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Greenhouse Gas Performance Standards and Energy Efficiency: Minnesota and the Midwest Look Ahead

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Leaders from MN’s Division of Energy Resources, the MN Pollution Control Agency, and the energy sector discuss regional solutions to cut emissions from existing power plants.

Leaders from MN’s Division of Energy Resources, the MN Pollution Control Agency, and the energy sector discuss regional solutions to cut emissions from existing power plants.


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  • 1. Greenhouse Gas Performance Standards & Energy Efficiency Minnesota & the Midwest Look Ahead Jessica Burdette | Department of Commerce Frank Kohlasch | Pollution Control Agency Jon Brekke | Great River Energy Webinar: May 22, 2014
  • 2. Pg. 2
  • 3. Pg. 3
  • 4. Pg. 4 How Utilities are Benefiting From Minnesota’s New Energy Savings Platform Webinar: Tuesday, June 24th 11:00 - 12:00 pm CST Joe Plummer Public Utilities Rates Analyst, ESP Program Mgr. MN Department of Commerce Division of Energy Resources Target Audiences • Minnesota utility program managers • Minnesota utility operations managers • Minnesota policymakers • Energy regulators in other states • Energy platform developers Jeff Haase Energy and Efficiency Conservation Program Mgr. Great River Energy
  • 5. Pg. 5 CEE Technology Forum Tuesday, June 24th MacPhail Center (Minneapolis) Networking Reception 5:00 - 6:15 pm Program 6:15 - 8:00 pm Steve Nadel ACEEE First in a series of anniversary forums Where MN is Taking the Future of Energy Efficiency Jay Stein E Source Mark Brown My Meter Rich Szydlowski CEE
  • 6. Greenhouse Gas Performance Standards & Energy Efficiency Minnesota & the Midwest Look Ahead Jessica Burdette | Department of Commerce Frank Kohlasch | Pollution Control Agency Jon Brekke | Great River Energy Webinar: May 22, 2014
  • 7. Pg. 7 Today’s Presenters Jessica Burdette Conservation Improvement Program Supervisor MN Department of Commerce Division of Energy Resources Frank Kohlasch Air Assessment Section Manager MN Pollution Control Agency Environmental Analysis & Outcomes Division Jon Brekke Vice President of Membership & Energy Markets Great River Energy
  • 8. Greenhouse Gas Performance Standards and Energy Efficiency: Minnesota and the Midwest Look Ahead Federal Carbon Regulation for Existing Power Plants Frank Kohlasch Minnesota Pollution Control Agency May 22, 2014
  • 9.  June 2013: President Obama’s Climate Action Plan  Regulations for new plants – a.k.a. 111(b)  Regulations for existing plants – a.k.a. 111(d) Background
  • 10.  Clean Air Act Section 111(b)  New Source Performance Standard (NSPS)  Plants built after proposal New Power Plants: 111(b) Photo credit: Portland General Electric Creative Commons License CC BY-ND 2.0
  • 11.  2013: a new proposal  Regulations for coal and natural gas  Creates an emission rate  Partial carbon capture and sequestration New Power Plants: 111(b) Photo credit: Montana Environmental Information Center
  • 12.  A different section the Clean Air Act  Applies to existing fossil fuel power plants  Will establish Emission Guidelines  States responsible for plans Existing Power Plants: 111(d) Photo credit: Minnesota Power (Laskin Energy Center)
  • 13.  Degree of emission limitation  Best System of Emission Reduction (BSER)  Considers  Costs  Non-air quality health & environment  Energy requirements  Adequately demonstrated Existing Power Plants: 111(d)
  • 14.  State plan  Similar process to State Implementation Plan (SIP) review  Demonstrates implementation & enforcement  Considers  Remaining useful life  “Other factors” Existing Power Plants: 111(d)
  • 15.  Carbon dioxide  It’s not like other pollutants  A product of good combustion  No end of pipe controls currently available Existing Power Plants: 111(d) Photo credit: Jynto, Robert A. Rohde, Jacek FH (Creative Commons License CC BY-SA 3.0) Basic Methane Combustion
