# Presentation: 525452

## Use of Renewable Energy and Energy Efficiency to Reduce Regional Hazein the West

- <date/time>

**Use of Renewable Energy and Energy Efficiency to Reduce Regional Haze****in the West**

**Air Innovations Conference**
**Chicago, Illinois**
**August 10-12, 2004**
**Rick Sprott**
**Director**
**Utah Division of Air Quality**

**Notes:**
When distilled to its essence, the panel was asked to comment on whether or not wind is a “good thing” in the generation portfolio of our electric utilities.

The perspective I bring to this panel is that of the GCVTC and the WRAP who have looked at renewable energy as a pollution prevention strategy within the context of  EPA’s regional haze rule.

.

## Today’s Presentation:

**Today’s Presentation:**
- • **What is Regional Haze?**
**Grand Canyon Visibility Transport Commission (GCVTC) and the Western Regional Air Partnership (WRAP)**
**WRAP Pollution Prevention Forum **
**Estimating Costs and Benefits of Renewable Energy**
**Conclusions**

**Notes:**
     Today I’ll quickly explain what regional haze is and why it is of concern and move on to focus on the Western Regional Air Partnership or WRAP.
     Since time is short and I want to concentrate on the dynamics of the partnership, I’ll only touch on our energy results.  
     Jeff Burks of the Utah Energy Office will have more to say about that in a Presentation this afternoon.

## Slide 3

**Notes:**
In the 1990 CAA Congress directed EPA to establish the Grand Canyon Visibility Transport Commission (GCVTC) to address haze causing pollutants in a nine state region whose emissions affect visibility in the Grand Canyon.[1]  

The Commission was charged with making recommendations on how to protect and improve visibility in 16 national parks and wilderness areas on the Colorado Plateau.

## Slide 4

**Notes:**

In 1996, the Commission issued its report to EPA recommending a suite of 12 emissions control strategies that, if adopted as a single package, would improve visibility throughout the Colorado Plateau.[2]  

## Regional Haze Rule and Renewable Energy(Section 309 (d) (8): Pollution Prevention) 

- <date/time>

- Regional Haze Rule and Renewable Energy(Section 309 (d) (8): Pollution Prevention)** **

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

**Notes:**
As recommended by the Commission  Section 309 (d) (8) of the Regional Haze Rule explicitly recognizes energy efficiency and renewable energy programs as strategies to reduce haze.
And in preparing Regional Haze SIPs, each state that follows the 309 path must describe programs relied on to achieve the Commission recommended renewable goal. 

309 SIPS are required to include projections of short and long-term:
·        Emissions reduction
·        Visibility Improvements,
·        Cost Savings, and 
·        Secondary benefits.

## Western Regional Air Partnership

**Notes:**
What makes WRAP extraordinary is that it is a partnership of state, tribal and federal agencies, that have joined together to cooperatively solve air quality problems. The WRAP seeks participation on an equal basis from all stakeholders who will be affected by this process.  

## Slide 7

**Notes:**
Western Regional Air Partnership (WRAP) was established in 1997 as the successor organization to the GCVTC.  The WRAP was created by western states and tribes to coordinate and oversee the implementation of the recommendations of the GCVTC and “identify regional or common air management issues, develop and implement strategies to address these issues, and formulate and advance western regional policy positions on air quality 

The Air Pollution Prevention (AP2) Forum was created September 1998 by the WRAP’s Initiatives Oversight Committee (IOC) and charged to: 

## Five WRAP states went “309” 

- <date/time>

- Five WRAP states went “309”** **

**.**

##  Prevention Forum 

- Air Pollution
-  Prevention Forum
- Work Plan

**Examine market  barriers to efficiency and renewable energy.**

**Identify policies to remove market barriers.**

**IPM Model**
**Demand**
**Fuel Costs**
**Gen Capacity**
**Electricity Costs**
**Gen Output**
**Emissions**

**Model Visibility**
** ****Impacts**

**REMI Model**
**Employment**
**Income**
** ****GRP**
***)***

**WRAP Policy**
- Renewable Energy and Energy Efficiency
*(A****pril 2003)***

**Notes:**
The WRAP established the AP2 Forum to assist states in implementing the GCVTC recommendations.

The objective of the AP2 Forum was to provide the states filing 309 SIPs with the policy and analytical framework needed to respond to the requirements of the regional haze rule. To accomplish this purpose the AP2 Forum’s work plan called for the Forum to:
Examine barriers restricting the penetration of renewable energy, energy efficient technologies in the Transport Region;
Recommend market-based incentives and public policies that will support increased investment in renewable energy within the Transport Region and ....
Then using ICF’s IPM model evaluate energy costs, emissions reductions, visibility improvements and secondary economic and environmental impacts associated with implementing policies to promote development of RE. 

## Renewable Recommendations

- <date/time>

- Enact RE Portfolio Std or Service Benefit Charges
- State and local tax incentives
- Govt “Green” purchase requirements
- Policies supporting efficient markets
- Transmission Reform
- Labeling/Disclosure
- Green Tags
- Green Pricing Programs (Renewable Energy Certificates)
- Net Metering
- Federal Policies

**Notes:**
The Forum finds that the most significant progress towards meeting the 10/20 renewable energy goals can best be accomplished through the adoption of state policies which provide financial incentives for the production and consumption of renewable energy. 

