Transcript Draft BG&E Presentation - Edison Electric Institute

What Electricity Consumers Need to Know
About Environmental Regulation of the
Utility Sector
Daniel Chartier
Director, Environmental Markets & Air Quality Programs
BGE Fall Customer Meeting
October 31, 2013
Edison Electric Institute
 Trade Association of Investor-Owned
Electric Companies
 Membership includes
 All US investor-owned electric companies
 70 international affiliates
 250 associate members
 US members
 Directly employ over 500,000 workers
 Provide electricity for 220 million electric utility customers
 Our mission focuses on advocating public policy; expanding
market opportunities; and providing strategic business
information
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Outline
 Setting the Stage
 The electric industry is responding to many challenges
 Federal Environmental Programs
 The 5 programs with the highest near-term impact
 State-Specific Programs
 Environmental programs specific to Maryland
 Overall Industry Impact
 Adding it all up – what does it mean?
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Setting the Stage: Divergent Forces
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Challenges
 With the current economy, little or no growth in energy
sales
 Still need to invest in new generation, upgrade existing
generation and spend on Transmission & Distribution
(T&D) to meet future anticipated demand
 Perhaps $2 trillion CAPEX over next two decades (Brattle Group,
2008)
 Maintaining fuel diversity in the near and long term
 Ensuring reliable electricity for our customers
 Negotiating the political landscape
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 Comply with environmental standards
Utilities Have Substantially Reduced Air Emissions
While Increasing Electricity Production
Electric Companies Use a Diverse Mix
Of Fuels to Generate Electricity
Natural
Gas
30.4%
Coal
37.4%
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2012
National Fuel Mix
*Includes generation by agricultural waste, landfill
gas recovery, municipal solid waste, wood,
geothermal,
non-wood waste, wind, and solar.
Nuclear
19.0%
** Includes generation by tires, batteries, chemicals,
hydrogen, pitch, purchased steam, sulfur, and
miscellaneous technologies.
Hydro
6.7%
Other
renewables*
5.4%
Misc.**
0.6%
Fuel Oil
0.6%
Source: U.S. Department of Energy, Energy
Information Administration, Power Plant Operations
Report (EIA-923); preliminary 2012 generation data.
Different Regions of the Country Use Different
Fuel Mixes to Generate Electricity
*Includes generation by agricultural
waste, landfill gas recovery,
municipal solid waste, wood,
geothermal, non-wood waste, wind,
and solar.
** Includes generation by tires,
batteries, chemicals, hydrogen,
pitch, purchased steam, sulfur, and
miscellaneous technologies.
Sum of components may not add to
100% due to independent rounding.
Source: U.S. Department of Energy,
Energy Information Administration,
Power Plant Operations Report (EIA923); 2011 final generation data.
February 2013
© 2013 by the Edison Electric
Institute. All rights reserved.
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Generation Fuel Mix
Net Electricity Generation (January 2009 – June 2013)
50%
Coal
40%
30%
20%
10%
0%
10
Natural Gas
Nuclear
Renewables
Other
Source: Energy Information Administration, Monthly Energy Review (Chapter 7), September 2013
$0.00
11
Source: Energy Information Administration, http://www.eia.gov/dnav/ng/hist/n3045us3M.htm
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
U.S. Natural Gas Electric Power Price
Dollars per Thousand Cubic Feet
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
Natural gas Production by Source,
1990-2040 (trillion cubic feet)
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ACTUAL
PROJECTED
30
25
Shale
20
15
Tight Gas
10
Lower 48 Onshore Conventional
5
Lower 48 Offshore
Coalbed Methane
1990
12
1995
2000
2005
2010
2015
2020
Alaska
2025
2030
2035
2040
Source: Energy Information Administration, http://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm
Non-Hydro Renewable Sources More
than Double between 2010 and 2035
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Renewable Portfolio Standard Policies
www.dsireusa.org / September 2012.
29 states,+
Washington DC and 2
territories,have
Renewable Portfolio
Standards
(8 states and 2 territories have
renewable portfolio goals).
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Coal Units by Age, Capacity and Emissions
U.S. Generating Units, 10 Year Increments
Age of
Units*
Generating
Units
Total Nameplate
Capacity
Total Net
Generation
Year 2008
Total CO2
Emissions
Year 2008
Total SO2
Emissions
Year 2008
Total NOX
Emissions
Year 2008
#
Percent
of Total
GW
Percent
of Total
GWH
Percent
of Total
MTons
Percent
of Total
Tons
Percent
of Total
Tons
Percent
of Total
0-10 Years
16
1.4%
5.3
1.6%
19,788
1.1%
28.7
1.4%
18,083
0.2%
13,779
0.5%
11-20 Years
64
5.8%
14.9
4.5%
78,261
4.2%
78.1
3.8%
137,803
1.9%
108,115
3.8%
21-30 Years
186
16.7%
86.1
26.1%
541,408
29.0%
615.0
29.6% 1,336,033
18.0%
763,207
26.9%
31-40 Years
238
21.4%
122.5
37.1%
724,206
38.8%
780.7
37.6% 2,750,025
37.1%
1,053,259
37.1%
41-50 Years
270
24.3%
60.8
18.4%
316,029
16.9%
352.2
16.9% 1,879,152
25.4%
533,038
18.8%
51-60 Years
304
27.3%
39.3
11.9%
187,473
10.0%
220.7
10.6% 1,265,388
17.1%
356,902
12.6%
61-70 Years
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2.7%
