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Sponsored by AABE Legislative Issues and Public Policy Committee August 27, 2009

American Association of Blacks in Energy (AABE) Webinar on The American Clean Energy and Security Act – H.R. 2454. Sponsored by AABE Legislative Issues and Public Policy Committee August 27, 2009. AGENDA. Introduction and Background Key of Provisions of H.R. 2454 Climate Change

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Sponsored by AABE Legislative Issues and Public Policy Committee August 27, 2009

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  1. American Association of Blacks in Energy (AABE) Webinar on The American Clean Energy and Security Act – H.R. 2454 Sponsored by AABE Legislative Issues and Public Policy Committee August 27, 2009

  2. AGENDA • Introduction and Background • Key of Provisions of H.R. 2454 • Climate Change • Combined Energy Efficiency and Renewable Energy Standard • Other • Questions • Action Items

  3. Background on H.R. 2454Passed By House June 26, 2009 • Four titles • Promoting clean energy • Increasing energy efficiency • Combating climate change • Assisting the transition to a clean energy economy • Regulates greenhouse gas emissions (GHG) • Amends Clean Air Act adding a Title VII • Establishes “Global Warming Reduction Program”

  4. Senate Action on Climate Legislation • Draft legislation to be released soon after the Labor Day recess • Chairwoman Boxer, Senate Environment and Public Works Committee • H.R. 2454 a starting point • Legislative hearings followed by markup • Week of September 22 before Senate Environment and Public Works • Other Senate Committees will have substantial input • Energy and Natural Resources, Finance, Agriculture, Commerce and Foreign Relations • Goal - Complete work of Committees by September 28 • Deadline set by Majority Leader Reid

  5. Climate Change QuestionsWe Must Answer! • How do you minimize the impact of compliance costs on low-income consumers? • What must U.S. climate change legislation and carbon management strategy include to • Ensure economic growth? • Ensure energy security? • Avoid unfairness?

  6. Key Climate Questions • Economy Wide? • Cap-and-Trade or Tax? • Mitigating Customer Impacts? • Allowances • Offsets • Strategic allowance reserve • Other approaches • Targets and Timetables?

  7. U.S. Green House Gas Emissions By Sector U.S. Territories 1% Agriculture 7% Electricity Residential Generation 6% 32% Commercial 7% Industry 19% Transportation 28%

  8. Targets and TimetablesLeading Congressional Proposals H.R. 2454  U.S. CAP proposal Boucher-Dingell discussion draft (110th Congress) • 3 % below 2005 by 2012 • 17 % below 2005 by 2020 • 42 % below 2005 by 2030 • 83 % below 2005 by 2050 • 3 % below to 2 % above 2005 by 2012 • 14-20 % below 2005 by 2020 • 42 % below 2005 by 2030 • 80 % below 2005 by 2050 • 6 % below 2005 levels by 2020 • 44 % below 2005 levels by 2030 • 80 % below 2005 levels by 2050

  9. Targets and TimetablesQuestions / Concerns • To meet short-term targets • Power sector will rely on energy efficiency, renewables and natural gas • In the medium term (i.e., 2020-2025) • Targets should be harmonized with the development and commercial deployment of advanced climate technologies and measures • (e.g., nuclear energy, advanced coal technologies with carbon capture and storage, PHEVs, smart grid) • Electricity demand will increase 21% by 2030 • Latest DOE Energy Information Administration forecast

  10. Targets and TimetablesQuestions / Concerns • Cost-containment mechanisms to mitigate consumer cost increases • Allocation of allowances (v. auctions) • Price collar • Full and robust domestic and international offsets • Additional mandates will further increase consumers’ electricity prices • e.g., Combined Efficiency and Renewable Energy Standard (CERES), performance standards for new coal generation and smart grid peak reduction goals

  11. Allocation of AllowancesPrimary Goals • Help mitigate the impact of increased energy prices on consumers • Assist in transition to clean energy economy • Advance development and deployment of clean energy technologies, including energy efficiency

  12. Mitigating Customer ImpactsAllowances • Electric power sector 35% • For consumers until 2025, phase out 2026 – 2030 • Small electric LDCs .5% • For (sales under 4 million MWh/year) for renewable, efficiency and low income; cannot sell output for RECs • Natural gas consumers - 9% • Low-and-middle-income consumers ~15% (auctioned) • Home heating oil and propane ~2% • Energy efficiency 3% to 6% • Through 2050

  13. Mitigating Customer ImpactsOffsets • Allows use of up to 2 billion tons annually of offsets • Up to 1 billion from domestic sources • With waiver (insufficient domestic offsets at market price of allowances), up to 1.5 billion from international sources • Recognizes three types of offsets • Domestic (exchanged at 1:1 basis) • International • Term offsets (only valid for five years) • Concerns • Questions about supply and ability to fully utilize cap • Domestic offsets mainly from ag, forestry projects (<1/2 billion tons)? • International offsets largely dependent on successor to Kyoto Protocol • EPA has discretion whether to issue any international offset credits

