overview epa’s proposed clean power plan and …...coal plant efficiencies • epa notes that...

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Overview EPA’s Proposed Clean Power Plan and Impacts for Louisiana Clean Cities Coalition Meeting November 5, 2014 David E. Dismukes, Ph.D. Center for Energy Studies Louisiana State University CAVEAT: The views and opinions provided in this presentation are those of the author and do not necessarily reflect the official position of the State of Louisiana or any Louisiana executive agency.

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Page 1: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Overview EPA’s Proposed Clean Power Plan and Impacts for Louisiana

Clean Cities Coalition MeetingNovember 5, 2014

David E. Dismukes, Ph.D.Center for Energy StudiesLouisiana State University

CAVEAT: The views and opinions provided in this presentation are those of the author and do not necessarily reflect the official position of the State of Louisiana or any Louisiana executive agency.

Page 2: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Take Away Points

New Natural Gas End Uses & Fuel Diversity Concerns

2© LSU Center for Energy Studies

Overview

EPA proposed the Clean Power Plan (“CPP”) in June 2014 with the goal of reducing carbon emissions by an average of 38 percent in 2020 (interim target) and 42 percent by 2030, both from 2012 levels.

The CPP is primarily based upon a target rate (lbs/MWh), not a level; although there is a potential “mass-based” conversion.

Rule differs from many past EPA approaches since it:

a) is primarily based on a target rate (lbs/MWh), not emissions level reduction;

b) Is not based on a market-based mechanism or a fixed technology method of emissions reductions;

c) Defines a range of potential compliance options; andd) Has ambiguous non-compliance provisions (at this point).

Final comments on the proposed rule are due on December 1, 2014.

Page 3: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Proposed Louisiana CO2 State-wide Emission Rate Reduction

New Natural Gas End Uses & Fuel Diversity Concerns

3© LSU Center for Energy Studies

Overview

0

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1,400

1,600

1,800

2012 Baseline 2020 Interim Goal 2030 Final Goal

Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-technical-documents.

Louisiana’s 2012 baseline is set at 1,533 lbs/MWh and will be required to decrease to 948 lbs/MWh by 2020 and to 883 lbs/MWh by 2030.

lbs

CO

2/M

Wh

2020 Interim Goal: 948 lbs/MWh; a reduction of

585 lbs/MWh, or 38 percent.

2030 Final Goal: 883 lbs/MWh; a reduction of

650 lbs/MWh, or 42 percent.

Page 4: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Total Annual CO2 Emission Reductions Needed

New Natural Gas End Uses & Fuel Diversity Concerns

4© LSU Center for Energy Studies

Overview

Note: Plant emissions are for 2012.Source: 2012 EPA Clean Air Markets database.

Proposed rule will require Louisiana to reduce its power sector annual CO2 emissions by over 27 million short tons of CO2 by 2030.

Over 27 million tons of CO2 per year

Big Cajun 2: 11 mllion tons CO2

Brame Energy Center:5.9 million tons CO2

Dolet Hills:5.7 million tons CO2

RS Nelson:6 million tons CO2

Page 5: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

State Comparison of Emission Rate Reductions

New Natural Gas End Uses & Fuel Diversity Concerns

5© LSU Center for Energy Studies

Overview

0

200

400

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800

1,000

1,200

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AL AK AZ AR CA

CO CT

DE FL GA HI

ID IL IN IA KS KY LA ME

MD

MA MI

MN

MS

MO

MT

NE

NV

NH NJ

NM NY

NC

ND

OH

OK

OR PA RI

SC SD TN TX UT

VA WA

WV WI

WY

Louisiana’s rate reduction of 650 lbs/MWh is close to the overall U.S. average of 649 lbs/MWh.

US average emission rate reduction: 649 lbs/MWh

Louisiana’s emission rate reduction: 650

lbs/MWh

Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-technical-documents.

lbs

CO

2/M

Wh

Page 6: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

State Comparison of Total Annual CO2 Emission Reductions

New Natural Gas End Uses & Fuel Diversity Concerns

6© LSU Center for Energy Studies

Overview

Louisiana requirement is 22nd most stringent state goal under the proposed rule. Top five states account for five percent of the required reduction; top ten states account for

12 percent of the required reduction.

lbs/

MW

h

0

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600

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1,200

1,400

1,600

RI

CT

CA

AK

KY

DE

MA

WV

NV

MS AL IN MO HI

ME FL NJ

NY

UT

OH PA

ND

WY

VA TX ID NH LA MI

OK

MT

NE

OR

NM GA

NC WI

AR KS

MD AZ

CO TN IA IL SC

MN

WA

SD

Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-technical-documents.

