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Western Regional Air Partnership Board Meeting Tempe, Az. November 12, 2002

This presentation outlines the findings and policy recommendations of the Air Pollution Prevention Forum on renewable energy and energy efficiency. It discusses market barriers, quantifies emissions reductions and economic impacts, and recommends a portfolio of policies and best practices for states and tribes to adopt. The presentation also highlights the cost savings and secondary environmental benefits of renewable energy and energy efficiency.

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Western Regional Air Partnership Board Meeting Tempe, Az. November 12, 2002

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  1. Renewable Energy and Energy EfficiencyFindings and Policy Recommendations of the Air Pollution Prevention Forum Western Regional Air Partnership Board Meeting Tempe, Az. November 12, 2002

  2. Outline of Presentation • Background on the AP2 Forum • AP2 Findings and Policy Recommendations • Discussion of WRAP Policy Statement • Reaffirm GCVTC findings • WRAP Policy on Renewable Energy/Efficiency • Management directive to implement policies • Questions and Discussion

  3. AP2 Charter Recommend legislative actions, economic incentives and regulatory policies States and Tribes can adopt to meet the GVCT 10/20 renewable energy goal and increase the use of energy efficiency technologies in the region.

  4. Objectives • 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.

  5. Renewable Energy Recommended Policies (June 2000) Air Pollution Prevention Forum Work Plan Energy Efficiency Policies and “Best-Practices (August 2001) We are here! • IPM Model • Demand • Fuel Costs • Gen Capacity • Electricity Costs • Gen Output • Emissions • (June 2002) • REMI Model • Employment • Income • GRP • (August) 2002) Policy Recommendations IOC WRAP (November 2002) Model Visibility Impacts AP2 Report to States & Tribes

  6. WRAP Policy Statement • Affirmation of GCVTC findings • Policy endorsing renewable energy and efficiency as regional P2 strategies • WRAP actions to implement policies.

  7. Affirm GCVTC Findings 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)

  8. Cost Savings From RE and EE Between $700 million to $1 Billion $20,000 $15,811 $14,830 $15,131 $15,000 Levelized Annual Production Cost (2005 –2022) Million 1997 $ $10,000 $5,000 $0 BAU EE Only With EE and 10/20 Goals Includes cost of implementing EE and avoided transmission distribution cost from EE use

  9. NOx Emissions Reductions of 2% in Utility Sector 16 14 12 10 8 Thousand Tons of NOx Saved 6 4 2 - 2005 2015 2018

  10. Emissions limited through the regional SO2 trading program SO2 ('000 tons) SO2 Emissions 800 600 Because of the trading program, there will be no changes in SO2 emissions under the 10/20 goals or EE 400 200 2005 2007 2010 2015 2018

  11. Secondary Economic and Environmental Benefits • Lowers SO2 compliance cost of Annex cap-and-trade program. • Reduces risk of electricity price increases due to natural gas prices. • Mitigates costs of compliance with potential CO2 regulations. • Small positive or no impact on the economy of the transport region.

  12. WRAP Action Item No. 1 “WRAP reaffirms findings of the GCVTC that renewable energy and energy efficiency are tools that result in emissions reductions, energy costs savings and provide secondary environmental and economic benefits. In conjunction with other WRAP emissions control strategies, renewables and energy efficiency can contribute to improving visibility in the transport region.”

  13. WRAP Policy on Renewable Energy and Efficiency • Ten policy findings for WRAP to consider. • Linked to AP2 Forum findings and recommendations.

  14. WRAP Policy on Renewable Energy and Efficiency • Joint implementation of AP2 Forum’s RE and EE policy and program recommendations result in the greatest benefit. • Economic incentives are necessary for states and tribes to make progress towards “10/20 goal”. • Electricity consumers should be able to voluntarily chose renewable electricity products and services. • States and tribes should take policy actions that improve efficiency of the market place.

  15. WRAP Policy on Renewable Energy and Efficiency • States and Tribes should support utility/state sponsored DSM programs; raise efficiency standards for buildings; and acknowledge emissions benefits of EE in SIPS/TIPS. • Actions should be taken to reform transmission policies. • An emissions cap-and-trade program is an economically efficient method to achieve emissions reductions. • States, Tribes and regional energy organizations should act in concert to implement regional policies.