  14. Mitigating Customer ImpactsStrategic Allowance Reserve • Provide price cushion if allowance prices rise faster than expected • Reserve pool stocked by borrowing from future • 1% of the allowances from years 2012-2019 • 2% from years 2020-2029 • 3% from years 2030-2050 (2.5 billion total) • Minimum auction price = 60% above rolling 36-month average market price by 2015 • In 2012, the minimum price will be $28/ton • Limits on purchase levels • Auction revenue used to purchase REDD offsets • Converted to allowances at 1.25:1 ratio, used to replenish the reserve

  15. Mitigating Customer ImpactsOther Approaches • Stretching out the transition to full auction • Economic safety valve • Upper limit or ceiling on price for allowances • To limit impacts of price volatility and rate impacts • Price collar • Also includes minimum prices for allowances • Mitigating near- and medium-term targets

  16. Federal Preemption • States cannot enact or enforce separate cap-and-trade programs from 2012-2017 • Can exchange Regional Greenhouse Gas Initiative (RGGI), California or Western Climate Initiative (WCI) permits issued before 2012 for federal permits, but not one-for-one exchange • States can continue to regulate GHG emissions in other ways • CAFÉ standards • Emissions caps • Required surrender of federal allowances • Etc. • Other federal laws not addressed • Endangered Species Act, Clean Water Act, etc.

  17. AABE Climate Change Principles • AABE supports • Consistency of compliance timetables w/ technology development • Ensuring low / fixed income consumers are not disproportionately impacted • Cost containment measures • Preserving all energy options – energy efficiency, renewables, advanced nuclear, carbon capture and storage • Inclusion of all sectors of the economy and all sources of GHG • Balancing economic improvements with economic development • Cost effective GHG reductions • Green jobs, economic development, maintain trade balances • Public / private partnerships – research, development & deployment • Use of alternative fuels and needed infrastructure

  18. What Will It Take to Address Climate Change? • Renewables • Energy efficiency • Clean coal technologies • Carbon capture and storage • Nuclear • Plug-in hybrid electric vehicles (Smart grid) There is no silver bullet! We need it all … but it will be costly!

  19. Renewable / Energy Efficiency QuestionsWe Must Answer! • Renewable Technology • How much can increased renewable capacity contribute going forward? • How do we get transmission constructed for renewables? • Energy Efficiency • How significant of a role can energy efficiency play in the future? • How can customers benefit and actively participate in energy efficiency programs from the residential and commercial perspectives?

  20. Combined Efficiency and Renewable Electricity Standard (CERES) • 20% federal CERES by 2020 for retail electricity suppliers • Federal Energy Regulatory Commission (FERC) administers • “Electricity savings” definition: • Reductions in electricity consumption, relative to business as usual. • FERC standards must ensure that electric suppliers had a “significant role” • Savings due to improved codes and standards are specifically excluded from “electricity savings” • Alternative compliance option of $0.25 / MWh; trading and banking option; civil penalties • Three-fourths (15% in 2020) must be qualified renewables unless a state petitions for more efficiency (up to two-fifths, or 8% in 2020)

  21. Waxman-Markey CERES Requirements20% by 2020 Percentage

  22. CERES – Changes Made on House Floor • Central Procurement State (CPS) • State runs central renewable procurement in lieu of RES • State assumes responsibility for CERES compliance • Federal RECs issued directly to state fund • State defines renewable resources • Mandatory state public benefit fund pays for renewables • Funded by retail customers via suppliers • State can make alternative compliance payments or demonstrate electricity savings

  23. Integrating RenewablesOperational Challenges • Higher RPS levels can create significant surplus energy • Can’t be used on grid or sold to others • Energy storage / off-peak electric vehicle charging can mitigate problem • At present these technologies can not significantly contribute to resource plans - smart grid will help enable these new technologies • Higher RPS levels will require higher planning reserve margins for system backup to maintain reliability • More ancillary services req’d to maintain frequency and voltage levels • Generation and storage technologies required to meet system regulation, load following, and ramping requirements • Quick start and fast ramping technologies (peaking / storage) to manage generation variability and maintain reliability

  24. Biggest Challenge for Renewables … Transmission • Planning • Siting • Cost Allocation Renewables are Variable Resources!