Page 7: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

State Comparison of Total Annual CO2 Emission Reductions

New Natural Gas End Uses & Fuel Diversity Concerns

7© LSU Center for Energy Studies

Overview

On a percentage basis, Louisiana’s required reduction of 42 percent ranks 20th overall.

Per

cent

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

RI

KY

WV IN MO

ND

WY

AK HI

MT

OH UT AL

NE

DE

PA

KS MI

CT

MS WI

FL CA

NV IA MD

NM IL TN LA MA

OK

CO VA

NC TX AR

GA NJ

NY AZ

NH

MN

ME

SC

OR

SD ID WA

Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-technical-documents.

Page 8: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Myth: Louisiana Will Not be Impacted Much Since it is a Natural Gas State

New Natural Gas End Uses & Fuel Diversity Concerns

8© LSU Center for Energy Studies

OverviewP

erce

nt

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

KY

ND

WY

WV

SD

MT

NE IA KS

MO IL IN TN UT

MD

OH

CO

MN

NC WI

SC MI

AR PA

NM GA AZ AL

OK TX LA VA

WA HI

FL OR

DE

MS

NH NV NJ

MA

AK

NY

CA

CT ID ME RI

Coal Generation as Percent of Total Emissions ReductionU.S. Average Emissions Reduction

States with large shares of coal-fired generation have reduction rates lower than the U.S. average, and lower than many states with larger shares of natural gas-fired generation.

Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-technical-documents.

Page 9: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Comparative Impacts: Emission Reductions Per-Capita

New Natural Gas End Uses & Fuel Diversity Concerns

9© LSU Center for Energy Studies

Overview

Greater than 3.0M short tons per person

No Requirement

Less than 2.0M short tons per person

2.0M to 3.0M short tons per person

Louisiana is the 8th hardest impacted state requiring 4.04M short tons of CO2 reductions per capita person by 2030.

Source: 2012 EPA Clean Air Markets database; National Electric Energy Data System (“NEEDS”); 40 C.F.R. Part 60, p. 34895; and 2014 Census Estimates.

Page 10: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Comparative Impacts: Emission Reductions Per State GDP

New Natural Gas End Uses & Fuel Diversity Concerns

10© LSU Center for Energy Studies

Overview

`

Greater than 100 M short tons per million $

No Requirement

Less than 50M short tons per million $

50M-100M short tons per million $

Louisiana is the 16th hardest impacted state in terms of reduction of CO2 per state GDP.

Source: 2012 EPA Clean Air Markets database; U.S Energy Information Administration, U.S. Department of Energy

Page 11: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

New Natural Gas End Uses & Fuel Diversity Concerns

11© LSU Center for Energy Studies

BSER and EPA’s Building Block Approach

Page 12: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

EPA’s Proposed Clean Power Rule – Louisiana BSER Targets

New Natural Gas End Uses & Fuel Diversity Concerns

12© LSU Center for Energy Studies

BSER and Building Blocks

15%

16%

3%

58%

8%

The EPA’s Proposed Clean Power Rule is based on a Best System of Emissions Reductions (“BSER”) that includes four “building blocks.”

Building Block 1: EPA reviewed the opportunity for coal-fired plants to improve their heat rates. BSER

assumes all coal plants can increase their efficiency by 6

percent.

Building Block 2: EPA found an average

availability of 70 percent for natural gas CCs to be technically feasible.

Building Block 3a: EPA identified five nuclear units

currently under construction and assumes that 5.8 percent of

existing nuclear capacity is ‘at-risk” but can be retained.

Building Block 3b: EPA developed targets for

renewable energy penetration in six regions and calculated

regional growth factors to achieve each target by 2030.

Building Block 4: EPA estimated energy efficiency deployment in 12

leading states and assumes all states can increase their current annual

savings rate to reach annual savings of 1.5 percent by 2030.

Each building block accounts for a portion of the total goal.