0.9
0.3%
1,166
0.1%
2.5
0.1%
19,223
0.3%
6,554
0.2%
> 70 Years
4
0.4%
0.0
0.01%
5
0.0003%
0.1
0.004%
87
0.001%
484
0.02%
Coal Unit
Totals
1,112
100.0%
329.95
15
100.0% 1,868,336 100.0%
Source: Ventyx, Inc.—EV Suite
MTon = million tons
* Does not include units that came online in 2009
2077.9 100.0% 7,405,794 100.0% 2,835,339 100.0%
Industry Capital Expenditures
($ Billions)
100
94.4
90
90.5
80
95.2
85.8
92.8
83.7
85.3
82.8
70
77.7
74.1
60
78.6
74.3
59.9
50
48.4
40
43.0
41.1
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2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Actuals
Projections (July 2012)
Projections (Oct. 2013)
Notes: Total company spending of U.S. Shareholder-Owned Electric Utilities
Projections based on publicly available information and extrapolated for companies reporting fewer than three projected years (6% in 2014 and 2015).
Source: EEI Finance Department, company reports, SNL Financial (October 2013)
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Projected Investment by Category
 Industry committed to
reliability, making
needed investments in
generation,
transmission, smart $100 B
grid/distribution and $80 B
environmental
controls
$60 B
 How will climate
regulations affect
capex decisions?
$40 B
2012P
as of August 2012
2012P
$94.4 B
$0 B
2013P
$95.2 B
Generation
41%
37%
22%
10%
6%
6%
21%
17%
12%
7%
6%
Notes: Total company functional spending of U.S. Shareholder-Owned Electric Utilities
Projections based on publicly available information and extrapolated for companies not reporting functional detail (1.6%).
Source: EEI Finance Department, company reports (October
172013)
Generation
Distribution
Distribution
Transmission
Transmission
15%
$20 B
2013P
as of October 2013
Gas-Related
Gas-Related
Environment
Environment
Other
Other
Federal Environmental Regulatory
Challenges: 2012 and Beyond
Land &
Natural
Resources
Waste &
Chemical
Management
316(b)
Transmission
Siting and
Permitting
Coal Ash
(CAIR/CSAPR)
NSPSExisting
Sources
Effluent
Guidelines
Limitations
Avian
Protection
PCBs in
Electrical
Equipment
Regional
Haze/Visibility
BACT
Permitting
Waters of the
United States
Endangered
Species
HazMat
Transport
Multiple
NAAQS
International
Negotiations
NPDES
Pesticide
Permits
Vegetation
Management
Air
Climate
Utility MATS
NSPS- New
& Modified
Sources
Interstate
Transport
New Source
Review (NSR)
Water
WaterbodySpecific
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Standards
Utility Mercury & Air Toxics (MATS)
Regulation
 Rule finalized April 16, 2012
 Significant Improvements – Filterable Particulate Matter (PM)
instead of total PM as surrogate for non-mercury metals;
monitoring/verification; startup-shutdown – now work practice
standards; and limited use subcategory for oil-based units
 Remaining key problems – compliance timeline; new source
limits
 EPA granted reconsideration of certain new source issues
 30 total petitions for review consolidated under White
Stallion Energy Center LLC v. EPA, D.C. Cir., No. 12-1100
 Oral arguments likely in spring 2013
 The court has granted expedited schedule for new source issues
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Utility MATS Regulation (2)
 Annualized compliance costs to power industry estimated
at $9.6 billion (2007$) in 2015
 Estimated annual monetized benefits of $27 - $80 billion
(2007$) using a 3-percent discount rate
 EPA projects ~5 GW of coal-based generation may retire by
2015, and the installation of:
 103 GW of dry scrubbing controls: 51 GW dry flue gas
desulfurization (FGD) and 52 GW dry sorbent injection(DSI)
 148 GW of activated carbon injection (ACI)
 191 GW of fabric filters (baghouses)
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Utility MATS Compliance Time
April 2015
April 2012
Years 1 -3
Year 4
Year
5+
Companies have up to 3 years to bring
units into compliance as specified by
§112(i)(3)(A)
State permitting authorities can grant 1 additional year
for compliance as needed for technology installation as
allowed by §112(i)(3)(B)
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EPA has indicated it will use §113(a) Administrative Orders for
sources that “must operate in noncompliance” (e.g., past a 4th year
extension.) EPA intends to limit applicability only to cases with a
“specific and documented reliability concern.”
Cross-State Air Pollution Rule (CSAPR)
 August 8, 2011 - final rule published in Federal Register
 Affects power companies in 27 eastern states through budgets
for NOX and/or SO2 (both for most states)
 On August 21, 2012, the D.C. Circuit vacated the rule
 EPA petitioned for rehearing en banc on October 5, 2012
 The decision leaves the Clean Air Interstate Rule (CAIR) in
place for now, but directed EPA to move “expeditiously”
to finalize a replacement for the Cross-State rule
 EPA appealed vacatur to the Supreme Court; Oral
arguments in the case are scheduled for December 9, 2013
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Cross-State Air Pollution Rule (2)
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President Obama’s Energy Agenda
 “All-of-the-Above” Strategy
 Invest in a Clean Energy Future
 Promote Energy Efficiency
 Reduce our Dependence on Oil
 Tackle the issue of Climate Change
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National Climate Action Plan
 On June 25, President Obama outlined his climate action plan, which
contains three “key pillars”

