Cost-effectiveness and economic incidence of a clean energy standard

Transcription

1 Cost-effectiveness and economic incidence of a clean energy standard Bryan Mignone Office of Policy & International Affairs US Department of Energy International Energy Workshop June 21, 213 Collaborators: Tom Alfstad (BNL), Aaron Bergman (DOE), Kenneth Dubin (OnL), Paul Friley (BNL), Andrew Martinez (NREL), Matthew Mowers (NREL), Karen Palmer (RFF), Anthony Paul (RFF), Sharon Showalter (OnL), Daniel Steinberg (NREL), Matt Woerman (RFF), Frances Wood (OnL)

2 Outline for today Introduction Modeling approach Results Conclusions Deliberative draft Not for distribution 2

3 GHG emissions originate from fossil fuels consumed in several sectors Deliberative draft Not for distribution 3

4 Clean Energy Standard (CES) basics A CES would work by giving electric power plants clean energy credits for every megawatt-hour (MWh) of electricity they generate from clean energy. Utilities that serve retail customers would be responsible for making sure they had enough credits to meet their target... This flexible, marketbased approach ensures that clean energy will be produced wherever it makes the most economic sense. Blueprint for a Secure Energy Future March 3, 211 Deliberative draft Not for distribution 4

5 Illustrative compliance flexibility for hypothetical utility Credits Issued for Clean Generation Credits Surrendered toward Obligation 8 1 Banked Credits Load-serving 4 Utility 1 Additional Clean Generation 6 Credits Purchased National CES Credit Market Deliberative draft Not for distribution 5

6 Illustrative compliance flexibility for hypothetical utility Credits Issued for Clean Generation Credits Surrendered toward Obligation 8 1 Banked Credits When-flexibility Load-serving 4 Utility 1 6 National CES Credit Market Credits Purchased Where-flexibility Additional Clean Generation How-flexibility Deliberative draft Not for distribution 6

7 Administration CES design principles c. 211 Double the share of clean electricity over the next 25 years Credit a broad range of clean energy sources Protect consumers from rising energy bills Ensure fairness among regions Deliberative draft Not for distribution 7

8 Goals and approach Understand the implications of alternative CES design options on overall economic impact and distribution of impact Use a multi-model framework to test which outcomes are robust to underlying analytic platform Focus on conceptual insights not precise numerical outcomes Deliberative draft Not for distribution 8

9 Summary of models used in this study Model NEMS-PI MARKAL ReEDS Haiku Developer OnLocation BNL NREL RFF Sector Coverage Time Resolution Electricity Regions Fuel Supply Technology Supply US energy system and macroeconomy One-year increments through 235 US energy system Five-year increments through 25 US electricity system Two-year increments through 25 US electricity system Five-year increments through Endogenous AEO 211 Exogenous supply curves calibrated to AEO 211 Calibrated to AEO 211 Exogenous supply curves calibrated to AEO 211 Calibrated to AEO 211 Exogenous supply curves calibrated to AEO 211 Calibrated to AEO 211 Solution Method LP for dispatch and expansion; recursively propagated LP for dispatch and expansion; inter-temporal optimization LP for dispatch and expansion; recursively propagated NLP for dispatch and expansion; inter-temporal optimization Deliberative draft Not for distribution 9

10 Key input assumptions and model outputs Modeling Assumptions Load growth Technology costs and performance Fuel supply CES constraint Electricity generation and capacity Fuel prices Credit prices Total cost CO 2 emissions Model Outputs Delivered electricity prices Specification of CES constraint: CES constraint can be written in each year as m i G i / R T m i = credit multiplier for technology i ; G i = generation; R = obligation; T = target m i = 1 (carbon intensity of technology i ) / carbon intensity of conventional coal) Deliberative draft Not for distribution 1

11 CES design options considered Case: Credit according to carbon intensity so that conventional coal receives no credit, carbon-free sources receive 1 credit per MWh and low-carbon sources receive partial credit Case: Same as but exclude units that would generate power in the absence of credit (i.e. existing nuclear and hydroelectric capacity) to avoid unnecessary windfalls Case: Same as but excludes generation from existing nuclear and hydroelectric capacity from obligation as well as crediting Nominal target adjustment: In and cases, adjust nominal target (T) to recover same real clean energy share as Full Credit Case Deliberative draft Not for distribution 11

12 Generation (TWh) Generation (TWh) Reference Case electricity generation 6, ReEDS 6, Haiku Other Wind 5, 5, Biomass 4, 4, Hydro Nuclear 3, 2, 3, 2, Oil & Gas Steam Natural Gas CT Natural Gas CCS 1, 1, Natural Gas CC Coal CCS Coal 6, 5, MARKAL 6, 5, NEMS-PI Other Wind Biomass 4, 4, Hydro Nuclear 3, 2, 3, 2, Oil & Gas Steam Natural Gas CT Natural Gas CCS 1, 1, Natural Gas CC Coal CCS Coal Deliberative draft Not for distribution 12

13 Generation (TWh) Generation (TWh) Difference in generation between Case and Reference Case 2,5 2, 1,5 1, , -1,5-2, -2,5 ReEDS ,5 2, 1,5 1, , -1,5-2, -2,5 Haiku Other Wind Biomass Hydro Nuclear Oil & Gas Steam Natural Gas CT Natural Gas CCS Natural Gas CC Coal CCS Coal 2,5 2, 1,5 1, , -1,5-2, -2,5 MARKAL ,5 2, 1,5 1, , -1,5-2, -2,5 NEMS-PI Other Wind Biomass Hydro Nuclear Oil & Gas Steam Natural Gas CT Natural Gas CCS Natural Gas CC Coal CCS Coal Deliberative draft Not for distribution 13

14 Power Sector CO2 (MMT/year) Power Sector CO2 (MMT/year) Emissions in Reference Case and all CES cases 3, ReEDS 3 Haiku 2,5 25 2, 2 1,5 15 1, , MARKAL 3, NEMS-PI 2,5 2,5 2, 2, 1,5 1,5 1, , Deliberative draft Not for distribution 14

15 Billion 29$ Billion 29$ Total electricity system cost in Reference Case and all CES cases 35 ReEDS 35 Haiku MARKAL 35 NEMS-PI Deliberative draft Not for distribution 15

16 Electricity Price (29 $/MWh) Electricity Price (29 $/MWh) Delivered electricity prices in Reference Case and all CES cases ReEDS Haiku MARKAL NEMS-PI Deliberative draft Not for distribution 16

17 Conclusions CES could effectively reduce CO 2 emissions in the power sector Total NPV welfare cost of the policy (at 5% discount rate) is projected to be approximately $23 per ton CO 2 (average across models in No Credit cases) Burden on consumers (ratepayers) relative to producers (merchant generators) could be reduced by decreasing crediting to inframarginal generation Distributional implications could be adjusted without significant erosion of overall cost-effectiveness Technology outcomes vary significantly due to close competition for market share in the power sector and flexible policy design Deliberative draft Not for distribution 17

18 End Deliberative draft Not for distribution 18