environmental issues in system planning jim platts – iso new england naruc summer meeting – new...
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Environmental Issues in System Planning
Jim Platts – ISO New England
NARUC Summer Meeting – New York CityJuly 15, 2007
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Presentation Objectives
• Summarize key environmental regulations andpolicies affecting electric generating plants inthe Northeastern U.S.– Air emissions– Thermal discharges
• Discuss their potential significance on systemplanning and reliability
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Principal Regulated Power Plant Air Emissions and Water Discharges
• Air– SO2
– NOX (ozone)
– Particulates– Mercury
– CO2
• Water– Plant water intake and thermal discharge
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Air Regulations – Federal
• 1990 Clean Air Act Amendments (CAAA)– Set U.S. SO2 Caps for 1995 and 2000 (9 million tons)
– NOX Reasonable Available Control Technology (RACT)
– Established Ozone Transport Region
• Clean Air Interstate Rule (CAIR) EPA 2005– Affects Eastern U.S.
– Sets lower regional SO2 Caps 2010, 2015
– Sets lower regional NOX Caps 2009, 2015
– Particulates
• Clean Air Mercury Rule (CAMR) EPA 2005– Sets caps in 2010 and 2018 for all coal plants
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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EPA Clean Air Interstate Rule (CAIR)
• Covers 28 eastern states plus Washington DC
• Health benefits estimated by EPA by 2015 at $85 to 100 billion and prevention of 17,000 premature deaths
• SO2
– By 2010: reduce 28 state total to 3.6 million tons
– By 2015: reduce by another 1.1 million tons to 2.5 million tons
– Reduces total power plant SO2 emissions by 77% from 1990 to 2015: from 15.7 million tons to 3.5 million tons
• NOX
– By 2009: reduce 1.5 million tons
– By 2015: reduce another 0.4 million tons to 1.3 million tons
– Reduces total power plant emissions 67% from 1990 to 2015: 6.7 million tons to 2.2 million tons
• Establishes federal cap-and-trade framework and states can choose their own cap and trade system
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Source: http://www.dnr.mo.gov/env/apcp/cair_camr/8-17-05mtg/epa_mdnr_cair_camr_ii.pdf
CAIR Affected Region and Emission Caps
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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National NOX and SO2 Power Plant Emissions: Historic and Projected with CAIR
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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EPA Clean Air Mercury Rule (CAMR)
• Applies “standards of performance” for mercury emissions from all existing and new coal plants
• Creates a market based cap-and-trade program to reduce mercury emissions in two steps– By 2010 reduce total U.S. emissions from 48 to 38 tons. Will be
achieved by the “co-benefits” of CAIR’s SO2 and NOX reductions
– By 2018 reduce to 15 tons– New coal plants (starting construction after 1/30/04) will have
stringent new mercury emission standards in addition to cap– States allowed flexibility on how to implement rule
• U.S. coal plants currently contribute about 1% to worldwide mercury emissions (Source: EPA)
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Regional Greenhouse Gas Initiative (RGGI) caps CO2 emissions from electric generators
• 10 Northeastern states voluntarily established a CO2 cap and trade program starting in 2009 for electric generators
• RGGI Region CO2 Cap – 188 million tons
• Allowances are allocated among 10 states
• New York, Maryland and Massachusetts to receive about 68% of Cap allowances
• First 3-year compliance period ends 12/31/11
• Compliance means: a generator must hold sufficient allowances plus offsets to cover its CO2 emissions for each compliance period
• Cap is reduced 10% from 2015 to 2018: 169 million tons
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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RGGI (Continued)
• States are setting up regulations or passing legislation to implement RGGI guided by a Model Rule
• CO2 Allowances– Minimum auction amount is 25% of states allocation. Remaining
amount would be allocated free to generators within a state– Most states are planning to auction 100% of state’s allocation
• Offsets can be used for of compliance needs• Use of offsets tied to higher CO2 allowance prices
– If less than $7/ton, maximum use is 3% of compliance needs– If between $7 and $10/ton, maximum use is 5%– If over $10/ton, maximum use is 10%
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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RGGI (Continued)
• Offset projects can be created as follows– Reduce methane from landfill gas
– Reduce SF6 leaks on T&D systems
– Reduce CO2 from improved gas and propane end use efficiency
– Take up CO2 through afforestation
– Reduce methane from agricultural wastes
• RGGI can add to these types of offset options
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Fossil Generator Emission Cost Adders with RGGI: SO2, NOX and CO2
Typical PlantFuel Cost
$/MBtu
Fuel $/MWh
SO2
$/MWh
NOX
$/MWh
CO2 $/MWh
Total $/MWh
Coal base load steam plant 2.25 20 4.7 4.4 4.4 34
Gas combined cycle 7 49 0 0.1 2.1 51
Oil peaking steam plant 7 73.5 11.5 4.4 5.4 95
CO2 allowance cost does not appear to change relative dispatch order of fossil plants
For illustrative purposes only
Allowance Prices ($/ton): SO2 – 1,085; NOX – 2,800; CO2 – 5
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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RGGI Implications for Generatorsand Market
• RGGI plants will have an additional dispatch cost adder starting in 2009
• Coal and oil plants will have higher CO2 adders than gas plants due to their higher CO2 emission rates (lbs/MWh)
• Higher emission costs will tend to increase operation of non or low CO2 emitting plants, e.g. hydro, nuclear, wind, gas fired combined-cycle
• May increase imports from non-RGGI regions (leakage)
• Costs of CO2 allowances will have to be recovered in the wholesale power markets similar to SO2 and NOX allowances today
