1 national association of clean air agencies 2012 fall membership meeting jeffrey logan october 1,...

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National Association of Clean Air Agencies

2012 Fall Membership Meeting

Jeffrey Logan

October 1, 2012

Natural Gas Dynamics and U.S. Electric Power Futures

Preliminary Results

Confidential Material – Do Not Copy or Distribute

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Today’s Talk

• Electric Power Market Snapshot

• Background on JISEA Study

• Electric Power Futures– Baseline– Coal Retirements– Clean Energy Standard– NG Supply: Social License to Operate Costs

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U.S. Power Sector Dynamics

Coal Percentage Down from 48% in 2008 to 35% in June 2012; 300 Million Tons of annual CO2 mitigation (13% of total power sector)

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Background on Study

• Multi-client sponsor group composed on natural gas producers, utilities, transmission companies, investors, researchers, and environmental NGO

• Scoping workshop in Spring 2011 prioritized research questions

• Work began in Summer 2011 with 3 research thrusts:– Lifecycle GHG attributes of shale gas (NREL)– Regulatory and best management practice trends in different

regions (CU School of Law; CSU Engineering; CSM; Stanford)– Modeling of various power sector futures using ReEDS (NREL)

• Study to be released next month

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Regional Energy Deployment Systems (ReEDS)

• Capacity expansion & dispatch for the contiguous US electricity sector including transmission & all major generator types

• Minimize total system cost (20 year net present value)o All constraints (e.g. balance load, planning & operating reserves, etc.) must be

satisfied o Linear program (w/ non-linear statistical calculations for variability)o Sequential optimization (2-year investment period 2010-2050)

• Multi-regional (356 wind/solar resource regions, 134 BAs) o regional resource characterizationo variability of wind/solar o transmission capacity expansion

• Temporal Resolutiono 17 timeslices in each year o each season = 1 typical day = 4 timesliceso 1 summer peak timeslice

Preliminary Material – Do Not Copy or Distribute

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Scenario Framework

Baseline• No New Policy• Conservative Technology Costs (B&V 2012)• AEO 2010 electricity demand, reference case non-electric sector gas demand • Mid-EUR• Standard Retirements

Baseline – Low-EURBaseline – Low-Demand

Baseline• No New Policy• Conservative Technology Costs (B&V 2012)• AEO 2010 electricity demand, reference case non-electric sector gas demand • Mid-EUR• Standard Retirements

Baseline – Low-EURBaseline – Low-Demand

Coal Retire (80 GW by 2020)

No New Coal (NSPS)

Coal Retire (80 GW by 2020)

No New Coal (NSPS)

CES – Low-EURCES – High-EURCES – High-EUR, No-CCS

CES – Low-EURCES – High-EURCES – High-EUR, No-CCS

Advanced REAdvanced Nuclear – Low-EURAdvanced REAdvanced Nuclear – Low-EUR

Dash To Gas – High-EURPrice Ramp +$0.5 +$1 +$1.5 +$2Dash To Gas – High-EURPrice Ramp +$0.5 +$1 +$1.5 +$2

Coal Scenarios Clean Electricity Standard Scenarios

Technology Improvement Scenarios Natural Gas Supply-Demand Scenarios

Reference Scenarios


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Baseline Scenarios – Capacity Expansion

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Baseline Low-EUR

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Baseline Low-Demand

Storage

Offshore Wind

Onshore Wind

PV

CSP

Other RE

Hydropower

NG-CCS

NG-CT

NG-CC

Oil/Gas Steam

Coal-CCS

Coal-New

Coal-Existing

Nuclear

• Results reflect no new policies (e.g. no clean electricity standard, no national RPS, no extension of renewable tax credits)

• Doubling of natural gas capacity by 2050• Low EUR reduces NG capacity growth and increases coal and RE growth• Approximately 30 GW of coal retirements by 2025; age-based retirements and load

growth require significant new capacity additions in latter years• Are we currently on the low-demand trajectory?Preliminary Material – Do Not Copy or Distribute

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Baseline Scenarios – Generation Expansion

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Baseline Low-EUR

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Offshore Wind

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Other RE

Hydropower

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Coal-Existing

Nuclear

Demand


• In vanilla baseline, NGCC generation nearly triples by 2050; wind quadruples• Low-EUR sees additional coal, wind after 2030; NGCC gen only doubles

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Power Sector NG Consumption and Price

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Power Sector Natural Gas Consumption

Baseline

Baseline Low-EUR

Baseline Low-Demand$0

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Power Sector Natural Gas Price

Baseline

Baseline Low-EUR

Baseline Low-Demand

• In the Baseline scenario, power sector NG consumption nearly triples over the 40-year period, while NG prices double

• In low-EUR scenario, power sector NG consumption doubles by 2050, while NG prices are $1-$1.50/MMBtu higher than the Mid-EUR Baseline

• With low demand, power sector NG consumption grows slowly until 2030, then accelerates given age-based coal and nuclear retirements

• Under Low-Demand growth, NG prices remain <$6/MMBtu for the next decade, and <$8/MMBtu for most years


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Power Sector CO2 Emissions

Baseline

Baseline Low-EUR

Baseline Low-Demand

Emissions and Electricity Prices

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National Average Retail Electricity Price

Baseline

Baseline Low-EUR

Baseline Low-Demand

• Even with standard load growth (~1%/year), power sector CO2 (combustion-only) emissions are nearly flat over time due to fuel switching from coal to NG (+RE)

• Low-Demand reduces power sector CO2 emissions by 250 MMTons/year in 2030 and 630 MMTons/year in 2050. Cumulative (2011-2050) reductions exceed 10 Gtons CO2.