  25. Renewables ChallengesTransmission Planning (Section 216A) • House-passed version has slightly modified planning section - Section 216A • FERC to develop planning principles • Planning entities submit plans within 18 months thereafter • Plans are to roll-up from subregional plans to interconnection-wide plans, if possible • A multi-regional plan cannot impose a facility on a region that did not include the facility in its plan • No cost allocation provision

  26. Renewables ChallengesBackstop Siting • Added on House floor • Provides FERC with limited siting authority when states fail to act • Treats Eastern and Western Interconnections differently • Eastern Interconnection • Current Federal Power Act Section 216 applies with additional requirement that facility must be “interstate in nature or is an intrastate segment integral to a proposed interstate facility” • Fourth Circuit decision problem not fixed • DOE is lead agency for siting

  27. Renewables ChallengesBackstop Siting • Western Interconnection • Adds new Federal Power Act (FPA) section 216B that applies only in the Western Interconnection • Applicability: Facility must be included in one or more plans and identified as needed “in significant measure” to meet the demand for renewables; multistate; no voltage limitation • FERC backstop siting triggered if state: • Did not issue a decision within one year; • Denied a complete application for siting; or • Authorized siting of the facility subject to conditions that unreasonably interfere with the development of the facility • Federal lead agency: FERC and Interior (for federal lands)

  28. Renewables ChallengesTransmission Cost Allocation • Who pays for new transmission? • Everyone pays • Interconnection-wide / rolled in • Beneficiaries pay • Participant funding • No cost allocation provisions in H.R. 2454 • Strong advocates on all sides • Heated debates

  29. AABE Renewables Principles • AABE supports • Renewables as part of an overall strategy for meeting energy and climate change challenges • Renewable programs that carefully balance the availability of renewable technologies, their cost effectiveness and environmental benefits • Recognition of renewable energy standards being developed at the state level • Research, education and training for African-Americans to expedite the development of renewable energy solutions • Renewable and alternative fuels and needed infrastructure • Working with regional and local communities on renewable programs

  30. New Efficiency Standards • Building efficiency code requirements • 30% efficiency improvement in codes by date of enactment • Compared to 2004 ASHRAE baseline / 2006 IECC baseline • 50% efficiency improvement by 2015, 75% by 2030 • Outdoor light bulb and luminaire efficiency standards • Staged approach, start in 2016, increase in 2018 • New efficiency standards • Water dispensers, portable electric spas, and commercial hot food holding cabinets, and increased standards for commercial furnaces (2011) • New standards for portable table lamps (2012) • Significant changes to EnergyGuide and Energy Star labels • Carbon footprint estimates added to EnergyGuide labels (AGA endorses), Ranking of Energy Star products

  31. AABE Energy Efficiency Principles • ABBE supports • Enhancements to US energy infrastructure for the development and implementation of energy efficient technologies • Focused national, regional and local effort to educate and make available to all consumers a broad range of options to encourage energy efficiency • Aggressive campaign for the promotion of energy efficiency technologies including “smart” buildings, appliances, grid and electric meters • Optimizing domestic and foreign energy resources while promoting energy security, economic prosperity and environmental solutions • Government and commercial suppliers making necessary energy efficiency upgrades to residential and commercial customers

  32. Smart Grid Peak Demand Reduction Goals • Must establish peak demand reduction goals w/in later than 1 year from enactment • Applies to any load-serving entity (LSE) serving more than 250 MW • FERC will develop methodology for adjustments to applicable baseline within 180 days of bill enactment • DOE, in consultation with FERC, EPA and NERC, will develop a system and rules for measurement and verification of demand reductions • Must specify reduction / mitigation by a minimum percentage from the applicable baseline to a lower peak demand during year 2012 • Greater reductions are required in 2015

  33. New Coal GenerationPerformance Standards “Commercial operation” means at least 4 GW of generating units, including at least 2 EGUs of 250 MW, injecting and storing at least 12 million tons of CO2 per year into geologic formations other than oil and gas fields in the U.S. Of the 4 GW, 3 GW must be EGUs; 1 GW may be industrial.

  34. New Coal GenerationCarbon Capture and Storage (CCS) • “National strategy” for a CCS regulatory framework • Federal agencies to develop a (sec. 111) • Geologic storage and propose regulations • EPA to finalize regulations for under the Clean Air Act (sec. 112) • Study of legal framework for geologic storage sites • Establish task force (sec. 113) • New Carbon Storage Research Corporation • Funded by charge on deliveries of fossil fuel electricity • Fund commercial-scale (>250MW), integrated demo projects (sec. 114) • $10 billion over 10 years; 50% of funds reserved for utility projects • Corporation is an affiliate of EPRI and not an agent of the U.S. government

  35. Other Energy Investments • Advanced Research Projects Agency – Energy (ARPA-E) • Allocated 1.05% of allowances for 2012-2050 to be awarded competitively to accelerate novel early-stage energy research • Clean Energy Deployment Administration (CEDA) • Newly-created independent government corporation to provide financing assistance to clean energy technologies for which commercial financing is not available at affordable rates • Focus on deployment of clean energy technologies • Clean energy technologies = help stabilize GHG concentration • Nuclear projects can receive financing assistance • Financing: loans, guarantees, letters of credit, etc. • Davis-Bacon applies to projects that receive assistance

  36. QUESTIONS

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