Page 13: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Louisiana Average Fossil EGU CO2 Emissions Standard based on BSER

New Natural Gas End Uses & Fuel Diversity Concerns

13© LSU Center for Energy Studies

BSER and Building Blocks

0

500

1,000

1,500

2,000

2,500

2012 FossilEmissions Rate

Coal Heat RateImprovement

Gas CC Re-Dispatch

New and "At-Risk" Nuclear

Existing andNew

Renewables

New EnergyEfficiency

2030 ProposedEmissionsStandard

Louisiana Average Coal CO2 Rate

Louisiana Average NGCC CO2 Rate

CO2 RateReduction: 42%

Foss

il E

GU

CO

2E

mis

sion

s S

tand

ards

(lbs

/MW

h)

Source: LA 111(d) EGU Computation.xlsx.

Page 14: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

14© LSU Center for Energy Studies

Building Block 1: Coal Plant Efficiency Improvements

Page 15: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 1: 4-6 Percent Lower Emissions from Existing Coal Generation

New Natural Gas End Uses & Fuel Diversity Concerns

15© LSU Center for Energy Studies

Coal Plant Efficiencies

• EPA notes that several studies have examined the potential to improve heat rates as coal-fired power plants, noting specifically a 2009 study by the engineering firm Sargent & Lundy.

• Based on the 2009 Sargent & Lundy study, EPA estimated that potential heat rate improvements are in the order of approximately 4 to 12 percent. Furthermore, based on review of EPA and DOE EIA generation data, EPA estimates that historically EGUs have experienced heat rate improvements from 3 to 8 percent.

• Based on a review of prior studies and generation trends, EPA estimates the potential for improvements in heat rates of between 4 and 6 percent, which mirrors a reduction in CO2 emissions by the same.

• EPA notes that improvements in heat rates decrease fuel consumption and thus costs, and that a 6 percent improvement would be sufficient to cover costs associated with improvement.

Source: 40 C.F.R. Part 60, pp. 34859-34861.

Page 16: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

FacilityGenerator

ID

2012 Emissions

Rate(lbs/MWh)

Thermal Efficiency

Improvement Factor

(%)

Adjusted Emissions

Rate(lbs/MWh)

2012 Net Output(MWh)

Dolet Hills 1 2,460 6.0% 2,312 4,616,823

R S Nelson 1 2,693 6.0% 2,531 821,331 R S Nelson 2 2,683 6.0% 2,522 802,645 R S Nelson 6 2,493 6.0% 2,344 3,118,384

Big Cajun 2 1 2,192 6.0% 2,061 3,273,725 Big Cajun 2 2 2,140 6.0% 2,012 3,408,652 Big Cajun 2 3 2,114 6.0% 1,987 3,594,632

Brame Energy Center 2 2,257 6.0% 2,121 2,677,857 Brame Energy Center 3 2,439 6.0% 2,292 1,992,364

Average Emissions Rate: 2,323 2,184

Building Block 1, Coal-Fired Heat Rate Efficiency

New Natural Gas End Uses & Fuel Diversity Concerns

16© LSU Center for Energy Studies

Coal Plant Efficiencies

EPA applies a six percent thermal efficiency improvement factor for each coal generation facility, setting a 139 lbs/MWh reduction target.

Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule-technical-documents.

Page 17: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 1 Issues

New Natural Gas End Uses & Fuel Diversity Concerns

17© LSU Center for Energy Studies

Coal Plant Efficiencies

There are a number of incorrect and problematic assumptions included in the development of this building block:

• Use of gross rather than net heat rate reductions.

• Statistical modeling used for heat rate analysis is flawed.

• Fails to consider recent efficiency gains/new pit technologies.

• Fails to consider efficiency losses of control technologies from other EPA rules.

• Cannot be practically done given new source review standards.

• Fails to examine or consider stranded generator costs (rate impacts).

Page 18: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

18© LSU Center for Energy Studies

Building Block 2: Increased NGCC Utilization

Page 19: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Recent Trends in Louisiana Gas-Fired Generation

New Natural Gas End Uses & Fuel Diversity Concerns

19© LSU Center for Energy Studies

NGCC Utilization

Louisiana’s natural gas heat rates have fallen 9.7 percent in the last 10 years (at an average annual rate of one percent); and natural gas-fired emissions have fallen 11.2

percent (at an average annual rate of 1.2 percent).

