Draft BG&E Presentation - Edison Electric Institute
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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
2
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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?
4
Setting the Stage: Divergent Forces
5
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
6
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%
8
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.
9
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
30
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
30
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)
16
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)
21
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
22
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
24
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
26
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
27
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
25
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
30
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
31
Cooling Water Intake Structures (3)
32
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)
34
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%
35
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
37
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
39
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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