  • 16.  What will an Emission Guideline look like?  An emission limit  Best System of Emission Reductions  Considering other factors  Adequately demonstrated Existing Power Plants: 111(d) Photo credit: Tom Corser (Creative Commons License CC BY-SA 2.0 UK) Photo credit: Intel Free Press (Creative Commons License)
  • 17.  Traditional approach  Facility boundary approach  Emission limits on a facility  Pollution controls  Work practices  Operational limits  Fuel blending  For carbon: combustion efficiency and on-site energy efficiency 111(d) Emission Guidelines
  • 18.  Flexible approaches for carbon  Electricity system approach  Actions outside the boundaries of an individual facility  Renewable energy  Combined heat and power  Electric efficiency programs and other demand side management  Regional or multi-state approaches 111(d) Emission Guidelines
  • 19.  Flexible approaches for carbon  Nexus to the electricity system  Stringency of the standard  Compliance with the standard  Data collection and verification 111(d) Emission Guidelines
  • 20.  Flexible approaches for carbon  Who does EPA hold accountable?  How do states demonstrate compliance?  How to ensure consistency across states? 111(d) Emission Guidelines
  • 21.  How far can EPA go for flexible approaches?  EPA’s discretion to allow flexible approaches  EPA’s authority for state plans  Cross State Air Pollution Rule decision 111(d) Emission Guidelines Photo credit: Kjetil Ree (Creative Commons License CC BY-SA 3.0)
  • 22.  June 2014: Proposed Rule  June 2015: Final Rule  June 2016: State Plans due to EPA  June 2017: EPA approvals State Plans  A State Plan will likely require a new rule Existing Power Plants: 111(d) Timeline
  • 23.  Next Generation Energy Act  Renewable Energy Standard  Electric Efficiency Standard  Emission reduction statutes Carbon Dioxide Emissions in Minnesota
  • 24. Carbon Dioxide Emissions in Minnesota
  • 25.  Carbon regulation is coming  EPA receptive to flexible approaches  Minnesota is well situated  The devil will be in the details Summary Photo Credit: NASA
  • 26. FRANK KOHLASCH – MINNESOTA POLLUTION CONTROL AGENCY frank.kohlasch@state.mn.us or 651-757-2500 Photo Credit: NASA THANK YOU
  • 27. Update on Energy Efficiency in Minnesota May 22, 2014 Presented By: Jessica Burdette
  • 28. Department of Commerce – Division of Energy Resources • State Energy Office • Conservation Improvement Program • Weatherization • State Energy Programs • Energy Planning and Advocacy • Energy Rates and Regulation • Energy Environmental Review & Analysis • Office of Energy Assistance • Telecommunications
  • 29. • Long standing commitment to energy efficiency in Minnesota • National recognition for energy efficiency work in Minnesota • Regulations and programs continue to evolve • Partnerships with industry stakeholders • Achievement of real results
  • 30. • Conservation Improvement Program (CIP) • Sustainable Buildings (SB) 2030 • B3 Benchmarking – Public Facilities • State Energy Programs – Department of Energy • Weatherization – Low Income/Residential • Financing Programs: • Guaranteed Energy Savings Programs • Public Buildings Enhanced Energy Efficiency Program • Revolving Loan Fund/Loan Loss Reserves
  • 31. • Conservation Improvement Program • Minnesota Statute 216B.241 and 216B.2401 • Minnesota Rules Chapter 7690 • 1.5% Energy Savings Goal: With few exceptions, all are required to meet state mandated conservation and efficiency expenditures and energy savings goals. • Utilities Subject to CIP • 130 Municipal Utilities • 44 Distribution Coops • 11 IOUs (natural gas and electric)
  • 32. • Regulatory Compliance • IOU CIP Triennials and Status Reports • Muni and Coop CIP Annual Reports and Plans • Evaluation, Measurement & Verification • Technical Reference Manual • Reporting Requirements • M&V Protocols and Custom Project Reviews • Conservation Applied Research & Development • Innovative program and technology research • Advance utility CIP programs to meet energy savings goals • Technical Assistance and Outreach • Policy Development • Stakeholder Engagement • Data Analysis and Report Development
