Transcript California Global Warming Solutions Act of 2006 and the

GLOBAL WARMING INITIATIVES
IN THE WESTERN STATES:
Update on California
Presented by:
Seth D. Hilton
Stoel Rives LLP
111 Sutter Street, Suite 700
San Francisco, CA 94104
[email protected]
October 4, 2007
SB 1368 – Greenhouse Gas
Emissions Standard
• Emissions Standard
– No load serving entity or local publicly owned electric
utility may enter into a long-term financial commitment
unless any baseload generation supplied under the
long-term financial commitment complies with the
greenhouse gases emissions performance standard
SB 1368 – Greenhouse Gas
Emissions Standard
• Responsible Agencies
– California Public Utilities Commission
• By February 1, 2007, shall establish
emission performance standard for utilities,
ESPs, and CCAs
• Adopted emission performance standard on
January 25, 2007 in D.07-01-039
SB 1368 – Greenhouse Gas
Emissions Standard
• Responsible Agencies
– California Energy Commission
• By June 30, 2007, shall establish emission
performance standard for local publicly owned
electric utilities
• On August 29, 2007, adopted regulations
consistent with CPUC standard in Order
No. 07-0829-6
AB 32 – The Global Warming
Solutions Act
• Basics
– Requires reduction in greenhouse gas emissions to
1990 levels by 2020
– Sources Covered:
Any source or category of source whose emissions
are at a level of significance . . . that its participation
in the program . . . will enable the state board to
effectively reduce greenhouse gas emissions and
monitor compliance with the statewide greenhouse
gas emissions limit
AB 32 – The Global Warming
Solutions Act
Responsible Agencies
California Air Resources Board—charged with
implementation of AB 32
California Public Utilities Commission and California
Energy Commission—will provide recommendations
to CARB for energy sector in joint proceeding
(R.06-04-009/07-OIIP-1)
AB 32 – The Global Warming
Solutions Act
• Implementation timelines
– Three elements to implementation:
• Reporting—deadline January 1, 2008
• 1990 Emissions Level—deadline January 1, 2008
• Reductions
–
–
–
–
–
Early Action Measures—June 30, 2007
Scoping Plan—January 1, 2009
Early Action Measures Adopted—January 1, 2010
Reduction Regulations Adopted—January 1, 2011
Regulations Become Effective—January 1, 2012
AB 32 – The Global Warming
Solutions Act
• Timelines: Reporting deadline 1/1/08
CARB issued draft reporting regulation for
August 15, 2007 workshop. Final proposed
regulation to be released October 19, 2007, for
consideration at December 6-7, 2007 Board
meeting.
CPUC/CEC Joint Opinion on Reporting and
Verification of Greenhouse Gas Emissions in
Electricity Sector (CPUC D.07-09-017)
AB 32 – The Global Warming
Solutions Act
• Timelines: Establish Limit 1/1/08
 AB 1803 transferred responsibility for preparing
and updating California’s GHG inventory from CEC
to CARB beginning 1/1/07
 CARB staff will present 2020 Statewide GHG
emissions limit for December board meeting
AB 32 – The Global Warming
Solutions Act
• Timelines: Reductions
– Market-Based Compliance Mechanisms
• AB 32 gave CARB the option to allow marketbased compliance mechanisms
• CARB’s January 1, 2009, Scoping Plan will identify
and recommend market-based compliance
mechanisms that CARB finds are “necessary or
desirable”
AB 32 – The Global Warming
Solutions Act
• Market Advisory Committee
– Created by Executive Order S-20-06 (Oct. 18, 2006)
– Issued recommendations on June 30, 2007
– Recommended “first seller” rather than load-based
approach
AB 32 – The Global Warming
Solutions Act
• Next Steps
– CARB adopts reporting regulations 12/07
– CPUC/CEC addresses load-based v. “first seller” 2/08
– Draft scoping plan issued by CARB 10/08
Summary of Key Deadlines
Due Date
Task
Agency
February 1, 2007
Establish emissions performance standard for load
serving entities
CPUC
June 30, 2007
1.
Publish list of early action emission reduction
measures
Establish emissions performance standard for local
publicly owned electric utilities
CARB
Adopt reporting and verification regulations
Determine 1990 baseline level
CARB
2.
CEC
January 1, 2008
1.
2.
