.40 0.60
PG&E
SCE
SDG&E
SMUD
LADWP
NorCal
SoCal
Subtotal CA
(tonnes / MWh)
2020 2008
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Business-as-Usual Reference and Target Case Preliminary Results
Costs RatesCost Increase (constant $2008)
37%
34%
34%
41%
33%
27%
27%
34%
2%
3%
4%
7%
9%
8%
8%
4%
0% 20% 40% 60%
PG&E
SCE
SDG&E
SMUD
LADWP
NorCal
SoCal
Subtotal CA
Δ from 2008 Δ from 2020 reference case
Rate Impact (constant $2008)
30%
21%
19%
34%
32%
18%
22%
25%
14%
11%
11%
19%
14%
10%
13%
12%
0% 10% 20% 30% 40%
PG&E
SCE
SDG&E
SMUD
LADWP
NorCal
SoCal
Subtotal CA
% Rate Increase in 2020
Δ from 2008 Δ from 2020 reference case
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Members: Governors of Arizona, California, New Mexico, Oregon, Utah and Washington, Premiers of British Columbia and Manitoba
Bring emissions down to 15% below 2005 GHG levels by 2020
Aug 2008 Goal: Design of market trading mechanism in place
Western Climate Initiative (WCI)
Opportunities Related to Climate Change
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Utility Business Opportunities
Customer service options
Grid modernization
Large-scale regional projects
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Contact Information
Energy and Environmental Economics, Inc. (E3)101 Montgomery Street, Suite 1600San Francisco, CA 94104Phone: 415-391-5100Fax: 415-391-6500Web: www.ethree.com
Ren Orans, Managing Partner ([email protected])