Transcript The Cost & Impacts of New Environmental Regulations and the Opportunity for a New, Cleaner Electrical Grid (Project No.

The Cost & Impacts of New
Environmental Regulations and the
Opportunity for a New, Cleaner
Electrical Grid (Project No. 37897)
Cyrus Reed
Conservation Director
Lone Star Chapter, Sierra Club
512-740-4086
[email protected]
1
Overview
 ERCOT Study Incomplete and Flawed
 Opportunity for PUC and ERCOT to take steps now to
position yourself for future challenges
 Continue Push for Transformative Technologies
 Air Quality and Water Resource Challenges are Real
under Present Electric Resources
 Commit to a plan for more complete report and
recommendations to Legislature in 2013
2
ERCOT Study Incomplete and Flawed
 Incomplete List of Upcoming Regulations – Ozone and
Haze could be big deals; Supreme Court case opens up
potential for global warming regulations in September
 Previous Studies suggest much greater pain on coal
industry, including in Texas
 Coal companies & utilities already reacting to these
regulations and increasing costs by examining retire vs.
retrofit
 Some utilities in Texas already considering retirements
3
Upcoming EPA Rulings







 PM2.5 NAAQS Reconsideration
 Haze FIP
 Hazardous Air Pollutant MACT
Standards
 Ozone NAAQS Area Designations
 NSPS for EGUs (NOx / SO2/ PM /
CO2)
 NSPS for non-EGU boilers (NOx /
SO2/ PM / CO2)
 Secondary SO2 and NOx NAAQS
 ELGs for Electric Generating Units
NO2 NAAQS
BACT for GHGs
SO2 NAAQS Review
PM2.5 PSD Increment Rule
Ozone NAAQS Reconsideration
Repeal of PM10 Surrogacy
CEQ Climate Change Guidance
 HAPs Standards for non-EGU Boilers
 Coal Ash Waste Regulation
 CAIR Replacement Rule
 Section 316(b) Water Intake
Standards
 OSM Regulation of Ash Minefills
4
Previous Studies Show Much Greater
Impact and Costs
Potential Coal Retirements in GW by Study
120
Synaps,
Replace with
Gas
100
80
Credit Suisse
NERCCombined
60
40
ICF Scenario
Bernstein-CATR
20
Brattle
0
1/0/00
1/1/00
BernsteinMACT
Bradley
1/2/00
1/3/00
1/4/00
1/5/00
1/6/00
1/7/00
-20
High
Low2
ERCOT High
5
ERCOT Low
1/8/00
1/9/00
1/10/00
Just the facts from the studies
 Brattle Study – some 13,000 MWs of coal plants in Texas
might become unprofitable if forced to add equipment
 Sanzillo Study – Debt levels plus $3.6 billion in retrofit costs
make Big Brown, Monticello & Martin Lake plants
worthless
 Bradley study – Texas Region has 28,889 MW of CC Natural
Gas above 500 MWs that is underutilized (44%) and could
replace older coal plants
 CPS Energy said it prefers retiring Deely rather than add
some $500 million in scrubbber and air pollution costs –
ERCOT study list only $34 million in costs
6
Coal Already On the Brink?
 Since October 2008 only 1 coal plant has broken ground for construction - the
Kemper IGCC plant in MS
 A total of 48 existing coal plants were announced for retirement in 2010, to be
replaced with cleaner burning fuels, renewable energy, and energy efficiency.
 In late 2010 Colorado established a plan to shut down 902 megawatts of existing
coal capacity. The plan was approved by the Colo PUC and the retirements start
this year (2011).
 In June 2011 American Electric Power, one of the country's largest consumers of
coal, announced a plan to retire 25% of its coal fleet (includes a unit at the Welsh
Plant in Pittsburg, TX).
 Announced coal plant retirements in 2010 in Colorado, Arizona, Utah and Oregon
will result in the retirement of nearly 10% of the entire Western coal fleet.
 In April 2011 Washtington state Governor Chris Gregoire signed a bill that will end
all coal burning in the state by 2025.
 The Energy Information Agency now projects that no new coal plants will be
built in 2011 without significant incentives.
 CPS Energy announces plan to end Deely
7 by 2018 or sooner
Coal Already Retired & Announced
for Retirement, USA
Units Announced for Retirement
172
Plants Announced for Retirement
69
Coal Units already Retired
54
Coal Plants already Retired
26
Total Number of Units
226
Total Number of Plants
92
Planned MW
25,152
Planned MW Percentage of Total Fleet
7%
Off Coal MW
4,150
Off Coal MW Percentage of Total Fleet
1%
Total MW
Total MW Percentage of Total Fleet
29,302
8
9%
The Case for Shutting Down TXU Older Plants:
Monty, Marty, & Browny
The Case for Retirement of Coal Plants
 Weak financial fundamentals:
Prolonged natural gas/low power
prices. Wind competition.
Questionable Long-Term
Outlook/Shaky revenues.
5
 Environmental liabilities -- $3.6 Billion:
the case for retirement done.