• Electricity prices (in real dollars) increase over time for all baseline scenarios, primarily as a result of load growth, coal and nuclear capacity retirements, and corresponding reliance on natural gas.

• Demand growth has a bigger influence on electricity price trajectories than EUR


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Baseline Coal Retire

Coal Retirements

Coal Scenarios

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nuclear NG-CC NG-CT oil gas steam

• Motivation: EPA regulations (CSAPR, MATS, 316(b), CCR) accelerate motivation to retire oldest, most inefficient plants (coal + OGS); NSPS discourages installations of new pulverized (non-CCS) coal plants

• Two scenarios evaluated– “Coal Retire” assumes ~80 GW retired by

2025 (Baseline assumes ~30 GW retired by 2025)

– “No New Coal” assumes no new (non-CCS) coal capacity

• ReEDS’ standard treatment of retirements is based on plant lifetimes for all plant types; usage-based retirement is also considered for coal


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Tradeoff Between Coal and NG (+Wind)


• Extra retired coal capacity in first two decades are largely replaced with NG capacity in the near term with little difference in the long term

• Without new coal capacity, additional NG and wind technologies are deployed in the last two decades (no effect in first two decades)

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Coal Scenarios

• Near-term coal retirements can have an effect on near-term electricity prices and CO2 emissions, but little long-term effect

• Cumulative (2011-2050) avoided emissions from EPA regulation-driven retirements are ~3300 MMTons CO2

• Without new (non-CCS) coal, annual avoided emissions in 2050 are ~160 MMTons CO2 and cumulative (2011-2050) avoided emissions are ~1100 MMTons CO2. These emission savings require little incremental electricity price increases (<$3/MWh in 2050)


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Coal Retire

No New Coal$60

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Coal Retire

No New Coal

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Clean Electricity Standard Scenarios

• Clean Electricity Standard– 80% clean electricity by 2035, 95% by 2050– Crediting: 100% for nuclear/RE, 50% for NG-CC, 95% for NG-

CCS, 90% for Coal-CCS, 0% all others

• Three CES scenarios:– High EUR– High EUR, No CCS– Low EUR


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CES High-EUR

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CES High-EUR, No-CCS

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• A CES generally leads to greater NG power generation in the near-term followed by reliance on RE (and to a lesser degree, CCS and nuclear) in the long-term

• Under a CES, 2050 RE power generation is significant even with high EUR and CCS deployment: 38% wind, 9% solar, 7% hydro, 3% other RE

• New nuclear capacity expansion is more limited under cost assumptions used

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• Under a CES, sustained power sector NG consumption growth depends on the viability of CCS

• With Low-EUR, NG consumption grows slowly (compared to Baseline); RE, coal-CCS, and nuclear are much bigger contributors

• With High-EUR, NG prices remain relatively low even with significant growth in consumption


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• CES can lead to deep cuts in carbon emissions (upstream and downstream emissions should also be considered)

• Abundant low cost NG (High-EUR) can help lower the cost of meeting a CES • Availability of a greater number of clean technology options (e.g. CCS and RE) can

lower the cost of meeting a CES


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• RE technologies can contribute significantly to meeting a CES• Among the CES scenarios, non-hydro RE annual electricity reaches 35%-43% in 2036

and 51%-69% in 2050• With increased RE deployment, transmission needs are increased and operational

challenges (e.g. curtailment) are increased


CES High-EUR No-CCS

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BaselineCES High-EURCES High-EUR No-CCSCES Low-EUR

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NG Supply Variation Scenario

• NG supply-demand sensitivity scenarios– Raise supply curve by $0.5/MMBtu increment up to +$2/MMBtu

for each year starting in 2012

– Motivation: Explore how additional supplier costs would effect power sector evolution (e.g. costs of best practices, regulations, social license to operate: well set-backs, greener frack-fluids, water recycling, green completions, well completions/monitoring, etc.)


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NG Price Variations

• Increased NG prices led to slower growth in power sector NG demand

• Long-term NG demand still significantly higher than today even with prices exceeding $10/MMBtu

• NG deployment replaced primarily by new coal and wind


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Preliminary Conclusions

• Recent coal-to-gas fuel switching has cut U.S. power sector CO2 emissions by approximately 13%

• Future power sector evolution is sensitive to assumptions of EUR, price, technology and policy.

• Coal retirements are largely replaced with natural gas and, to a lesser extent, wind

• CES: without CCS, NG demand peaks around 2030

• Power sector NG demand in the SLOC case doubles by 2050 when prices are +$1/MMBtu above baseline (compared to 2.5x increase in baseline)


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Discussion

Questions?

1 national association of clean air agencies 2012 fall membership meeting jeffrey logan october 1,...

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