  • 33. • ReportingESP™ • Reporting tool for CIP • Required for all MN utilities • Data are public with controlled access • ESP® • Program operations and tracking with automated reporting • Measure design • Available for free to all MN utilities (optional) • Data are private
  • 34. • Minnesota Technical Reference Manual (TRM) • Standard algorithms, inputs, and costs • Regular workgroup meetings/updates • TRM is being built as Smart Measure™ library on ESP® • Real-time calculators and tracking available for free to all MN utilities • Better data, more efficient program implementation
  • 35. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 $0 $10 $20 $30 $40 $50 2006 2007 2008 2009 2010 2011 IncrementalSavings(Bcf) Expenditures($1M) Expenditures Savings 0.9% 1.0% Natural Gas Utility Performance 0 200 400 600 800 1,000 $0 $50 $100 $150 $200 2006 2007 2008 2009 2010 2011 IncrementalSavings (GWh) 1.4% 1.5% Electric Utility Performance
  • 36. 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2006 2007 2008 2009 2010 2011 IncrementalCO2Savings(tons/yr) Electric Gas
  • 37. • Energy Savings from Codes and Standards • Industrial Energy Efficiency • Low Income Programs Challenges • Energy Efficiency Project Financing • Combined Heat and Power • Electric Utility Infrastructure Upgrades • Evaluation, Measurement and Verification • Ongoing Tracking of Energy Savings • Sustainability of Annual Energy Savings
  • 38. Recently Established Energy Efficiency Principles–“3N” Groups: • National Association of State Energy Offices (NASEO) • National Association of Clean Air Agencies (NACAA) • National Association of Regulatory Utility Commissioners (NARUC) How EE can be used to comply with 111(d) – for EPA’s consideration
  • 39. 1. Guidance on inclusion of EE 2. State energy program recognition 3. Non-utility delivered efficiency 4. Recommended EM&V Protocols 5. Translating electricity savings into avoided emissions 6. Avoiding double counting 7. Transmission and distribution efficiency 8. Multi-State or regional efficiency programs 9. Energy efficiency registry 10. Accountability for energy efficiency in state 111(d) plans
  • 40. Thank You
  • 41. ISO market-based compliance option for 111d regulations Jon Brekke Vice President, Membership & Energy Markets
  • 42. GRE and our membership  28 member cooperatives – 1.7 million consumers  4th largest G&T in the nation • $3.7 billion total assets • $2.8 billion total debt • $980.4 million revenue  880 employees (MN and ND)  3,619 MW generation • 701 MW renewables  4,660 miles transmission 5.4% 1.0% -2.6% -0.8% -0.2% 0.1% 3.0% 7.5% -20.0% 0.0% 20.0% 2007 2008 2009 2010 2011 2012 2013 2014 YTD Member sales
  • 43. Our triple bottom line... • Affordable rates • Reliable electric service • Environmental stewardship Balance Reliability Environment Rates
  • 44. Regulation of CO2 emissions from existing sources  EPA (and states) in process of developing CO2 performance standards for existing power plants  Most complicated issue in four decades of Clean Air Act  Potential to be very costly to electricity consumers  GRE has engaged in advocating its positions as EPA crafts guidelines for state implementation plans
  • 45. GRE engagement approach  Board of directors resolution  Treats threat of GHG regulation as a business issue  Gradual reduction in potentially-stranded investment issues  New resource approaches  Pragmatic, GRE-centered approach to engaging in the GHG regulation debate • Engagement in development of GHG regulations to minimize the financial impact on GRE members
  • 46. External stakeholders: “What’s your plan for carbon?”  Command and control plant-by-plant approach may be very costly  Plant shutdowns / under-investment  Reliability concerns  Uncertainty not alleviated by traditional regulation  Leverage energy market to optimize for reliability, cost, and CO2 emissions