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. 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.  
.
 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.
And we see a role for both state and federal policies.

## Fossil-Fuel Capacity Displaced Region Meets 10/20 Goal

- <date/time>

**Fossil-Fuel Capacity Displaced** Region Meets 10/20 Goal

- (10,000)

- (8,000)

- (6,000)

- (4,000)

- (2,000)

- -

- 2,000

**Coal**

**Oil/Gas**

**Turbines**

**Combined**

**Cycle**

**CoGen**

- MegaWatts

**Notes:**
Based on our natural gas price assumptions, over the next 16 years virtually all new generation capacity that is brought on line in the region is expected to be Combined cycle natural gas plants. 

New RE will competes with new conventional capacity leaving existing electricity generation capacity in-place.

And for the most part, new renewable generation brought on-line will displace this gas-fired generation capacity.

Which has important implications for emissions reductions.

## Investments in RE and EE Lowers SO2 Compliance Costs

- <date/time>

- Investments in RE and EE Lowers SO2 Compliance Costs

- 10/20 goals and EE will reduce the need for scrubber capacity by 1200 MW to 1700 MW by 2018
- Cuts compliance cost by about $10 million or 7%

- -

- 2,000

- 4,000

- 6,000

- 8,000

- 10,000

- 12,000

- 2018

**Scrubber Capacity (MW****)**

**BAU**

**10/20 Goals**

**10/20 Goals + EE**

**With**** EE**

**Notes:**
Achieving the 10/20 goals and expanding energy efficiency has another effect.  It lowers the cost of compliance under the regional haze sulfur cap and trade program by about $10 million in 2018 or 7%.  This is because some fossil fuel generators where it is costly to put on new controls wouldn’t have to.  They could buy allowances at lower prices since fewer sources are competing for sulfur allowances.

This chart shows the impact of the RE, EE and combined RE & EE measures on the amount of scrubber capacity required under the cap and trade program in 2018.  

---------------------

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)

## Summary of Modeling Results

- RE strategies reduce haze-causing pollutants
- Visibility improvements not large
- SO2 cap
- “Cleaner” gas-fired generation is displaced
- Secondary benefits beyond regional haze
- Downward pressure on gas prices
- Lowers SO2 compliance costs
- Significant CO2 reductions
-  Small positive or no impact on region’s jobs, income and economic activity.

**Notes:**
Let me conclude.  The bottom line is:

## The Future

- 309 RH SIPs good start, but not typical
- REEE is a **regional goal**, not a single state RFP enforceable measure
- Need EPA & State vision to:
_**Catalyze**_, not just encourage RE/EE in SIPs & more
- New RE/EE Guidance good, but still has barriers
- Find different yardsticks to accept and measure effectiveness
- We all need to think regionally
- Power, like pollution, doesn’t stop at state lines
- 	(except in Texas)
- Encourage multi-state collaboration
- Create the market...hardware will follow

## RE is coming soon...

**RE is coming soon...**

## ...EE is coming too...

**...****EE is coming too...**

## ...Voila!!!!

**...****Voila!!!!**

**It’s a “WRAP”**

## GCVTC Renewable Energy Recommendation

- “The Commission promotes the transition to power production based on renewable resources ...[T]the goal of the states in the Transport Region should be to achieve annual additions in order that renewables will comprise 10% of the regional power needs by 2005 and 20% by 2015.”

**Notes:**
...... and established a goal for states in the transport region “...to achieve annual additions in order that renewables will comprise 10% of the regional power needs by 2005 and 20% by 2015.”

## GCVTC Findings

- <date/time>

- GCVTC concluded that renewable energy and efficiency can be effective tools to reduce haze and if adopted could result in “...emissions reductions, improvements in visibility, and provide secondary environmental and economic benefits to the region.”
*(Report of the GCVTC to the U.S. Environmental Protection Agency: Recommendations for Improving Western Vistas, June 1996, pg. 28)*

**Notes:**
In its final report the Commission declared its support for renewable energy and energy efficiency and concluded .....

## Regional Haze Rule

- Final rule issued July 1999
- Targets 156 Class I air sheds
- Applies to all states
- SIPS must demonstrate “reasonable progress”
- Section 309: GCVTC Optional Approach – Presumptive RFP

**Notes:**
EPA issued its final rule on Regional Haze in the summer of 1999 and adopted the recommendations of the Commission in Section 309 of the rule.  

The rule applies to all states and requires states to file SIPs demonstrating “reasonable progress” towards  achieving natural background levels for visibility in 156 class I air sheds in the U.S.  

The 9 states that were part of the GC transport region are allowed to pursue an optional approach to meeting the rule requirements by adopting the suite of strategies recommended by Commisssion in its 1996 report.