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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A long range view of New England’s possible generation system’s CO2 emissions
• ISO New England conducted a Scenario Analysis (SA) of 7 different resource expansions to meet a 35,000 MW load (ISO’s 2006 peak was 27,130 MW)
• Performed a one-year system simulation for 35,000 MW of each scenario and for many sensitivity cases
• All information and results at http://www.iso-ne.com/committees/comm_wkgrps/othr/sas/index.html
• SA was an open stakeholder process to provide region’s policy makers with impacts of alternatives ways to meet region’s projected needs, not suggest any one path
• Final report due around August 1
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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New England Scenario Analysis
• Seven future resource scenarios
• Each models 8,000-MW system expansion based on:
– A representative mix of the resources currently being proposed, plus
– A large concentration of a certain technology / resource option
• Measure and compare reliability, economic, and environmental performance of each scenario
• Results can be used to begin discussions of policy choices and implications
31,000
5,400
2,600
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10,000
15,000
20,000
25,000
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40,000
Scenario Analysis
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Existing Supply 9/06 Queue Mix Each Scenario
8,000
39,000
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Many Routes to Meet Future Electricity Needs Region most likely to choose a combination of these options
EXIT 1QUEUE MIX
EXIT 3NUCLEAREXIT 2
DEMAND RESOURCES
EXIT 5NATURAL GAS
EXIT 4COAL
EXIT 6RENEWABLES
EXIT 7IMPORTS
Seven Scenarios Identified
DPW
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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New England’s Simulated Generation System’sCO2 emissions for Scenario Analysis:35,000 MW load
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CO2 Emissions from Non-RGGI Units New England Allocation of 2018 RGGI Cap Allowances (50.2 million tons)
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Water Regulations
• Clean Water Act Section 316b– Requires EPA to insure Best Available Control
Technology (BACT) for cooling intake structures– 3 Phase implementation
• Phase I applies to new facilities
• Phase II applies to large existing plants > 50 Million gallons per day (MGD) (equivalent to about 60 MW)
• Phase III applies power plants < 50 MGD and other facilities
– Site by site determination of Phases I and II– Implication is cooling towers may need to be
installed on existing plants
• In New York some merchant plants have dry cooling
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Environmental Issues: What do they mean for System Planning?
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Impacts of environmental regulations on power plants
• Will increase the costs of fossil power plants• Fossil generating plants will have increased emission
constraints from new air regulations. This translates to:– More complex plant operation
• Can affect startup/shutdown
• Compliance strategy could limit energy from plants
• Economic bidding must recognize costs of new emission allowances
– Higher costs for emissions compliance
• Regulations will have little or no impact on costsof non- and low-emitting power plantse.g. nuclear, hydro, wind and fuel cells
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Impacts of environmental regulations on power plants (continued)
• Coal plants are more vulnerable than gas/oil-fired units:– Higher CO2 emissions rate
– Mercury emissions– Gas/oil price differential with coal may still give coal an economic
advantage even with added CO2 costs
– Potential for added costs for cooling towers
• May cause earlier plant retirements due to changing economics or inability to comply– ISO’s concern for generating unit attrition when outlook shows
need for more capacity with the 5-10 year planning horizon
• Overlapping maintenance or refurbishing scheduling for compliance
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
22
Impacts on System Planning
• Meeting resource adequacy requirements may encourage shift to low or non-CO2 emitting generating and demand side resources– An example is Ontario’s plan for replacement of it coal-fired units– RGGI’s regional economic expansion modeling yielded
• Mostly wind and new combined cycle additions with low natural gas prices
• Mostly clean coal, more wind and some combined cycle with high natural gas prices
– Potentially can change transmission flow patterns and this may require additional system improvements
– ISO’s modeling of CO2 emissions shows need for new zero or low emitting resources to meet RGGI CO2 cap
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Impacts on System Planning (continued
• Requirements and incentives for clean resources can continue shift to natural gas plants and increase fuel diversity and price issues
• Gas combined cycle plants are– Easy to site– Have low capital cost– Produce lowest fossil plant emissions– Increase regional dependence on natural gas supply
i.e. LNG facilities, a possible reliability issue in the winter– Create more demand can increase price volatility
Environmental Issues in System PlanningNARUC Summer Committee Meeting July 15, 2007
© 2007 ISO New England Inc.
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Summary
• Key environmental issues are ozone attainment, global warming, mercury reductions and water discharges
• Addressing these issues can lead to complex policy and planning evaluations and decisions
• In response to these regulations, generation costs for generators will likely increase and therefore energy costs will likely increase
• A region’s response to these issues needs to be flexible to not impair electric system reliability and meet increased environmental constraints
• Zero or low emitting resources are most likely needed for meeting environmental constraints in the future