epri’s comments on the federal plan - resources for … · epri suggests that epa consider...

© 2016 Electric Power Research Institute, Inc. All rights reserved.

Victor NiemeyerSenior Technical Executive

Resources for the Future Forum on Comments on the EPA’s CPP Federal Plan

and Trading Rules

January 27, 2016

EPRI’s Comments on the Federal Plan

2© 2016 Electric Power Research Institute, Inc. All rights reserved.

1. Inclusion of Energy Efficiency

2. Evaluation, Measurement, and Verification (EM&V) for Energy Efficiency

3. Credit for Nuclear Life-extension

4. Reliability

5. Choice of Rate vs. Mass Final Plans

6. Allowance Allocation

7. Allowance Banking

8. Output-based Set-asides (OBS) for NGCCs in the Mass Model Rule

EPRI Comment Topics


EPRI Comment Topics

1. Inclusion of Energy Efficiency

2. Evaluation, Measurement, and Verification (EM&V) for Energy Efficiency


4. Reliability

5. Choice of Rate vs. Mass Final Plans

6. Allowance Allocation

7. Allowance Banking

8. Output-based Set-asides (OBS) for NGCCs in the Mass Model Rule



EPRI suggests that EPA consider explicitly allowing generation from existing nuclear units that have undergone a life extension on or after 2013 to count as a source of ERCs

This is consistent with EPA’s treatment of nuclear unit uprates, and new nuclear units, as a life extension essentially is a new source of zero-CO2 generation

At this time, a real possibility exists to extend the license for nuclear plants out to 80 years

The decision to seek license extension and to operate a nuclear plant for a longer period of time is a deliberate one and is weighed against other generation options


Evolution of U.S. Nuclear Fleet:Extending 75% of Units to 80 Years Maintains 80GW through 2050

0

20

40

60

80

100

120

2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075

Gene

ratio

n Ca

paci

ty (G

W)

Remaining Nuclear Generation Capacity by License Limit

80-year 60-year


Energy & Environmental Analysis REGEN Reference Scenario Assumes 80-year Nuclear License Limit

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048

TWh

Reference Scenario GenerationEE + Price Response

Solar

Wind

Hydro

NGCS

New Gas

Existing Gas

Coal CCS

New Coal

Existing Coal

Other

Geothermal

New Nuclear

Existing Nuclear

Scenario LoadExisting Nuclear


With 60-year Nuclear License Limit New Natural Gas Generation Makes up Over 80% of Loss (+ wind/solar)

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048

TWh

Nuc 60 Scenario GenerationEE + Price Response

Solar

Wind

Hydro

NGCS

New Gas

Existing Gas

Coal CCS

New Coal

Existing Coal

Other

Geothermal

New Nuclear

Existing Nuclear

Scenario Load

New Gas

Existing Nuclear


REGEN Simulation of Additional Emissions Under 60-year License

0

50

100

150

200

250

2015 2020 2025 2030 2035 2040 2045 2050

CO2

(mill

ions

of t

ons)

Incremental CO2 Emissions with 60-year License Limit

Cumulative electric sector CO2 emissions 2.3 billion tons higher by 2050


8. Output-based Set-asides for NGCCs in the Mass Model RuleEPA can greatly simplify the mass-based Federal Plan by

dropping the requirement to have an OBS program for existing NGCCs, at no significant increase in total CO2emissions

The OBS program for existing NGCC units offers no benefit unless it facilitates participating units to operate at a loss

In practice, challenges such as risk, uncertainty, and time delays for receiving the required subsidies will likely limit participation

Simulations suggest limited opportunities to increase NGCC output in an environment already strongly incentivizing NGCC use


1,007 993 984 1,001

1,170 1,199 1,218 1,184

617 600 589 609

0

500

1,000

1,500

2,000

2,500

3,000

3,500

ExMass-NoOBS FedPlanOBS 2X OBS OBS no 50%CF

TWh

Fossil Generation 2030 (US48)

The Effect of Output-based Set-asides for NGCCs (~zero)

Coal

Gas CTs

New NGCC

Exst. NGCC


1,011 996 987 1,004

528 542 552 535

233 227 222 230

0

400

800

1,200

1,600

2,000

ExMass-NoOBS FedPlanOBS 2X OBS OBS no 50%CF

2030 CO2 Emissions (million short tons)

The Effect of Output-based Set-asides for NGCCs (~zero)

Coal

Gas CTs

New NGCC

Ex NGCC

1,801 1,7911,795 1,798


Together…Shaping the Future of Electricity


OBS for NGCCs


Allocation Method to Incentivize Existing NGCCs

Pool of allowances set-aside to give to existing NGCCs (0-20%, depending on the state)Existing NGCC can claim 1030 pounds of allowances per

MWh, for any MWh generated over 50% of the unit’s capacity factor– Allowances are not awarded until the following compliance period– Rate is fixed, and not subject to pro-rata reductions

These allowances are in addition to the unit’s share of allowances due to historic generationExisting NGCCs sell allowances at the market price to obtain

their subsidy


How would a “smart” owner of an existing NGCC think about the OBS incentives

Lots of uncertainty, but maybe some of moneyThinking easier if there are really good forward markets for

power (by time segment) and for CO2 allowances (in current and future time periods)Key decision is when to operateNormally only operate when power price > dispatch priceBut now get a future (uncertain) pay-off if operate > 50% CF

so maybe should operate in additional hours when current power price is below units dispatch priceNeeds to think about these decisions on a compliance period

basis, not just yearly


Price Duration Curve Provides a Framework for Understanding Dispatch Decision

0

10

20

30

40

50

60

70

80

90

100

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

$/M

Wh

Hours per Year

2024 Alabama Price Durataion Curve

PDC

Price duration curve shows distribution of prices over time period


Sample Dispatch Strategy for NGCC Named x3

0

10

20

30

40

50

60

70

80

90

100

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

$/M

Wh

Hours per Year


PDC ngcc-x3 50% CF ngcc-x3 hrs

Dispatch price of NGCC x3

X3 dispatches50% capacity factor

Margin



0

10

20

30

40

50

60

70

80

90

100

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

$/M

Wh

Hours per Year





Cumulative operating margin



0

10

20

30

40

50

60

70

80

90

100

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

$/M

Wh

Hours per Year






Loss getting to 50% CF

Subsidy pmts once above 50% CF



0

10

20

30

40

50

60

70

80

90

100

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

$/M

Wh

Hours per Year






Loss getting to 50% CF

Subsidy pmts once above 50% CF

Net payoff once output > 50% CF


1,025 1,096

1,318 1,177

444 528

804 804

273 273139 139224 22352 51177 177

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

OBS NoOBS

TWh

Generation 2030 (US48) EEOtherNew SolarEx. SolarNew WindEx. WindHydro / GeoNuclearGas TurbineNew NGCCEx. NGCCCCS GasCCS Coal


Observations on OBS for NGCC

Wow, this is a tough businessBut incentives are clearAlso, incentives work better for NGCCs already > 50% CF

Larger modeling problem not shown here is setting the incentives to exhaust the EPA-mandated supply for the state’s mix of generators– We can do this– Probably reasonable to believe our calculations will be an upper

bound on the real OBS-induced NGCC output

epri’s comments on the federal plan - resources for … · epri suggests that epa consider...

Documents