  16. WRAP Policy on Renewable Energy and Efficiency • Federal policies that provide incentives to increase development of renewable energy in the region should be supported. • States, Tribal governments and federal agencies should “lead-by-example”.

  17. WRAP Action Item No. 2 Adopt “WRAP Policy” findings supporting State, Tribal and regional actions that increase renewable energy generation and deployment of energy efficient technologies, products and services in the transport region.

  18. WRAP Management Directive • Forward AP2 Forum’s recommendations and reports to States and Tribes. • Monitor Transport Region’s progress implementing AP2 recommendations and meeting 10/20 goal. • Support States and Tribes preparing regional haze SIPS/TIPS with analytical tools and technical assistance. • Assist WGA efforts to establish a viable renewable energy certificates market in the West.

  19. WRAP Action Item No. 3 In consideration of the WRAP’s policy on renewable energy and energy efficiency and recommendations of the AP2 Forum, direct the IOC to implement actions identified in the Management Directive of the WRAP Policy Statement.

  20. Questions and Discussion

  21. Secondary Regional Economic Impacts • Small, and mostly positive regional economic impacts • Local economic impacts more significant • Driven by investment/employment linkage • Meeting 10/20 goal with EE increases….

  22. 12047: - Please see comments below. Regional Employment 10,000 • 4,097 ave. annual increase in employment • Most jobs created in 2010-2015 period • Colorado, Arizona, and Wyoming experience largest growth in employment….. 8,441 8,000 6,000 5,050 4,097 4,000 2,000 0 1 -1,389 -2,000 2005-2010 2011-2015 2016-2020 Average

  23. 12047: Please see comments below Real Disposable Income(Thousand $) $1,000,000 • Pursuing 10/20 goal and EE increases annual levelized disposable income. • Regional income increases by an average of $547 million. • Largest increase occurs in the 2016-2020 period. $853,638 $787,882 $800,000 $546,600 $600,000 $400,000 $277,557 $200,000 $0 1 2005-2010 2011-2015 2016-2020 Average

  24. 12047: Please see comments below Gross Regional Product( Thousand Dollars) 200,000 100,242 100,000 • $58 million annual average decrease in gross regional product (less than 0.01%) • 7 of 9 states in Transport Region experience increase in gross regional product. 29,541 0 1 -58,330 -100,000 -200,000 -300,000 -400,000 -500,000 -474,913 -600,000 2005-2010 2011-2015 2016-2020 Average

  25. 12047: Please see comments below 10/20 RE Goal Increases Annual Electricity Production Cost 2% - 5% $20,000 $16,630 $16,067 $15,811 $15,000 Levelized Annual Production Cost (2005 –2022) Million 1997 $ $10,000 $5,000 $- 10/20 Goals 10/20 Goals with no change in wind costs BAU

  26. 18% 29% 14% 0% Renewable Energy Generation Mix in 2018 6% 7% 26% 12047: Please see comments below Renewable Generation Mix 2018 GCVTC Generation Mix 2018

  27. Fossil-Fuel Capacity DisplacedRegion Meets 10/20 Goal 2,000 Combined Cycle - Oil/Gas Turbines (2,000) CoGen Coal MegaWatts (4,000) (6,000) (8,000) (10,000)

  28. 12047: Please see comments below 10/20 Goals – Impact on Wholesale Energy Prices Wholesale energy prices under 10/20 goals 35 29.42 29.33 .89 30 25 28.53 20 1997 $/MWh 15 10 5 0 BAU 10/20 Goals BAU 10/20 Goals Added cost to meet 10/20

  29. 12047: Edits in Bold Red, please see edits below Energy Efficiency Modeling Results • Implementation of the energy efficiency recommendations would reduce power demand in the Western states by 1.0 % in 2005 and 8% in 2018. • Represents 54,000 (56,000) GWH of saved energy and 6,100 (15,000) MW of capacity (in 2018). • Net savings in electricity production costs range from $200 ($150) million in 2005 to $2.1 ($2) billion in 2018.

  30. Summary of Modeling Results • RE/EE strategies reduce haze-causing pollutants • Visibility improvements not large • SO2 cap • “Cleaner” gas-fired generation is displaced • Benefits beyond regional haze • Energy savings • Downward pressure on gas prices • Lowers SO2 compliance costs • Significant CO2 reductions • Positive impact on region’s jobs, income and economic activity.

  31. 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

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