 Major water user and creator of ozone
0
in Dallas region
 Private equity deal makes retirement
priority.
-5
 Keeping the Lights On
 Graduated Shutdown. 5,280 MW
-10
manageable.
 Natural Gas reserves and new
construction.
-15
 ERCOT Planning: Other Generation and
9
Energy Resources.
Worthless TXU Plants?
2011 Value
Existing
Debt
Pollution
Debt
The Case to Retire Big Brown,
Monticello and Martin Lake
Coal Plants, Tom Sanzillo, TR
Rose Associates
With Great Power Comes Great…
Opportunity!
 Take concrete steps today to position yourself for future
challenges
 Implement SB 1125 Sooner Rather than Later
 Transition to 0.4% of peak demand goal
 Allow more varied and direct energy efficiency programs
 Encourage ERCOT to adopt rules now to allow market-based
demand response programs – PJM has tripled DR over last
five years
 Work with SECO to implement reporting requirements of SB
898 and SB 924 (energy efficiency goals and reporting by
political entities, Cooperatives and Municipalities)
 Work with SECO and ESL to incorporate building code
efficiencies into planning and forecasting (HB 51)
 Continue to push for better demand and supply forecasting
short and long-terms – incorporation of building codes, EE
programs, demand side, etc. 10
We can mitigate some of potential cost and challenge
of upcoming regulation through demand response &
EE
 ERCOT 2011 Report on Capacity, Demand and Reserves:
Program
Amount Saved, 2015
 EE Program – SB 1125
681 MWs
 LARS –Industrial
1,063 MWs
 LARS- Commercial & Residential
? (500 MWs)
 EE Programs – Coops, Munis
 and Political Subdivisions
? (1,500 MWs)
 Implementation of Building Codes ? (500 MWs)
Potential Savings of Peak Demand
4,344 MWs (?)
11
Implement 500 MWs Rule
 Take Action at July
8th Open Meeting to
implement
 500 MW Rule and
make it effective by
2016
 Make at least half
solar
 Legislature took no
action but did
confirm “you’ve got
the power”
Proposed Utility- Area to Serve
Scale Solar Plant
Size in MWs
Travis
Austin
60
Travis
Austin
30
Presidio
San Antonio?
144
Presidio
Unknown
90
Pecos
Unknown
135
Reeves
Unknown
50
Tom Green
Unknown
90
Ector
Unknown
40
Kent
Unknown
100
Howard
Unknown
60
Total
799
ERCOT 2011 Report on12 Capacity, Demand and Reserves,
Proposed Projects with Interconnection Agreements, 2012
Transition to Transformative
Technologies
 Coastal and offshore wind
 Major new additions in CREZ and coastal and off-shore announced
 Figure out market protocols and give them the percentage they deserve
 Might want to treat coastal vs. West Texas wind differently
 Get market rules fleshed out for storage
 SB 941
 NPRR 340
 Work of ETWG at ERCOT
 Implement SB 981 for renewable distributed to get those markets moving now
 Prioritize Co-location -Figure out colocation of resources at CREZ lines and
prioritization lines for storage, solar, wind and yes natural gas
 Identify and address barriers to entry for large-scale solar
 Get the market rules right so these technologies can enter the market and start
to develop scale by the time they are needed
 Potential for TERP & other investments to lead to transformative electric vehicle
infrastructure
13
Air Quality and Water Resource Challenges are
Real and Part of Answer will be New Cleaner
Electric Grid
 Reducing
emissions from
rural power plants
by adding on
SCRs or retiring
these old plants
may be far less
expensive than
cleaning up urban
sources
14
Water Needs for Electricity are Real and so too
is Drought and other needs
• Water availability is
expected to decline
by 35%
• The current drought
throughout Central
Texas sets the trend
for what we can
expect in the future.
• Droughts are
expected to get worse
and thus energy
sources that require
little or no water will
be far more viable
National Drought Mitigation Center
15
Plan for the Future
 Follow this workshop with a commitment to plan for
the future
 like it or not, the federal rules are what are or will be
 Question is how will Texas position itself to provide
the clean, affordable, reliable energy its economy
needs?
 nothing prevents PUCT from collaborating with RRC,
TCEQ, TDHCA, TWDB, SECO and other state agencies
to assess our position and plan for success
16
Plan for success
Use PUC study proposed in SB 15 as a blueprint for an approach
 Consider an 18-month timeline for this report, include collaboration with RCT and
TCEQ
 Include public process, including potential for advisory committee – use utilities
and interested parties to do your work for you
 identify the tools you will need to address these issues before the 83rd Texas
Legislature convenes and make sure state leaders understand these challenges
and the options to address them.
 Be prepared to answer the questions by January of 2013 and what
recommendations are needed
 May need to look at retirement strategy and transition strategy for early
retirement, including use of natural gas reserve capacity
 Forgiveness for environmental sins including consent decrees for reliability
only
 Purchasing commitment for state needs
 Use of state credit for loan guarantees for transitional resources
17