Exploring AB 32 and CPP Interactions in the WECC EPRI ENV-Vision Conference Washington, DC

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1 1 Exploring AB 32 and CPP Interactions in the WECC EPRI ENV-Vision Conference Washington, DC May 11, 2016

2 Project Overview Analyzed power sector impacts of the Clean Power Plan (CPP) Focused on interactions between AB 32 import provisions and the CPP in the context of mass-based CPP goals Key model outputs included: CPP allowance prices Natural gas prices Wholesale electric prices Total production costs CO 2 emissions

3 Key Takeaways AB 32 Electricity Import Provision Drives Significant Differences in Outcomes Absent linkage, California generators face higher GHG prices than out-of-state generators GHG price differential drives large swings in NGCC generation GHG price differential does not change WECC or California in-state + import GHG emissions, but does change California in-state vs import GHG emissions Removing the AB 32 import charge reduces wholesale electricity prices and total system costs in California Removing the AB 32 import charge reduces wholesale electricity prices in the WECC, but results in higher total system costs in the WECC as California imports more power

5 IPM Model Assumptions Key Similarities to EPA Modeling of Final Rule Both analyses use ICF s IPM PG&E s analysis starts with V5.13 and incorporates key updates from V5.15 Firm builds and retirements Natural gas module (results in lower gas prices) Electricity demand (lower in AEO 2015) Key Differences Reflects California s 50/50/50 Executive Order Assumes higher AB 32 allowance prices Assumes aggressive energy efficiency, renewable energy, and transport electrification policies

6 Cases Vary AB 32 Cap-and-Trade Regulation of Emissions from Electricity Imports Case Name CPP Policy Assumed AB 32 C&T for CA Power Plants AB 32 C&T GHG Regulation of Electricity Imports into CA Nat l Trading Imports 2x Nat l Trading Imports 1x Final Rule Mass Caps on Existing and New Sources, National Trading* Active * Allowance banking not modeled

7 CO 2 Allowance Prices Policy Case imports 2x imports 1x CO 2 Allowance Prices* (2012$/MT) State/ Region In State CA Imports into CA Rest of US In State CA Imports into CA Rest of US * Allowance banking not modeled 1 AB 32 Allowance Price Input Assumption: Preliminary 2015 IEPR GHG price projections, Modified High Case 2 Post-2022, imports into CA in the 2x case pay both the CPP CO 2 price and the AB 32 price 3 Post-2022, imports into CA in the 1x case pay only the CO 2 price in the region where power is generated (CPP Price)

8 California s Generation Mix 140 Gas Fired Generation Supplying CA (TWh) imports 2x imports 1x imports 2x imports 1x 12 imports 2x imports 1x Gas Imports Gas In State

9 California Emissions Trajectory* * Includes emissions from all fossil generation facilities 60 CO2 Emissions (Million Metric Tons) imports 2x imports 1x imports 2x imports 1x imports 2x imports 1x CA in state CA Imports

10 WECC Emissions Trajectory* * Includes emissions from all fossil generation facilities WECC CO2 Emissions (Million Metric Tons) imports 2x imports 1x

11 US Emissions Trajectory* * Includes emissions from all fossil generation facilities US CO2 Emissions (Million Metric Tons) 2,000 1,800 1,600 1,873 1,862 1,810 1,792 1,684 1,671 1,400 1,200 1, imports 2x imports 1x

12 California Production Costs* * Total Production Cost = Fuel + VOM + FOM + Capital Cost + Net Import Costs CA Production Costs (Billions of 2012$) $25 $ $15 $10 $5 $0 imports 2x imports 1x

13 WECC Production Costs * Total Production Cost = Fuel + VOM + FOM + Capital Cost + Net Import Costs WECC Production Costs* (Billions of 2012$) $40 $35 $ $25 $20 $15 $10 $5 $0 imports 2x imports 1x

14 California Wholesale Electric Prices $90 $80 CA Average Wholesale Energy Price (2012$/MWh) $70 $ $50 $40 $30 $20 $10 $0 imports 2x imports 1x

15 WECC Wholesale Electric Prices $90 WECC Average Wholesale Energy Price (2012$/MWh) $80 $ $60 $ $40 $30 $20 $10 $ imports 2x imports 1x

16 Key Takeaways AB 32 Electricity Import Provision Drives Significant Differences in Outcomes Absent linkage, California generators face higher GHG prices than out-of-state generators GHG price differential drives large swings in NGCC generation GHG price differential does not change WECC or California in-state + import GHG emissions, but does change California in-state vs import GHG emissions Removing the AB 32 import charge reduces wholesale electricity prices and total system costs in California Removing the AB 32 import charge reduces wholesale electricity prices in the WECC, but results in higher total system costs in the WECC as California imports more power

Energy and Consumer Impacts of EPA s Clean Power Plan. Prepared for the American Coalition for Clean Coal Electricity

Energy and Consumer Impacts of EPA s Clean Power Plan Prepared for the American Coalition for Clean Coal Electricity Contents Executive Summary Overview of the Clean Power Plan NERA Methodology Baseline