epri prism 2.0 environmental controls analysis with regen

Victor Niemeyer, EPRI

RFF Modeling Workshop on Regulatory Impacts on the USElectricity Sector

Washington, DC

July 19, 2012

EPRI PRISM 2.0 Environmental ControlsAnalysis with REGEN

2© 2012 Electric Power Research Institute, Inc. All rights reserved.

Contact Information

Together…Shaping the Future of Electricity

Bryan HanneganVice President, Environment and RenewablesElectric Power Research Institute(650) [email protected]

Energy and Environmental Analysis Group

Tom Wilson Victor NiemeyerSenior Program Manager Technical Executive(650) 855-7928 [email protected] [email protected]

Geoffrey Blanford Francisco de la ChesnayeProgram Manager Program Manager(650) 855-2126 (202) [email protected] [email protected]

mailto:[email protected]






Pacific

California

Mountain-N

Texas

NW-Central

SW-Central

NE-Central-R

M-Atlantic

S-Atlantic

SE-Central

Florida

NENE-Central-C NY

Mountain-S

US-REGEN Model Description


Pacific

California

Mountain-N

Texas

NW-Central

SW-Central

NE-Central-R

M-Atlantic

S-Atlantic

SE-Central

Florida

NENE-Central-C NY

Mountain-S

US-REGEN Model Description

GeneralEquilibrium

Economy Model

• Aggregate EconomicRepresentation

• Energy Markets for Oil, NaturalGas, Coal, & Bioenergy

• Foreign Exchange

• Landuse (Ag and Forest)

Energy Demand(Electric & Non-

Electric)

• Energy Efficiency acrossCommercial, Industrial, &

Residential Sectors

• Transportation: Detailed model ofvehicle technologies and

intermodal choices

Electric SectorModule

• CO2 Mitigation Technologies

• Environmental Controls: Air,Water, Land

• Transmission


Integrated Analysis of Retrofit Decision in Lightof Full Set of Air (non-GHG), Water, Ash Policies

• Full Control policy (stringent control for SO2, NOx, Hg,cooling, and CCRs, but no CO2)

• Assume asset owner makes single retrofit-retire decision in2015 based on full mix of requirements.

• Retrofit cost scenarios reflect cost and policy uncertainty

– High

– Ref

– Flex


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0 50 100 150 200 250 300 350

Co

ntr

olC

ost

($/k

W)

Cumulative Generation Capacity (GW)

High

Ref

Flex

Scenarios Represent Uncertainty Ranges inCosts for Technology, Policy, and Escalation

High (Current) scenario represents littletechnology flexibility, and real costescalation driven by demand for retrofits

Flex (Alternate) scenario representsavailability of lower cost technologiesand policy flexibility to apply them,lower escalation in retrofit costsassociated with extra time for MATSand Ozone compliance


Cost to Retrofit Entire Fleet Uncertain butSeveral $100 Billions

• Chart show investment cost toretrofit entire existing fleet (sumof unit costs input to model)

• Existing coal

– 316 GW

– 40% of electric supply

– 1,100 generating units

– Diverse size/age mix

• Age, size, and market impactretrofit/retire decisions

• Many units poor candidates forenvironmental retrofits

• ~ 40 GW of coal retirementsannounced to date

0

50

100

150

200

250

300

Ref Flex High

Expenditures to Retrofit All Existing Coal

Ash

316b

Hg

NOx

SO2$

Bill

ion

s


0

50

100

150

200

250

300

350

2010 2015 2020 2025 2030 2035

GW

Exis

tin

gC

oal

Cap

acit

y

Age Retire

Retire/Refuel

Env Retrofit

Base

Disposition of Existing Coal in Ref Scenario


Regional Coal Disposition in Ref Scenario

Age Retire

Retire/Refuel

Environmental Retrofit

Base

0

25

50

75

100

125

2010 2015 2020 2025 2030 2035

GW

EAST

0

25

50

75

100

125

2010 2015 2020 2025 2030 2035

GW

SOUTH

0

25

50

75

100

125

2010 2015 2020 2025 2030 2035

GW

MIDWEST

0

25

50

75

100

125

2010 2015 2020 2025 2030 2035

GW

WEST


5

227

218

8 0

57

0

50

100

150

200

250

300

350

GW

Exis

tin

gC

oal

Cap

acit

y

Retire/Refuel

> 15-year payback

10 - 15 year payback period

5 - 10 year payback period withIRR in first 10 years < 15%

5 - 10 year payback period withIRR in first 10 years > 15%

<= 5 year payback period

Already in compliance

U.S. Distribution of Pay-offs for Retrofits ofExisting Coal in Ref Scenario

Retrofits

Continued operationin question (on bubble)

Strong economicssupporting retrofits


How Much Coal Capacity Might Convert Fuel orRetire Early?

GW Retired/Refueled

Flex Ref High

If requireNPV of 7%

25 57 61

If require paybackof <10 years

27 66 76


$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

2010 2015 2020 2025 2030 2035

Gas

Pri

ce($

/MM

Btu

,20

09

$)

+$2

+$1

Ref

-$1

-$2

NYMEX (2009$)

Sensitivity Analysis on Natural Gas Prices


Gas Price Scenarios Show Critical Role of GasPrice Expectations for How Much Coal Survives

0

50

100

150

200

250

300

350

-$2 -$1 Ref +$1 +$2

GW

Exis

tin

gC

oal

Cap

acit

y

Age Retire

Retire/Refuel

Env Retrofit

Base

Disposition of existingcoal capacity in 2020 bygas price scenario


0

50

100

150

200

250

300

Ref Flex High

GD

PLo

ss2

01

0-2

03

5(P

VB

20

09

$)

GDP Impacts Show Magnitude of Costs andOpportunity in Flexibility


Note That Total GDP Impacts ~25% GreaterThan Increased Cost to Electric Sector

0

50

100

150

200

250

300

Ref Flex High

Co

sts

20

10

-20

35

(PV

B2

00

9$

)

Flex

GDP Loss Electric Sector Cost


U.S. Electric Sector CO2 Emissions

0

0.5

1

1.5

2

2.5

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Bill

ion

ton

ne

s History

Baseline

Flex

Ref

High


0

2

4

6

8

10

12

14

16

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Mill

ion

ton

ne

s History

Baseline

Flex

Ref

High

U.S. Electric Sector SO2 Emissions


0

1

2

3

4

5

6

7

8

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Mill

ion

ton

ne

s History

Baseline

Flex

Ref

High

U.S. Electric Sector NOx Emissions


Concluding Observations

• Economic cost of full control policy is $175B to $275B (PV 2010-2035) with bulk of policy costs near-term

• Cost range driven by ability to deploy low-cost technologies,which may require policy flexibility and extra time to assess

• Cost impacts greatest in high-coal regions

• Compliance decisions dependent on gas price expectations

• 50 to 100+ GW of coal may retire or convert fuels

• Most of existing coal continues to play key role

• SO2/NOx emissions drop to less than 30% of 2010 levels

• If emission reductions phased in over an extra two years therelative impact on cumulative emissions is modest


Together…Shaping the Future of Electricity

epri prism 2.0 environmental controls analysis with regen

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