Download - Carbon Regulation and Resource Planning Jim Hill Western Resource Planning Forum June 21, 2010
Carbon Regulation and Resource Planning
Jim Hill
Carbon Regulation and Resource Planning
Jim Hill
Western Resource Planning Forum
June 21, 2010
2
Colorado Carbon Landscape
2004 - PUC approves PSCo IRP that proposes to include CO2 in resource acquisition decisions
Renewable Energy Standard
• 2004 - RES 10% by 2015
• 2007 - RES increased to 20% by 2020 HB 1281
• 2010 - RES increased to 30% by 2020 HB 1001
Nov 2007- Governor issues Climate Action Plan • Reduce GHG from 2005 levels by 20% by 2020 and 80% by 2050 • Increased use of energy efficiency, renewables, and clean coal.
3
CO2 Applied in IRP’s
2004 IRP – $9/ton (2010, 2.5% esc) 800 MW wind, 750 MW supercritical coal, 600 MW of gas-fired
2007 IRP – 20$/ton (2010, 7% esc) 700 MW wind, 300 MW solar, 900 MW gas, 229 MW coal retired
Modeling Methodology CO2 price included planning model dispatch decisions and economy
energy market representation.
Sensitivities Least-cost plans under ‘base’ CO2 with substantially different technology
mixes are re-priced at higher and lower CO2 values to test robustness
4
Evaluation of Coal Unit Retirements
Retirement date influenced by: Labor Issues Fuel contracts (both commodity and rail liquidated damages) Capacity need after retired time to build replacement capacity Transmission impacts and lead time to fix
Economics of Retirement Estimate life extension costs (O&M and capital) Estimate likely emission control requirements Determine CO2 price at which life extension is cost equivalent
combinations of CC, CT, and renewables.
Assess likelihood of resulting CO2 price Analysis of proposed federal legislation and industry estimates of
economic and political impacts
5
Estimating CO2 Price Likelihood
Political climate
Economic impacts on timing
Consequences of no legislation
EPA regulates
Analysis of Waxman-Markey
$-
$50
$100
$150
$200
$250
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Nominal $/metric ton
ACCF
Heritage
EIA
NBCC/CRA
MIT
CBO
EPA-IGEM
6
Planning Challenges of Carbon
Renewable Energy Standard Rate Caps Forecasting customer rate impact heavily influenced by CO2 cost Could exceed rate impact if CO2 regulation delayed Revenue from rate rider < cost of renewables
Limitations on level of Renewables Reliability (CPS1 and CPS2) Coal unit cycling
Analyzing assets over useful life Dealing with outer year escalation Can change result of PV analyses Appropriate to trade near-term rate
hike to avoid speculative future?$-
$50
$100
$150
$200
$250
$300
$350
$400
1 3 5 7 9 11 13 15 17 19 21 23 25Operating Year
$/MWh
RenewableFossil HighFossil Low
7
Achieving Expected Reduction Goal
Pros of Early Action
Has put PSCo on path to achieve expected range of reduction goals
Allowed for more EE to pass cost-effectiveness tests
Captured PTC or ITC in price paid for renewables
Operators gaining experience accommodating intermittent resources
Cons of Early Action If benchmark date pushed out
from 2005 to later, could lose ability to take credit for prior CO2 reductions
24.0
25.0
26.0
27.0
28.0
29.0
30.0
31.0
32.0
33.0
34.0
35.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
To
ns
(mil
lio
ns)
Resource selections complete through 2015 in last Resource Plan
???
2020 Reduction
Target
Future Resource Plans>Sales ?>Energy Efficiency ?>More Renewables ?
>Rate Impacts ?