January 1, 2009
Approve scoping plan for maximum reductions by 2020
CARB
January 1, 2010
Adopt regulations for early action measures
CARB
January 1, 2011
Adopt regulations on emissions limits and reduction
measures
CARB
January 1, 2012
Regulations go into effect
CARB
GLOBAL WARMING INITIATIVES
IN THE WESTERN STATES:
Other Efforts in the West
to Control Greenhouse Gas Emissions
Presented by:
Christopher M. Heaps
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204
503.294.9864
[email protected]
October 4, 2007
Western Climate Initiative (WCI)
• Collaborative effort to identify, evaluate, and
implement ways to reduce GHGs in the region
• WCI Partners: Arizona, British Columbia,
California, Manitoba, New Mexico, Oregon,
Utah & Washington
• WCI Observers: Colorado, Kansas, Nevada,
Ontario, Quebec, Saskatchewan, Sonora &
Wyoming
Western Climate Initiative (WCI)
• Regional Goal: Aggregate reduction of GHGs
15% below 2005 levels by 2020
– Goal is consistent with, and does not replace, goals of
individual WCI Partners
– Data updates & entrance of new WCI Partners may
incrementally change goal
• WCI Partners plan to complete design of marketbased mechanisms to help achieve GHG
reduction goal by August 2008
• Establish a regional GHG registry to track
emissions and credit reductions
Western Climate Initiative (WCI)
• WCI Partners encourage participation of new
US States, US Tribes, Canadian Provinces, and
Mexican States that have or are:
– Adopted an economy-wide GHG reduction goal;
– Developing comprehensive action plan to achieve
goal;
– Committed to adopt GHG tailpipe standards for
passenger vehicles; and
– Participating in Climate Registry
WCI Partner Goals
2010-12
2020
2040-50
not est.
2000 levels
50% < 2000
BC not est.
33% < 2007
not est.
CA 2000 levels
1990 levels
80% < 1990
MB 6% < 1990
6% < 1990
not est.
NM 2000 levels
10% < 2000
75% < 2000
OR arrest growth
10% < 1990
76% < 1990
AZ
UT
WA not est.
Will set goals by June 2008
1990 levels
50% < 1990
Arizona Climate Action Initiative
• Arizona Climate Change Advisory Group
established by Executive Order:
– Establish baseline GHG inventory
– Develop Action Plan
• Climate Change Action Plan:
– 49 recommendations for GHG reductions in AZ
– Reductions in all economic sectors, focusing on
agriculture and forestry, transportation and land use,
energy supply, and fuel use
British Columbia’s Climate Change
Plan
• 40 identified actions
• 50% of new electricity demand met with
renewable energy
• Emissions considerations incorporated in
transportation planning
• Incorporation of carbon management principles
in Provincial forests and agriculture operations
• Adaptation of LEED building standards for BC
and use in new government construction
Manitoba
• Goal is to meet and exceed GHG targets
established in Kyoto Protocol
• Install 1,000 MW of wind generation over next
decade
• Manitoba Hydro’s Earth Power Loan Program
allows installation of ground source heat pumps
in new and existing residences
• Revising building code to incorporate advanced
energy efficiency standards
• Incentives for biofuel and hydro power
development
New Mexico
• New Mexico Climate Change Advisory Group
established by Executive Order:
– Establish baseline GHG inventory
– Develop Action Plan
• Climate Change Action Plan:
– 69 recommendations for GHG reductions in NM
– Reductions in all economic sectors, focusing on
agriculture and forestry, transportation and land use,
energy supply, and fuel use
Oregon Strategy for GHG Reduction
• Oregon Global Warming Commission will
develop GHG reduction recommendations
• Promotion of energy efficiency measures
• Increased renewable energy generation:
25% by 2025
– OPUC rulemaking ongoing currently
• Considering Pavley GHG emissions standards
for vehicles
• Farm and forest carbon capture and storage
• Aggressive biofuels standard
Washington
• Imposed emissions performance standard on
baseload electricity generation
– 1,100 lbs CO2/MWh
– Applies to all plants serving load in WA
– Effectively bars pulverized coal-fired generation
without sequestration or other carbon management
strategies
– WUTC rulemaking ongoing currently
• Increased renewable energy generation: 15% by
2020 for large utilities
• Adopted Pavley GHG emissions standards for
vehicles
GLOBAL WARMING INITIATIVES
IN THE WESTERN STATES:
Impacts on the Location and Marketing
of Electric Generation
Presented by:
Marcus Wood
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204
503.294.9434
[email protected]
October 4, 2007
Risks and Uncertainties in Power
Sale Agreements
• Commonly-included environmental risk
provisions include:
– Environmental compliance covenants
– Allocation of the cost of new environmental
requirements
– Allowance for environmentally-driven operating
restrictions
Risks and Uncertainties in Power
Sale Agreements
• Allocable risks due to global warming initiatives:
– Siting: Unanticipated restrictions on net carbon
emission can increase cost of a thermal facility
– Governmental Assessments: Carbon emissions may
be taxed in the future, and greenhouse gas
allowances may be auctioned rather than allocated
– Force Majeure: If a load serving purchaser of output
cannot obtain sufficient carbon allowances, the
purchaser might assert a force majeure claim
Risks and Uncertainties in Power
Sale Agreements
• New contract terms necessitated by global
warming laws and regulations include:
– Allocation of responsibility for obtaining greenhouse
allowances (usually to load supplier)
– Allocation of benefits of any carbon allowances, if
allowances are granted to the generation owner
– Allocation of risk of carbon-based output caps or
carbon offset requirements for generation facilities
Marketing of the Output of RemotelySited Renewable Generation
• Key facts
– California has a greater demand than supply of
renewable generation
– Utility executives acknowledge that global warming
legislation will change the mix of resources in their
resource plans
– California is reaching out for distant U.S. (or even
Canadian) renewable resources, while Washington law
tends to block such resources
– Because of the lack of unconstrained interstate
transmission and restrictions on dynamic transmission
scheduling, distant renewable generation often must
be stored and shaped for delivery to California
Washington RPS Definition of
“Eligible Renewable Resource”
• “Eligible renewable resource” means:
“(a) Electricity from a generation facility powered by a
renewable resource other than fresh water that
commences operation after March 31, 1999, where:
(i) The facility is located in the Pacific Northwest; or
(ii) the electricity from the facility is delivered into
Washington state on a real-time basis without shaping,
storage, or integration services”
Marketing of the Output of RemotelySited Renewable Generation
• What are energy storage and shaping services
– Entity with a load “sink” in the location of the generator
takes the generation into its system to meet load in real
time, often treating the resource as a network resource.
This is “storage”
– Storage provider redelivers the generation as a future
prescheduled firm product to a point of delivery with the
energy purchaser. Hourly firm transmission is used for
delivery, thus substantially reducing transmission costs for
delivery of intermittent generation
– The point of delivery may be on the load side of a
transmission constraint between the generator and load
– Storage and shaping can come in many varieties and is
underexploited by renewable resource owners
Marketing of the Output of RemotelySited Renewable Generation
• Impacts of global warming legislation and rules
on the storage and shaping of remote renewable
generation
– How is the “storing” resource treated under the global
warming regimes (i.e., what is the resource “deemed”
delivered)?
– Impacts of the “no non-regional storage” requirement
in the Washington legislation
Global Warming and Construction of
Western Transmission
• Global warming concerns may block transmission
– Example: Frontier Line
• The Northwest region is wary of building
transmission for carbon emitting resources, for
export of renewable resources, or for Canada-toCalifornia transactions
– Examples: N. California to Canada line and Northern
Lights line
• On the other hand, global warming may speed
transmission construction and initiatives
– Examples: BPA transmission open season and BPA
wind energy initiatives
Conclusion
• For thermal generation
– You will be needed, but challenged
– Negotiate carefully the power sales contract
provisions related to global warming
• For renewable generation
– You will be in demand; a seller’s market is developing
– If you can get your product to market
GLOBAL WARMING INITIATIVES
IN THE WESTERN STATES:
Why Energy Efficiency and Green Building Will Play
Major Roles in Reducing Greenhouse Gas Emissions and
Addressing Global Climate Change
Presented by:
Stephen C. Hall
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204
503.294.9625
[email protected]
October 4, 2007
Why Energy Efficiency Must Play A
Role in Addressing Climate Change
• New renewable energy capacity will not be
enough to meet GHG reduction goals
• Energy efficiency offers vast potential for
reduction of GHG emissions
• Energy efficiency is the low-hanging fruit of CO2
reductions
– Many advantages over renewable energy
• We already have the technology and knowledge
to cost-effectively achieve energy efficiency on a
large scale
The Importance of Green Building in
Addressing Climate Change
• Buildings are major users of energy
– 40 percent of energy use comes from the building
sector
– For a variety of reasons, the absolute amount of
energy usage is growing
• Improved living standards in developing countries
• (Relatively) cheap electricity in the U.S.
