# Presentation: 681963

## Renewable Energy and Regional Haze

**Renewable Energy and Regional Haze**
**Doug Larson, Western Interstate Energy Board**
**Juanita Haydel, ICF Consulting**

**Notes:**
Because much of the Western landscape is wide open, it may be difficult to believe that sometimes visitors to national treasures such as the Grand Canyon, shown here, are not always able to fully appreciate these spectacular vistas.  The reason? 

## National Visibility Goal

- “...[T]he prevention of any future, and the remedying of any existing, impairment of visibility in mandatory Class I federal areas which impairment results from manmade air pollution.”
*(Clean Air Act as Amended, 1977)*

**Notes:**
We can’t talk about regional haze without a national context.  Congress established a national goal to improve visibility in the Clean Air Act Amendments of 1977.  The Act called for the prevention of any future, and remedying existing visibility impairment in Class I federal areas throughout the U.S.

## Regional Haze Rule

- Final rule issued July 1999
- Targets 156 Class I air sheds
- SIPS demonstrating “reasonable progress.”
- Section 309: GCVTC Optional Approach

**Notes:**
On July 1, 1999 EPA issued rules outlining how states were to develop and file  Regional Haze SIPs  that would lead to improved visibility in 156 national parks and wilderness areas throughout the U.S. 

The rule applies to all states due to evidence that haze-causing emissions can be transported hundreds of miles

The rule calls for states to prepare State Implementation Plans (SIPS) and establish goals and long-term strategies for achieving natural back ground visibility conditions in these Class I areas by 2064.

The rule includes options to follow two paths. Section 308 is the traditional approach a state would follows in preparing a SIP......

## Slide 4

## Section 309 (d) (8): Pollution Prevention 

- Identify state RE and EE programs
- Progress meeting 10/20 renewable goal
- Projections of short and long term:
- Emissions reductions
- Visibility Improvements
- Cost savings
- Secondary economic benefits

**Notes:**
. 

As recommended by the GCVTC, Section 309 (d) (8) explicitly recognizes energy efficiency and renewable energy programs and policies as strategies to mitigate haze-causing pollution.  And in preparing Regional Haze SIPs, each state that follows the 309 path must describe programs relied on to achieve the GCVTC recommended goal that renewable energy comprise 10 percent of the regional power needs by 2005 and 20 percent by 2015...” . 

A state’s SIP must also provide for programs to preserve and expand energy conservation efforts.

In both cases, 309 SIPS will be required to include  projections of short and long-term:
        Emissions reduction
        Visibility Improvements,
        Cost Savings, and 
        Secondary benefits.

## Approach to EE & RE Recommendations 

- Examine market barriers
- Identify policies that can overcome market barriers
- Quantify emissions reductions and economic impacts
- Recommend a portfolio of policies and “best practices”

**Notes:**
As is the expectation of all the WRAP Forums, the objective of the AP2 Forum is to provide states with the policy and analytical framework they need to respond to the Pollution Prevention requirements of their regional haze SIP.

## State Renewable Policies

-  RPS or SBC core financial incentives
- State and local tax incentives
- “Greenpower” purchase requirements
- Policies supporting efficient markets
- Net Metering
- Transmission Reform
- Labeling/Disclosure
- Green Tags and Green Pricing Programs

**Notes:**
Our renewable energy recommendations are targeted to help electricity markets in the West to realize the full economic potential of renewables beyond what will be achieved if we left it to the market place under the status quo.  And we see a role for both state and federal policies.   Our renewable energy policy recommendations are grouped into two major categories.
Seven recommendations that provide financial incentives for the production and consumption of electricity generated from renewable energy resources.  
 Major progress can be made by the adoption of SBC and RPS financial incentives and by implementing favorable tax polices, i.e. property tax and sales tax exemptions.
 We are also recommending states adopt policies that improve the efficiency of the market place and ensure electricity consumers have the option to choose a “green” electricity service through a green market or green pricing program.  Other policies we are recommending include:
Net metering
Information disclosure and labeling of utility bills.
Regional “green tags” trading program
Consumer Education
Transmission pricing reform, and 
Adoption of the cap and trade program under section 309.

## Supportive Federal Renewable Policies

-  Federal RPS
- Extend Production Tax Credit
- Fund Public Power incentive
-  “Greenpower” purchase requirement
- Income tax credits
- Funding for R&D

**Notes:**
The forum also believes states should support complimentary efforts by the federal government including:
A national RPS with provisions for trading renewable energy credits. 
Development of tax incentives, including the extension of the existing 1.5 cent per kWh federarl production tax credit.
And a federal agency renewable energy purchase requirement of 10 and 20 percent.