1,150

1,200

1,250

1,300

1,350

1,400

9,500

10,000

10,500

11,000

11,500

12,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Natural Gas Heat Rate Natural Gas Emissions

Hea

t Rat

e (B

tu/k

Wh)

Source: 2012 EPA Clean Air Markets database.

Page 20: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Louisiana NGCC Efficiencies and Utilization

New Natural Gas End Uses & Fuel Diversity Concerns

20© LSU Center for Energy Studies

NGCC Utilization

On average, Louisiana’s NGCC units operate at heat rates that are 29 percent lower than Louisiana’s steam units and emit 30 percent less emissions.

0

200

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013NGCC Heat Rate Steam Heat RateNGCC Emissions Steam Emissions

Hea

t Rat

e (B

tu/k

Wh)

Em

issions (lbs/MW

h)

Page 21: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 2, Natural Gas CC Dispatch

New Natural Gas End Uses & Fuel Diversity Concerns

21© LSU Center for Energy Studies

NGCC Utilization

EPA assumes all natural gas-fired combined cycle units can be re-dispatched at a rate of 70 percent. This increases the NGCC generation from 19.8 million

MWh to over 40 million MWh, an increase of 102 percent.

Source: 2012 EPA Clean Air Markets database.

EPA EPA Highest HighestNameplate 2012 Estimated Assumed in Last in Last

Capacity Generation Generation Increase 10 Years 5 Years(MW) (%)

Louisiana 1 406.3 2,949,067 2,498,257 -12.6% 99.5% 99.3%Coughlin Power Station 922.8 1,434,842 5,674,113 52.3% 26.9% 26.3%Sterlington 226.3 4,610 1,391,473 69.8% 15.6% 1.4%Acadia Energy Center 1,376.0 4,785,503 8,460,749 30.4% 40.8% 40.8%Carville Energy LLC 570.0 2,899,630 3,504,816 12.1% 62.6% 62.6%Ouachita 903.9 1,658,025 5,557,900 49.1% 20.8% 20.8%Washington Parish Energy Center 655.0 - 4,027,464 70.0% 0.0% 0.0%Perryville Power Station 824.1 2,486,523 5,067,226 35.7% 29.4% 29.4%J Lamar Stall Unit 624.0 3,552,982 3,836,851 5.2% 43.0% 43.0%

Total 6,508 19,771,182 40,018,850 34.7%

Capacity Factor

------ (MWh) ------

Page 22: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 2 Deficiencies

New Natural Gas End Uses & Fuel Diversity Concerns

22© LSU Center for Energy Studies

NGCC Utilization

There are a number of errors and problems with the EPA methodology:• Incorrect data. For instance, the EPA includes Washington Parish Energy Center

(655 MW) in Louisiana’s NGCC capacity totals. Other items include Louisiana 1, Perryville’s 2 CT unit and the omission of NGCCs under construction (Ninemile 6 and Morgan City 14-01).

• The EPA incorrectly uses nameplate capacity rather than net summer capacity to estimate the total NGCC potential.

• Fails to understand the gravity of the change on the use and operation of these units.

• Fails to examine ripple impacts to natural gas markets. The EPA does not consider the increased use of natural gas associated with a 102 percent increase in natural-gas fired capacity (in Louisiana alone).

• Does not adequately examine transmission constraints.• Fails to examine or consider stranded generator costs (rate impacts).

Page 23: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

23© LSU Center for Energy Studies

Building Block 3a: “At Risk” Nuclear Power Generation

Page 24: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 3a, “At Risk” Nuclear Capacity

New Natural Gas End Uses & Fuel Diversity Concerns

24© LSU Center for Energy Studies

At-Risk Nuclear

• In Building Block 3a, the EPA assumes 5.8 percent of the current nuclear fleet is “at risk.” This nuclear capacity is incorporated into state goals as zero emitting generation (at a 90 percent capacity factor).

• Nuclear is not considered a “dispatchable” resource as is NGCC capacity; and instead of redispatching from coal to nuclear like in Building Block 2, the expected generation is simply added to the state goal denominator – lowering the state goal emission rate.

• For Louisiana, this amounts to 985,225 MWh being added to the denominator (generation) to calculate the emissions rate.

