To Output or Not to Output Is It Really A Question?
Why Allowances Anyway? • Started in Acid Rain Program • Reduces Litigation Which Delays Emission Reductions • Overall Cap on Emissions is Set. Allows Companies to Determine Optimal and Least Cost Compliance Plans • Not all Plants Have to Install Identical Controls • Allowances Provided Based on Historical Heat INPUT, Minus the Overall Cap for Each Phase. Utilities can then Determine how to Most Effectively Control Plants • Remaining Allowances Help to Smooth out Capital Investments and Plant Requirements
How Does It Really Work? • Plant A = 1600 Allowances: Input • Must Cut Emissions by 50% = 800 Allowances Needed to Continue Operations • Instead Plant A Cuts Emissions by 80% • 480 Allowances Remain to Use at More Expensive Plants or to Sell in the Market, Reducing the Total Cost of Compliance for Everyone
Input Vs. Output Example Plant APlant B • Spends $200 + million Spends No $ • Receives Allowances to Wants Allowance Continue Running Plant Stranded Cost Recovery • Costs Reduced Plant Runs Competitively by Sale of Excess Allowances
All Power Sources:Have Some Negative Environmental Aspect • Nukes: • Waste Problem • Government Subsidizes Final Nuke Waste Resting Ground; States w/o Nukes face Increased Liability due to Waste Transport.
All Power Sources Have Some Negative Environmental Aspect • Nukes: Part Duex • Accident Problem • Government Subsidizes Potential Accidents by Limiting Nuke Liability to the Tune of several hundred Million Per Year
All Power Sources Have Some Negative Environmental Aspect • Wind Power • “Cussinart in the Sky” • Kills Endangered Species; Cute Little Bats; Ruins Views of Nantucket Sound
All Power Sources Have Some Negative Environmental Aspect • Hydro • Fish Boulebaisse • Gets in the Way of Barge Traffic; Ruins Salmon Sex Drive; Makes Mincemeat of Fish – Really Ticking off the Bear Population
Output Based StandardsTruth And Consequences • Truth: • Output Based Standards: Giant Wealth Transfer • Takes Allowances from Coal Plants and Gives them to Nukes, Gas and Renewables • Then Nukes, Gas and Renewables Turn Around and Sell them to Coal Facilities • Does NOT Improve the Environment • Incentive to Move to Natural Gas • What’s the point?
Output Based StandardsTruth And Consequences • Consequences • States with Large Coal Generation Fleet: BIG LOSERS • Significantly Increases Cost of Environmental Compliance: Hurts Consumers • Turns Acid Rain Program on its Head • Rewards Outmoded and Outdated Technologies Such as 30 year Old Nukes; Outdated Renewables; Inefficient Natural Gas Units • Provides Primarily Nuke or Gas States With Ability to Sell to Coal States or Even to Increase Emissions
How About Another Example? • Handouts: • For Mercury: • Big Winners: (Get more allowances then they need) • California; Maine; Utah; New Hampshire; Hawaii; Colorado • For NOx • Big Winners: (Get to increase NOx emissions) • Rhode Island; California; Maine; Idaho; New York (don’t they always sue us???)
Final Example • The Big Losers • For Mercury • Vermont; Rhode Island; Idaho; PA; IL; NM; AL; MD; IO; WA; DE; OH; WVA; OK; LA; MI; MO; NY etc, etc, • For NOx • Ohio; KY; SD; TN; NB; KS; FL; etc.; etc.
What Else Is Wrong with the Ouput Based Approach? • Acid Rain Program and all State SIPs Based on Input • Change Would Result in Hybrid Output & Input Based System – Confusing, Cost Ineffective • Some Supporters Just Want Multi-Emissions to Die • Output Based Approach has Little Political Support • Some Supporters Simply want Cash – Without Bearing the Significant Cost of Making Reductions • Some Companies Support Output Based Approach, but Refuse to Support Economic Dispatch on a Fuel Neutral basis Because it Would Impact Their Old, Inefficient Natural Gas Plants
Can’t We All Just Get Along? • New Units Could be Awarded Allowances on an Output Basis – Puts all New Plants on Even Playing Field Regardless of Fuel Choice
Final Slide: I Really Mean It! • Going Forward • Prioritize Issues: Output Based Standards simply conquers and divides – does not solve emission problem • Multi-Emissions Legislation is Important, Every Moment of Delay = Delay in Air Quality Improvements and Increases Costs • Please Don’t Feed the Lawyers By Throwing These Issues Back to Court