## Energy Efficiency Recommendations 

**RESIDENTIAL**
- Efficient Cooling Systems
- CFL Lighting
- Energy Star Appliances
- Appliance Recycling
- Building Envelope

**COMMERCIAL**** ****      ****INDUSTRIAL**** **
- Efficient Cooling Equip          Efficient Motors
- Retro Commissioning            Motor Drive Systems
- Commercial Lighting            ( *Fans, Pumps, CAir)*
- Efficiency Standards              Ind. Transformers
- Efficient Refrigeration
- Fuel Switching
- Commercial Appliances

**Notes:**
The range of technologies and practices that could increase efficiency of electricity use in the west is potentially vast.  
The focus in developing energy efficiency recommendations was to identify “best practices” for the WESTERN economy that are the most cost-effective measures and  have a high potential of achieving significant energy savings if adopted.. 

Demand side technologies and practices were grouped into 15 sets of DSM options comprising of over 40 major measures.  

## Integrated Analytical Framework

- <date/time>

**Integrated Analytical Framework**

- WRAP/MTF Economic-Analysis

**IPM****®**

- REMI®

**State/Tribal regional economic impacts**

-  **Emission Impacts**

** ****Electric/Steam Impacts**

## BAU Scenario – Current and Known Conditions

- Assumptions developed by AP2 Forum
- Includes SO2 Annex; no additional policies to promote renewable energy (RE) or energy efficiency (EE)
- Significant additional penetration of renewable energy capacity assumed unlikely without pro-active RE policies
- Includes known future firm builds in the GCVTC region1  about 700 MW of future firm wind capacity.

- 1 Source: New builds in WSCC reported by California Energy Commission, 2001

## SO2 Emissions Under BAU

- -

- 200

- 400

- 600

- 800

- 2005

- 2007

- 2010

- 2015

- 2018

## NOx Emissions Under BAU

- -

- 200

- 400

- 600

- 800

- 2005

- 2007

- 2010

- 2015

- 2018

- Avg. rate for Coal: 4.3 lbs/MWh

## CO2 Emissions Under BAU

## Slide 15

## 10/20 Sets Targets for Generation

## Targets May Affect Underlying Cost Factors Important to Promoting RE

- 10/20 targets
- May accelerate learning by doing
- May create stronger incentives to improve technology cost and performance
- May ease other barriers to entry

- Source: AP2 Forum and Walter Short, NREL

## Costs Reflect Resource Quality and Transmissions Constraints

- Source: AP2 Forum and Walter Short, NREL

**Resource quality**
- Production cost for wind varies with different wind speeds (i.e., wind class)

- Production cost

## Certain Cost Types Unique to RE Will Remain Under 10/20 Goals

**Supply Curve for Wind in 2010**

- Production cost assumed to increase as higher levels of intermittent generation (i.e., wind generation) are supplied
- Increasing production cost reflects backup cost
- Backup cost applies after generation from wind energy exceeds 10% of a region’s load or reaches 10% of resource potential
- Backup cost increases from 10% to 60% as higher levels of wind generation are supplied

- Source: AP2 Forum and Walter Short, NREL

## Load Reduction From EE Assumed to Increase to 8% by 2018

- Source: AP2 Forum

## 10/20 Goals Likely to Increase Annual Production Cost by 2% - 5%

## 10/20 Goals – Impact of Wholesale Energy Prices

- 29.43

- Levelized $6.5/MWh REC converted to energy price

- 10/20 Goals – Impact of Wholesale Energy Prices

- Wholesale energy prices under 10/20 goals

## Gas Capacity Is Displaced Under 10/20 Goals

**Changes in Fossil Fuel Capacity Under 10/20 by 2018**

## Annual Savings With EE May Range From $ 0.7 – $1 Billion

- Levelized Annual Production Cost (2005 –2022)

- Includes cost of implementing EE and avoided transmission distribution cost from EE use

## 10/20 & EE – Reduce Nox Emissions 1%-2% 

## 10/20 Goals and EE – Reduce CO2 Emissions 10–14%

## 10/20 Goals May Lower Compliance Cost of SO2 Annex

- Assumed SO2 Annex milestones employed through a backstop regional trading program with all states & tribes participating in the trading program
- 10/20 goals could lower compliance cost of meeting SO2 Annex milestones by approximately $ 10 million in 2018 (or 7% of the compliance cost of meeting the SO2 Annex milestones without 10/20 goals)1

- 1 Compliance cost of SO2 Annex milestones without 10/20 goals based reported cost in “*Economic Impacts of Implementing a Regional SO2 Trading Program in Grand Canyon Visibility Transport Region*, Volume II” WRAP/MTF, 2000

## 10/20 and EE May Reduce the Need for Investments in SO2 Controls

- Much of the scrubber installed in response to the regional SO2 trading program
- 10/20 goals and EE will reduce the need for scrubber capacity by 1200 MW to 1700 MW by 2018

## Next Steps

- Complete modeling, including economic analysis work
- Request WRAP to endorse the AP2 report in November
- Assistance to states electing 309 route
- SIP guidebook
- Possible workshops
- Foster recommended regional actions
- Development of a Renewable Energy Credit market in the Western Interconnection