Page 25: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Historic Trends in Nuclear Generation, Operating Plants and Generation

New Natural Gas End Uses & Fuel Diversity Concerns

25© LSU Center for Energy Studies

At-Risk Nuclear

750

760

770

780

790

800

810

820

830

840

850

0

20

40

60

80

100

120

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Number of Operating Plants Generation

Num

ber o

f Pla

nts

Million M

Wh

Source: Energy Information Administration, U.S. Department of Energy.

The number of operating nuclear plants in the U.S. remained constant until this year, when four plants were retired. Nuclear generation has been falling in

the last five years.

Page 26: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Historic Trends in Nuclear Generation, Average Annual Capacity Factor

New Natural Gas End Uses & Fuel Diversity Concerns

26© LSU Center for Energy Studies

At-Risk Nuclear

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Cap

acity

Fac

tor (

%)

The average annual capacity factor of nuclear facilities has been between 86 percent and 92 percent.

Source: Energy Information Administration, U.S. Department of Energy.

Page 27: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Nuclear Power Plant Operating Challenges: Zero Dispatch

New Natural Gas End Uses & Fuel Diversity Concerns

27© LSU Center for Energy Studies

At-Risk Nuclear

0%

2%

4%

6%

8%

10%

12%

0%

1%

2%

3%

4%

5%

6%

Dec-10 Jun-11 Dec-11

Wind Generation ERCOT Day Ahead ERCOT Real Time

% H

ours

Mar

ket i

s A

t or B

elow

Zer

o Wind G

eneration as a % of Total 0%

1%2%3%4%5%6%7%8%9%

0%

1%

2%

3%

4%

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Wind Generation SPP Imbalance

% H

ours

Mar

ket i

s A

t or B

elow

Zer

o Wind G

eneration as a % of Total

ERCOT SPP

MISO PJM

0%2%4%6%8%10%12%14%16%18%20%

0%

1%

2%

3%

4%

5%

6%

7%

Jan-09 Jan-10 Jan-11 Jan-12Wind Generation Real Time Day Ahead

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

0%

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3%

4%

Jan-09 Jan-10 Jan-11 Jan-12Wind Generation Real Time Market

% H

ours

Mar

ket i

s A

t or B

elow

Zer

o Wind G

eneration as a % of Total

% H

ours

Mar

ket i

s A

t or B

elow

Zer

o Wind G

eneration as a % of Total

Page 28: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 3a Deficiencies

New Natural Gas End Uses & Fuel Diversity Concerns

28© LSU Center for Energy Studies

At-Risk Nuclear

• EPA’s allowance for “at risk” nuclear capacity effectively subsidizes unprofitable generation

• The basis for EPA’s “at risk” nuclear capacity estimates is weak and not well supported

• EPA’s “at risk” nuclear proposals are ambiguous on how nuclear generation will be treated for compliance purposes

• Unintended consequences of EPA’s Proposed Rule on nuclear generation.

• EPA should not expand its definition of “at risk” nuclear capacity.

Page 29: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

New Natural Gas End Uses & Fuel Diversity Concerns

29© LSU Center for Energy Studies

Building Block 3b: Renewable Generation

Page 30: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 3b, RE Potential

New Natural Gas End Uses & Fuel Diversity Concerns

30© LSU Center for Energy Studies

Renewables

EPA assigns the states to one of six regions and sets a RE target for each, based on an average of all 2020 RPS requirements of the states in that region.

20%by 2020

10%by 2020

10%by 2020

33%by 2020

30%by 2020

20%by 2020

15%by 2020

15%by 2020

20%by 2020

22%by 2020

West Average: 22%

South Central Average: 20%

South East Average: 10%

DE: 19% by 2020DC: 20% by 2020MD: 18% by 2020NJ: 22% by 2020PA: 8% by 2020OH: 9% by 2020

East CentralAverage: 16%

CT: 23% by 2020ME: 40% by 2020MA: 22% by 2020NH: 20% by 2020NY: 29% by 2020RI: 16% by 2020

NortheastAverage:

25%

16%by 2020

10%by 2020

30%by 2020

10%by 2020

North Central Average: 15%

10%by 2020

Page 31: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Louisiana’s Existing Biomass Capacity

New Natural Gas End Uses & Fuel Diversity Concerns

31© LSU Center for Energy Studies

Renewables

Louisiana’s biomass capacity totals 445 MW. However, almost 60 percent of this capacity (262 MW) is over 30 years old.