  • 47. The concept  Establish a target for CO2 emissions for the region as a whole  Negotiation between ISO states (15) and EPA  Target declines gradually over time  No caps on plants or utilities  Use existing wholesale market infrastructure to optimize:  Reliability  Cost  CO2 emissions
  • 48. The concept  ISO models the market’s resources, load, and carbon targets  Identifies required carbon price necessary to achieve target  Could be a path of values over time  Carbon price charged to generators per ton of CO2 emissions  Carbon revenues collected by ISO and refunded to load by MWH’s
  • 49. The effect  Carbon price affects dispatch results, tilting the region’s carbon intensity downward  Carbon price allows utilities to make strategic decisions based on market dynamics  Results tracked to determine if adjustments should be made to carbon price path
  • 50. Advantages of approach  Uses existing ISO market structure  Optimization ensures continued focus on reliability and cost  Avoids direct control of plant emissions, minimizing inefficiencies and costs of regulation  Applies an efficient carbon price, without flowing a tax to government – refund to load  Plants can compete for space in an economic framework  Can benefit from events in other states  Regional influence on EPA
  • 51. Comparison of approaches – effect on existing plants Conventional CO2 regulations Market-based optimization Efficiency standard or CO2 intensity standard (CO2 / MWH) Plant owner’s decision CO2 limit – tons / year Plant owner’s decision, subject to market success Best system of emissions reduction Plant owner’s decision Renewable energy standards, plant shutdown agreements, energy- efficiency requirements, or other measures Plant owner’s decision
  • 52. | brattle.com52 $- $10 $20 $30 $40 $50 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 $/shortton Price 1 Price 2 Price 3 Illustrative value paths examples 1. Start low and rise steadily (blue line) ▀ Least impact on existing fossil generation early 2. Start high and rise slowly (red line) ▀ Most impact on existing fossil generation 3. Wait and then accelerate price increase (green line) ▀ Least displacement of coal ▀ Creates steep increases later ▀ Potentially problematic for investments Carbon price paths to reach ~30% emissions reduction by 2035
  • 53. | brattle.com53 Resulting carbon emissions differ by path… While all price paths achieve the same annual reduction in 2035, the cumulative effects are different 150 200 250 300 350 400 450 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 MillionShortTons Annual Carbon Emissions No policy Price 1 Price 2 Price 3 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Millionshorttons Cumulative Carbon Emissions No policy Price 1 Price 2 Price 3
  • 54. | brattle.com54 …as do energy market prices  Waiting longer requires larger jump in energy prices later  After accounting for refunding carbon revenues to load, energy price increases less than 1 ₵/kWh through 2030, to 2-3 ₵/kWh thereafter $20 $30 $40 $50 $60 $70 $80 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 $/MWh Energy Prices Energy market price Net price to load
  • 55. Capacity factors for fossil units depend on carbon value path… 30% 40% 50% 60% 70% 80% 90% 100% 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 NoPolicy Price 1 Price 2 Price 3 Coal 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 NoPolicy Price 1 Price 2 Price 3 Natural gas combined cycle
  • 56. Thank you.
  • 57. Jessica Burdette | MN Department of Commerce jessica.burdette@state.mn.us Frank Kohlasch | MN Pollution Control Agency frank.kohlasch@state.mn.us Jon Brekke | Great River Energy jbrekke@grenergy.com
  • 58. Question & Answer Webinar Link: http://www.mncee.org/Innovation-Exchange/Resource-Center/
  • 59. Pg. 59