# Presentation: 453366

## Clean Air /  Clean Energy:Policy Options for Multiple Objectives

- Alison Bailie
- Stephen Bernow
- William Dougherty
- Sivan Kartha

- May 2002

## NREL sponsored project, part of larger effort to explore synergies between clean air and clean energy policies
Tellus focused on quantitative analysis of various policies – tracked incremental renewable electricity generation, emission reductions and costs
Also assessed implementation issues on qualitative basis

- Tellus focused on quantitative analysis of various policies – tracked incremental renewable electricity generation, emission reductions and costs
- Also assessed implementation issues on qualitative basis

**Introduction**

## Tellus-NEMS – modifications to NEMS
Project description – policies, modeling
Results – renewable energy use, emissions, economic costs
Policy implications
Other aspects of study

- Project description – policies, modeling
- Results – renewable energy use, emissions, economic costs
- Policy implications
- Other aspects of study

**Presentation Outline**

## Tellus-NEMS

-   Tellus modified the version of NEMS used for the Annual Energy Outlook 2002
-   Modifications based on review of parameters used to characterize renewable energy plants for electricity generation by renewable energy experts familiar with NEMS from 	- Union of Concerned Scientists	- NREL, ORNL, LBL	- Princeton Economic Research Institute	- Michael Brower

**Tellus-NEMS**

## Removed regional build limits for biomass and solar technologies
Changed intermittency constraint to 20% per region, rather than 12% 
Reduced aspects of geothermal capital costs 	- field costs by 12%	- drilling costs by 15%	- power plant costs by 25%
	and eliminated geothermal capital cost multipliers

- Changed intermittency constraint to 20% per region, rather than 12%
- Reduced aspects of geothermal capital costs 	- field costs by 12%	- drilling costs by 15%	- power plant costs by 25%
- 	and eliminated geothermal capital cost multipliers

**Model Modifications**

## Reduced capital cost multipliers from maximum of 300% to maximum of 140%
Maximum multiplier combines additional costs associated with access and market issues of higher resource use with costs of backup requirements
Reduced available windy land areas by 35%-39% for mountainous regions, 17%-20% for non-mountainous regions
Reduction based on analysis of wind availability by UCS 

- Maximum multiplier combines additional costs associated with access and market issues of higher resource use with costs of backup requirements
- Reduced available windy land areas by 35%-39% for mountainous regions, 17%-20% for non-mountainous regions
- Reduction based on analysis of wind availability by UCS

**Model Modifications - wind**

## Effects of adjustments to multipliers and land area

**Model Modifications - wind**

## Changed capacity factors for wind
Based on input from NREL and LBL

- Based on input from NREL and LBL

**Model Modifications - wind**

## Comparison of base case vs AEO2002 reference case results

**Model Modifications - Impacts**

- About half of the increase in wind generation is from increased capacity and half is from changes to capacity factors

- Electricity generation by renewables in 2020 (TWh)

- Avoided generation consists of 7 TWh coal, 25 TWh natural gas and 2 TWh oil

## Policies

- Explored adjustments to existing Clean Air Act
- The 1990 Clean Air Act Amendments included the Conservation and Renewable Energy Reserve (CRER)
- SO2 allowances are set-aside for renewable energy and energy conservation projects, qualifying sources obtain allowances to sell on the market, based on one allowance per 500 MWh generated/saved

## Policies - continued

- CRER underutilized – only 44,000 of total reserve of 300,000 had been awarded (by December 2000)
- This study considered the following adjustments	- increasing the number of credits per MWh	- decreasing the size of the SO2 cap

## Analytic Approach

- Applied negative externalities to renewable energy sources in the capacity planning module of NEMS
- These externalities (in $/MWh) mimic the financial incentives that renewable generators would gain from selling SO2 allowances on the market
- We analyzed six cases with externalities ranging from -$1.4/MWh to -$34/MWh (representing increased numbers of allowances per MWh of 2 to 93 times the current CRER level)
- Also analyzed two cases with tighter SO2 emission caps

## Results

- All costs in 2000$

## ElectricityGeneration

## Emission Reductions

## Cost Curves

## Natural Gas Prices

## Natural Gas Price Feedbacks

## Electricity Prices

## Emission Reductions – tightened SO2 caps

## Policy Implications

- Change in natural gas prices plays strong role in overall costs

## Policy Implications

- -  To gain even small increases in renewables requires large transfer of credits-  Combining with tighter emission caps will decrease the transfer requirement, still significant when aiming for more than 10% renewables-  May be necessary to combine with other policies – eg. greater production tax credit

## Other Aspects of Study

- Compare this policy with RPS and set-asides in NOx cap and trade program
- Compare policies based on meeting objectives (renewable electricity / clean air) and costs
- Describe implementation issues of alternative policies
- Discuss interactions when policies are combined