• Air conditioning
• Flat screen televisions
Understanding Energy Efficiency
• Energy efficiency means doing more (and often better)
with less energy
– Energy efficiency is different from
• energy conservation
• load management/demand response
•
High-Efficiency Products
– Windows
– Motors, Pumps, Drives, Compressors
– Insulation and Building Materials
– Household Appliances
– Heating, Ventilation, Air Conditioning (HVAC)
– Sensors and Control Systems
– Lighting Equipment
– Distribution Transformers
– Office Equipment
– Control and Metering Equipment
– Cogeneration/Combined Heat and Power
– Industrial Process Equipment
•
Energy Efficiency Services
– Energy Performance Contracting
– Building and System Design Software
– Process Improvement Engineering
Existing Obstacles to Energy
Efficiency
• Regulatory flaws
– e.g., utility rates that reward utilities for selling more
energy
– e.g., building codes that specify minimum safety
requirements, not maximum energy efficiency value
•
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•
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•
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Organizational failures
Lack of information
Perverse incentives
False or absent price signals
Incomplete markets and property rights
Risks to manufacturers and distributors
Capital misallocation
Harnessing the Potential of Energy
Efficiency
•
•
•
•
Regulatory mandates
Market-based approaches
Improved state and federal policies
Access to financing
Regulatory Mandates:
The California Model
•
•
•
The California Public Utilities Commission issued a Proposed Decision on
September 17, 2007 (proceeding number R.06-04-010) that lays the
foundation for making energy efficiency an integral part of "business as
usual" in California
Directs the utilities to prepare a single, comprehensive statewide long-term
energy efficiency plan
Adopts three programmatic initiatives:
– All new residential construction in California will be zero net energy by 2020
– All new commercial construction in California will be zero net energy by 2030
– Heating, Ventilation, and Air Conditioning (HVAC) industry will be reshaped to
ensure optimal equipment performance
•
•
•
Develops the "next generation" of California utility energy efficiency
programs for 2009-2011
Commits in the near term goals to adopting energy efficiency goals through
2020 and reaffirms our previously adopted 2009-2011 goals
Establishes new, collaborative processes with key business, consumer
groups, and governmental organizations in California, throughout the West,
nationally and internationally
The California Model: Challenges
and Opportunities
• Evaluation, measurement & verification of CO2
savings from energy efficiency
• Integration of energy efficiency policies into the
AB 32 GHG cap structure
• Jurisdiction
– CPUC lacks jurisdiction over energy efficiency
standards for appliances and new buildings
• Ownership of energy efficiency gains is unclear
Energy Efficiency-Friendly Policy
Changes
• Treat energy efficiency as a separate resource
• Renewable Portfolio Standards
• Integration of tradable energy efficiency credits
(“EECs”) into cap-and-trade system
• Remove disincentives for utilities
• Clear regulatory signals about
– How the carbon benefits of energy efficiency will be
calculated
– Ownership of energy efficiency
– Credit for embedded efficiency
– Interaction between GHG caps and energy efficiency
measures
The Challenges of Financing Energy
Efficiency
• High performance buildings cost more to build but they
are also worth more because they deliver operating cost
savings by reducing monthly energy bills
• However, there is often a mismatch of benefits and costs
– e.g., landlord owns the building, but the tenant pays the electric
bill
• A variety of different standards, methods and values that
are continually evolving
• Quantifying the many different and unfamiliar types of risk
and benefit into standard real estate risk/benefit business
models
• The many parties involves in developing a green project
are often not coordinated or working at cross purposes,
undermining the ability to fully deliver on potential benefits
Federal Tax Incentives for Energy
Efficiency
• Tax Deductions for Commercial Buildings
– A tax deduction of up to $1.80 per square foot is available to
owners or designers of new or existing commercial buildings that
save at least 50 percent of the heating and cooling energy of a
building that meets ASHRAE Standard 90.1-2001
• Includes building envelope, interior lighting, heating,
ventilating and air conditioning (HVAC) and service hot water
(SHW) systems
– Partial deductions of up to $.60 per square foot can be taken for
measures saving at least 16 2/3 percent in energy costs affecting
any one of three building systems: the building envelope,
lighting, or heating and cooling systems
– The credits are available for systems “placed in service” from
January 1, 2006 through December 31, 2008
Innovative Models for Financing
Energy Efficiency
• Green Loans
– Loan for energy efficiency upgrades is carried by the condominium
Home Owner’s Association
– Note: Check with local real estate laws
• Clinton Climate Initiative Building Retrofit Program
– Five large financial institutions
• $5 billion in commitments
– Four largest energy service companies (“ESCOs”)
– Retrofitting existing buildings in 16 cities worldwide
– Goal is to include smaller buildings and to globalize the market for
ESCOs
– The program seeks to reduce the cost of implementing building retrofits
by streamlining lending approval processes and reducing the cost of
energy efficient and clean energy products used in the retrofits
– Retrofitting existing buildings in 16 of its partner cities
• Carbon offsets
On-Site Renewable Energy
• On-site Renewable Energy
– Solar photovoltaics
– Wind microturbines
– Building-integrated photovoltaics (BIPV)
• Ownership models
– Traditional
– Third-Party Investment
• Power purchase agreements
• Lease models
To order any of these books or
our upcoming Law of the Sun, please contact:
Stephen C. Hall * 503.294.9625 * [email protected] * www.stoel.com