Source: Energy Information Administration, U.S. Department of Energy.

Online FacilityCompany Name Generator Id Capacity Date Age Fuel

(MW) (years)

Agrilectric Power Partners Ltd GEN1 12.1 1984 30 Agricultural ByproductBoise Packaging & Newsprint LLC TG 61.5 1969 45 Wood/Waste WoodTemple-Inland Corp NO10 37.0 1999 15 Wood/Waste WoodTemple-Inland Corp NO8 25.0 1981 33 Wood/Waste WoodTemple-Inland Corp NO9 37.5 1979 35 Wood/Waste WoodIPC-Mansfield Mill GEN1 40.0 1981 33 Black LiquorIPC-Mansfield Mill GEN2 40.0 1981 33 Black LiquorIPC-Mansfield Mill GEN3 30.0 1981 33 Black LiquorM A Patout & Sons Ltd 1000 1.0 1981 33 Agricultural ByproductM A Patout & Sons Ltd 2000 2.0 1981 33 Agricultural ByproductGeorgia-Pacific Consr Ops LLC-Port Hudson GEN1 67.7 1986 28 Black LiquorKPAQ Industries LLC GEN2 12.5 1966 48 Black LiquorRed River Mill Intl Paper Company 3 T-G 78.8 2008 6 Black Liquor

Total 445.1

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NREL Estimated Technical Potential for Onshore Wind Power by State

New Natural Gas End Uses & Fuel Diversity Concerns

32© LSU Center for Energy Studies

Renewables

Source: National Renewable Energy Laboratory, U.S. Department of Energy.

Thousand GWh

< 5050 – 100100 – 500500 – 1,000> 1,000

Louisiana is not likely to be installing much onshore wind power.

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NREL Estimated Technical Potential for Utility-Scale Solar PV by State

New Natural Gas End Uses & Fuel Diversity Concerns

33© LSU Center for Energy Studies

Renewables

Thousand GWh

< 1010 – 5050 – 7575 – 100> 100

Large amounts of solar is unlikely as well.

Source: National Renewable Energy Laboratory, U.S. Department of Energy.

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NREL Estimated Technical Potential for Biopower by State

New Natural Gas End Uses & Fuel Diversity Concerns

34© LSU Center for Energy Studies

Renewables

Source: National Renewable Energy Laboratory, U.S. Department of Energy.

Thousand GWh

< 11 – 55 – 1010 – 15> 15

Biomass is Louisiana’s most likely option for increasing renewable generation.

Page 35: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 3b, Louisiana Renewable Requirements

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35© LSU Center for Energy Studies

Renewables

Under Building Block 3, the EPA expects Louisiana to be able to increase current renewable generation to 7 percent of total generation by 2030, an increase of 184 percent from current levels.

0

1

2

3

4

5

6

7

8

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Target Baseline

Mill

ion

MW

h

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Building Block 3: Renewable Energy Growth

New Natural Gas End Uses & Fuel Diversity Concerns

36© LSU Center for Energy Studies

Renewables

Under Building Block 3, the EPA expects Louisiana to be able to increase current renewable generation to 7 percent of total generation by 2030, an increase of 184 percent from current levels.

Per

cent

Cha

nge

in R

enew

able

Gen

erat

ion

0%

5%

10%

15%

20%

25%

30%

AL

AK AZ

AR

CA

CO CT

DE FL GA HI

ID IL IN IA KS

KY LA ME

MD

MA MI

MN

MS

MO

MT

NE

NV

NH NJ

NM NY

NC

ND

OH

OK

OR PA RI

SC

SD TN TX UT

VA

WA

WV WI

WY

2012 Renewable Percentage 2030 Goal Percentage

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Building Block 3b Deficiencies

New Natural Gas End Uses & Fuel Diversity Concerns

37© LSU Center for Energy Studies

Renewables

There are a number of problems with the EPA methodology:• The EPA targets are based upon an erroneous method of averaging..• Louisiana’s RE potential differs considerably from other states in this region.• EPA’s calculations are in error (capacity vs. generation). The Kansas RPS is a

capacity based goal, and correcting for this will change generation based targets significantly.