Cutting U.S. carbon emissions

Preparing U.S. for the impacts of climate change (adaptation)

Leading international efforts to address climate change
 Near-term mitigation focus is on power sector emissions reductions
 Presidential Memo set schedule for EPA action

New source reproposal: September 2013

Final new source standards: “in a timely fashion”

Existing source emission guidelines for states: June 2014

Final existing source guidelines: June 2015

State compliance plans: June 2016
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National Climate Action Plan (2)
 Presidential memo also calls on EPA to:

Engage with states, the power sector and other stakeholders
 Take into account other “environmental regulations and polices that
affect the power sector”
 Ensure the continued provision of reliable and affordable electricity
 What does the President’s plan mean?

Legacy issue – likely to push hard to complete NSPS rulemakings
 Consistent with messages since State of the Union
 New spending will be difficult to get through Congress
 Ramped up U.S. presence in international climate talks
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GHG Regulation – Introduction
 EPA already is regulating GHG emissions under Clean Air Act’s (CAA)
prevention of significant deterioration (PSD) Program

Pre-construction (BACT) permits addressing GHGs required for larger
new and modified sources, such as power plants, since January 2011

Permits issued to date have largely focused on efficiency of technology
being used in order to limit GHG emissions
 Next wave of GHG regulations will be under CAA’s new source
performance standards (NSPS) program

§111(b): covers new and modified sources; EPA will address modified
and reconstructed sources under a separate standard

§111(d): covers existing sources
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GHG NSPS – New Sources
 EPA required to issue unit-specific regulations for new sources;
no compliance flexibility

EPA issued original proposal in April 2012
 As part of President’s climate plan, EPA issued a reproposed
NSPS for new sources on September 20

Sets separate standards for coal and gas
 Coal standard requires use of Carbon Capture & Sequestration (CCS);
effectively prohibiting new coal plants because technology is not
commercially available
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GHG NSPS – Existing Sources
 EPA develops guidelines; states submit compliance plans
 Proposed GHG NSPS for existing sources due by June 2014

Undergo inter-agency review starting in March 2014
 Proposal will be drafted during late fall and winter
 Near-term windows of opportunity to impact the proposal
 EPA is believed to be looking at variety of approaches

Energy efficiency improvements
 Flexibility mechanisms (e.g., define existing state programs like RGGI
as equivalent or credit for early action)