## WRAP P2 Forum Objectives

- <date/time>

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

**Notes:**
As is the expectation of all WRAP forums, the objective of the AP2 Forum and its 27 members has been to provide the WRAP, states and tribes with the policy and analytical framework needed to respond to the requirements of the Pollution Prevention section of regional haze SIPs 

To accomplish this purpose the AP2 Forum’s work plan called for the Forum to:
Examine barriers restricting the penetration of renewable energy, energy efficient technologies in the Transport Region;

Recommend market-based incentives and public policies that will support increased investment in renewable energy within the Transport Region and improve the efficiency of the region’s energy production and end-use sectors.

## Renewable Generation Mix 2018

- <date/time>

- GCVTC Generation Mix   2018

**Notes:**
20,000 MW of new RE generation would be required to meet the 10/20 goal.  

Wind power dominates share of the growth of new renewable energy generation. 

## Renewables lncrease Regional Electricity Production Cost 2% - 5%

- Levelized Annual Production Cost (2005 –2022)

**$17.4 **

**$17.7**

**$****18.3**

- $-0

- $5,000

- $10,000

- $15,000

- $20,000

**BAU**

**10/20 Goals**

**No Improvements in wind technology**

- Million 2001 $

**Notes:**
RE will lead to a modest increases in annual levelized production costs of between $300-900 million.  Range reflects different assumptions about renewable energy cost and performance.

Blue assumes modest improvements in technology and cost performance
Green assumes no change.

(Since the study was completed we have already seen significant improvements in the newest generation of wind turbines exceeding even those assumptions we made in the “improved cost performance scenario).

The most notable feature of RE is that it shifts expenditures away from fuel and toward capital, accordingly the modeling results suggest these technologies offer some security against fuel price volatility and fuel supply shocks.

## SO2 Emissions 

- <date/time>

- SO2 Emissions** **

**200**

**400**

**600**

**800**

**2005**

**2007**

**2010**

**2015**

**2018**

- Because of the trading program, there will be no changes in SO2 emissions under the 10/20 goals or EE

**Notes:**
Because of the “cap and trade” program the region has agreed to adopt as part of the 309 filing, there will be no “net” change in the level of SO2 emissions in the region. Any emissions reductions associated with RE is fully offset by increases of affected sources that are allowed to emit up to the SO2 emissions cap.

However, there are measurable economic benefits.  Because the trading program creates a monetary value for SO2 emissions, RE does decrease compliance costs of SO2 trading program by $10 million and offsets the need for 1,200 MW to 1,700 MW of new scrubber capacity. (Increases available emissions allowances—increase of supply lowers costs of allowances.)

## CO2 Emissions of Utility Sector Reduced by 10%

- <date/time>

**CO****2 ****Emissions of Utility Sector Reduced by 10%**

- -

- 5

- 10

- 15

- 20

- 25

- 30

- 35

- 40

**2005**

**2015**

**2018**

**Million Metric Tons of CO2 Saved**

**Notes:**
A secondary environmental benefit of implementing the 10/20 renewable goals is reduction in Carbon.

Estimated impact will be about 40 million metric tons per year by 2018, and like NOx emission reductions, reductions of carbon serve as a hedge against a future that may be carbon constrained.   

## NOx Emissions of Utility Sector Reduced by 1%

- <date/time>

**NO****x ****Emissions of Utility Sector Reduced by 1%**

- -

- 2

- 4

- 6

- 8

- 10

- 12

- 14

- 16

**2005**

**2015**

**2018**

**Thousand Tons of NOx Saved**

**Notes:**
Emission reductions are likely to be modest under the natural gas price scenario we used as our BAU case.

This is because future expansion for renewable energy competes against new, relatively lower emissions technology compared to the existing generation capacity in the West.  

The analysis indicates that annual emission reductions from implementing 10/20 goals will be about 1 percent for NOx emissions of the utility sector, or about 8,000 tons per year. 

However, I would also argue that as small as they seem to be these reductions provide a hedge against future emissions growth.  

## Final Observations

- Energy efficiency cost-effective emissions control strategy
- Cost of meeting 10/20 renewables goal lower than expected.
- Federal actions (e.g., production tax credit, RPS) can help
- Regional action desirable
- Need regional RE credit trading system
- Need regional action on transmission reform
- Don’t exclude out-of-state RE power in state RPS’s
- Environmental policy benefits from a balanced  energy policy.

**Notes:**
These are my personal observations from the modeling effort.

Energy efficiency is still a huge bargain.
The cost of meeting 10/20 is much less than I thought and this is mainly due to declining wind costs.
3. Although not modeled and not really within the charge of the AP2 Forum, federal action such as adoption of an a federal RPS or production tax credit disproportionately benefits the West because this is where most of the high quality renewable energy resources are located.
4. In addition to state-by-state action to promote renewables, there is need for regional action, including
	Development of a regional renewable energy credit trading system, something Western governors are supporting
	Changing transmission practices so intermittent renewables like wind are not penalized
	Finally, while it is a difficult pitch to this group, the Forum recommends that when states adopt RPSs they not limit eligible renewable resources to only those produced within the state.  A regional renewables market will buy a lot more renewables at lower cost than an in-state only market.