• It is well documented the Louisiana has limited technical RE capabilities. • The EPA’s proposed rule is ambiguous on the degree to which states will be

allowed to use biomass to meet RE generation targets.• EPA fails to recognize the age of existing RE facilities in Louisiana. Most of the

State’s non-hydro RE generation was developed in the late 1970s and 1980s.• EPA assumptions are inconsistent with the findings of the LPSC RPS

proceeding. The LPSC has already analyzed the opportunities for RE in the State.

• The EPA fails to consider lost fixed cost recovery (lost revenues or rate impacts).

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New Natural Gas End Uses & Fuel Diversity Concerns

38© LSU Center for Energy Studies

Building Block 4: Increased End-Use Energy Efficiency

Page 39: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 4, Energy Efficiency Deployment

New Natural Gas End Uses & Fuel Diversity Concerns

39© LSU Center for Energy Studies

Energy Efficiency

EPA determines the total MWh sales that could potentially be avoided through demand-side energy efficiency measures.

Cum

ulat

ive

Sav

ings

as

a P

erce

nt o

f Sal

es

0.0% 0.2%0.6%

1.1%1.9%

2.7%

3.7%

4.8%

5.9%

6.9%

7.8%8.6%

9.3%10.0%

0%

2%

4%

6%

8%

10%

12%

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Incremental EE Savings Cumulative EE Savings

0.2 percent increase per year

1.5 percent increase per year

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Building Block 4 Deficiencies

Energy Efficiency

There are a number of problems with the EPA methodology:

• Inappropriate method of determining technical potentials.

• Fails to examine cost-effectiveness.

• Fails to recognize that prior potentials arose in high-cost energy environment.

• Fails to consider rate impacts and lost base revenues.

• Fails to consider CHP potentials at industrial facilities.

• Fails to examine total rate and ratepayer impacts adequately (cumulative impacts).

40© LSU Center for Energy Studies

Page 41: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Building Block 4, Energy Efficiency

Energy Efficiency

Source: 40 C.F.R. Part 60, pp. 34873-34874.

Under Building Block 4, the EPA assumes it is practical for all states to implement demand-side portfolios such that 1.5 percent of annual sales growth per year are reduced. The compounded effect results in a full 1.1 percent of total annual sales being avoided by Louisiana in 2020, and 9.3 percent

of total annual sales being avoided by 2029. This is an increase

Per

cent

Incr

ease

in E

E

0%

500%

1000%

1500%

2000%

2500%

3000%

3500%

4000%

4500%

5000%

AL

AZ

AR

CA

CO CT

DE FL GA ID IL IN IA KS

KY LA ME

MD

MA MI

MN

MS

MO

MT

NE

NV

NH NJ

NM NY

NC

ND

OH

OK

OR PA RI

SC

SD TN TX UT

VA

WA

WV WI

WY

The increase is actually greater than 5,000 percent

41© LSU Center for Energy Studies

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New Natural Gas End Uses & Fuel Diversity Concerns

42© LSU Center for Energy Studies

Conclusions

Page 43: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

EPA Rulemaking Timeline

Conclusions

June 2014

EPA issuesproposed

Clean PowerPlan

Commentsdue on

proposedplan

December2014

Target datefor EPA to

issue Final Rule

Target datefor states to

submit proposedImplementation plans

June2015

June2016

December2015

December2016

States develop individual implementation plans

43© LSU Center for Energy Studies

Page 44: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Conclusions

Conclusions

• Regardless of your opinion on carbon regulation, there are a number of problems and challenges with the EPA rule.

• Inefficient way to regulate carbon emissions: fails to examine cost-effectiveness, represents the worst in command and control regulation by (a) not utilizing market-based approaches and (b) forcing resource decisions on state regulators.

• This rule has very little to do with environmental regulation, and everything to do with utility regulatory resource planning.

• The costs to Louisiana ratepayers could be considerable. Some concerns this could create a significant near-term reliability challenge as well.

44© LSU Center for Energy Studies

Page 45: Overview EPA’s Proposed Clean Power Plan and …...Coal Plant Efficiencies • EPA notes that several studies have examined the potential to improve heat rates as coal-fired power

Questions, Comments & Input

Conclusions

CAVEAT: The views and opinions provided in this presentation are those of the author and do not necessarily reflect the official position of the State of Louisiana nor any Louisiana executive agency.

Comments, Questions

45© LSU Center for Energy Studies