EPA and some legal scholars think that EPA and states have a lot of
flexibility
But, no one really knows what this might mean because courts have never
addressed it
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Cooling Water Intake Structures –
316(b) Rule
 Proposed rule signed March 28, 2011; EPA is required to
finalize the rule by July 27, 2012
 In general, the rule sets separate standards for
impingement mortality and entrainment mortality for
units with design intake rates above 2 million gallons per
day (MGD)
 The proposed rule leaves much to the discretion of the
permit writer (and the EPA Region that reviews the
permit)
 EPA estimates the total annualized cost at $384.8 million;
benefits = $18 million; cost-benefit ratio ~21:1
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Cooling Water Intake Structures (2)
 Implications
 Every facility over 2 MGD withdrawal will be required to install
new equipment
 > 600 steam electric generating facilities affected (includes
nuclear plants)
 Fairly prescriptive rule; based largely on closed-cycle cooling
with aspects of site-specific decision-making
 Closed-cycle cooling may not meet all requirements
 Other water regulations
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Cooling Water Intake Structures (3)
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Coal Combustion Residuals (CCR)
 Co-proposal of two options in June 2010 (75 Fed. Reg. 35128):
 Subtitle C, “Special” hazardous waste listing; Subtitle D regulations
 Beneficial use exempt from regulation
 Comments submitted Nov. 2010; Final Rule expected 2012
 Subtitle C option would reverse 1993 & 2000 Regulatory
Determinations
 Majority of states, ash recyclers, industry groups, large
number in Congress oppose hazardous waste regulations
 Will significantly impact operations: closure of ash ponds,
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construction of additional disposal capacity, reductions in
beneficial use
Effluent Limitation Guidelines (ELGs)
 Will set new Best Available Technology (BAT) limits on 7
important waste streams (including fly ash and bottom ash
already covered under the CCR rule)
 Coal, oil, gas and nuclear facilities affected (~1,200
facilities)
 Proposal issued April 2013
 8 options; 4 preferred
 “Zero discharge” fly ash limits a part of all but 2 options
 No industry preference (yet)
 Industry will conduct cost and feasibility analysis
 Final rule required by May 2014 due to consent decree
 Implementation: 2014-2019 (maybe longer)
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Maryland Environmental Snapshot
 State Utility Sector Emissions (2011 preliminary, EIA)
 Carbon dioxide (CO2): 23,031,013 tons
 Nitrogen oxide (NOx): 17,184 tons
 Sulfur dioxide (SO2): 30,541 tons
 The Maryland Healthy Air Act, signed into law on April 6,
2006, establishes emission limitations and related
requirements for NOx, SO2 and mercury
 These emission limitations apply to 15 coal-fired electric
generating units.
 Reductions in two phases: 2009/2010 and 2012/2013
 Total reductions: NOx, 75%; SO2, 85% and mercury, 90%
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Maryland Environmental Snapshot (2)
 Maryland Greenhouse Gas Reduction Act of 2009
 Requires the State to achieve a 25% reduction in Statewide GHG
emissions from 2006 levels by 2020.
 Requires the State to demonstrate that the 25 percent
reduction can be achieved in a way that has a positive impact on
Maryland’s economy, protects existing manufacturing jobs and
creates significant new “green” jobs in Maryland
 Maryland participates in the Regional Greenhouse Gas
Initiative (RGGI)
 Mandatory, multistate market-based program to achieve an
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initial 10% reduction in CO2 emissions from the power sector;
participants recently amended the program
 Maryland’s cumulative share of proceeds from the allowance
auctions is $300,026,815 (through Auction 21 , Sept. 2013)
Maryland Environmental Snapshot (3)
 Maryland's Renewable Portfolio Standard (RPS)
 Requires that 20 percent of Maryland's electricity be generated
from renewable energy resources by 2020, including 2 percent
from solar energy
 In 2012, renewable energy resources accounted for 7.9 percent
of total net electricity generation
 MD Solar Renewable Energy Credit (REC) types and prices1
 Tier 1 2013, $12.79 (wind, biomass, methane from landfills,
geothermal, ocean, poultry litter incineration, certain fuel cells and
small hydro)
 Solar 2013, $142.50
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1. REC pricing as of 10/18/2013, per SNL Financial
Overall Industry Impact
 Retrofit, retire or repower virtually every coal plant
 Estimates of retirements vary widely
 Impacts on reserve margins; potential local reliability challenges
 ~63 GW of coal-fired generation retirements have been
announced; Brattle estimates a total of 59−77 GW
1, 2
 Take place between 2010 and 2022; Most will be 50-60 years old
upon retirement; Approx. 16% of 2010 fleet
 Due to fuel and/or compliance costs, consent decrees, age, etc.
 Will require significant amount of investment; potential
impacts on power prices
38
1. Announced retirements based on publicly available data as compiled by EEI.
2. Projected retirements from Potential Plant Retirements: 2012 Update, The Brattle Group, October 2012.
What does this mean for
electricity consumers?
 The Energy Information Administration’s latest Annual Energy
Outlook (AEO 2013) says that average electricity prices in 2035
are expected to average 2 percent above 2011 levels 1, 2
 Predicated on low natural gas prices continuing
 Doesn’t include
 Impacts of ash, water, greenhouse gases (GHG) and other rules
 Capital for T&D upgrades and modernization
 Other projections 2
 IHS Global Insight, average 20 percent increase 2011 to 2035
 INFORUM, average 6 percent increase 2011 to 2035
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1 Price increases are based on 2011 dollars and do not reflect the impact of inflation.
2. All price data from AEO 2013, table 11. Available online at http://www.eia.gov/forecasts/aeo/pdf/0383(2013).pdf
Contact Information
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