Regional Greenhouse Gas Initiative (HB 1434)

1. Regional Greenhouse Gas Initiative (HB 1434) Presentation to House Science, Technology, & Energy Committee January 10, 2007 New Hampshire Department of Environmental Services Thomas S. Burack, Commissioner Robert R. Scott, Director Air Resources Division

2. Climate ChangeImpacts on New Hampshire • Trends indicate NH is experiencing impacts now • Extreme storm events • More rain in winter • Less snow cover

3. Flooding in NH October 2005 May 2006 April 2007 • Peak flows in many rivers greater than 100 year flood • Millions of dollars in state and individual losses

4. By late in the century (without reducing GHG emissions) Winter snow season cut in half Sea-level rise up to nearly three feet More than 60 days with temperatures over 90°F in most cities 4 to 28 days with temperatures over 100°F (compared with one or two days per year historically). FutureEconomic Impacts to New HampshireNortheast Climate Impacts Assessment (2007)

5. What if we don’t act now to reduce green- house gases?

6. Extreme weather alone – 0.5-1% world GDP annually Total cost of taking no action equivalent to reduction in consumption per head of 5-20% annually Less costly to take actions now than to delay Risk to world economy on the order of multi-national world conflict Insurance market already reacting Global Cost of No Action(Stern Review UK Treasury 2006)

7. All three political parties working together to address climate change 1990-1999 14% reduction in GHG emissions; 14.9% increase in economic growth; 5% increase in jobs Confederation of British Industry – recent economic report on growth in emerging technologies and energy services (very supportive of climate change policies) Specific examples of companies transforming from skeptics to champions of aggressive energy efficiency policies UK Experience

8. NH CO2 (equivalent) Emissions by Sector 2004 Transportation Agriculture, Residential Forestry and Waste Transportation Industrial 2% 34% Electric Utilities 34% Commercial Electric Utilities Agriculture, Forestry Commercial and Waste Residential Industrial 8% 15% 7%

9. Regional cap on emissions from fossil-fueled power plants >25 megawatts Cap (10 state region) 188 million allowances 1 allowance = 1 ton NH Budget 8.6 million allowances Majority of allowances will be sold in regional auction RGGI Cap & Trade Program

10. Power plants must have enough allowances to equal their emissions by the end of the three year period Can buy allowances (regional auction) or offset allowances Unlimited banking of allowances Compliance

11. 9 other states going forward with RGGI Regional energy prices will be affected by RGGI whether NH participates or not Only way to mitigate costs is to participate and use auction revenues RGGI impact on NH

12. Driving federal action Western Climate Initiative Mid-western initiative (Illinois, Iowa, Kansas, Minnesota, Michigan, Wisconsin, and Manitoba) Investment in more efficient energy market is positive for NH regardless of climate change Regional Leadership

13. RGGI is Significant • RGGI would represent the seventh highest emitting developed country • The RGGI cap (188,076,976 tons) is similar to the emissions of Australia, France, or Italy • There is no “silver bullet” but RGGI is part of the “silver buckshot”

14. Benefits of HB 1434 • Helps to mitigate long-term energy costs via greater investment in energy efficiency • Creates a market signal that encourages development of cleaner and, in many cases, more local energy sources • Increases our energy independence with more local energy sources: keeping more dollars local • Starts to mitigate our GHG emissions to avoid the most deleterious projections of climate change impacts

15. Downside of not joining RGGI • Roughly half of NH’s supply is purchased from the regional market • As a consequence, NH electric prices will be affected by RGGI • No benefit of sale of NH allowances • No seat at table – no influence on program

16. Record peak demand in summer >28,000 MW Peak demand increase twice as fast as average load growth Costly new capacity may be needed to meet demand reached for only a few hours or days our of the year Reducing electricity use by 5% during peak times will save consumers $580 million a year (ISO – NE June 2006) Energy Efficiency – Regional Priority

17. RGGI bill proposing a “fuel-neutral” fund Technology continuing to improve Recognize opportunities vary Increased energy efficiency overall – can avoid costly new capacity – reducing everyone’s energy costs Major Potential for Energy Efficiency Improvements

18. Light Bulb Evolution

19. Fluorescent Light Evolution 34–40 Watts 32 Watts 28 Watts 1950’s – 1980’s late 1980’s – 1990’s Last 5 yrs

20. Should RGGI work? Yes – markets have helped meet environmental policy objectives Transparent prices enable potential investors to determine value of projects and allowances Open access encourages a large number of developers to participate in markets Stakeholder process enable market changes to meet policy objectives Regional Transmission Planning provides a for(u)m to support ISO-NE Comments (D. LaPlante presentation 11-9-07)

21. RGGI rules compatible with continued reliable operation of the system Allowances are not required before the fact to generate Generators have many opportunities to acquire allowances Before the fact in auctions or the secondary market After the fact in two month window after close of compliance period As a last resort, future allowances at a rate of 3 future allowances for 1 current period allowances can be used ISO-NE Comments (D. LaPlante presentation 11-9-07)

22. NH participation is lower cost overall to NH than not joining Lowest long-term net utility cost is to auction allowances and put revenues into energy efficiency Positive impact on employment and the overall NH economy UNH Economic Analysis 2007

23. Net Rate Impact – All NH Utilities

24. Average Monthly Change Residential Household Bill - All NH Utilities

25. Potential Mitigation of Monthly Business Electricity Costs Net change from 100% investment in energy efficiency compared to not joining RGGI

26. NH tradition of innovation and leadership NH needs to foster R&D development of new technologies and related ancillary services Current examples – Power Span GT Solar Opportunity for Economic Development

27. Clean Power Act Cap on PSNH fossil fuel units (Bow, Portsmouth, Newington) 5,425,866 tons RGGI – 10 state MOU PSNH (Bow, Portsmouth, Newington) Granite Ridge (Londonderry) Newington Energy (Newington) 8,620,460 tons Regional Greenhouse Gas Initiative (www.rggi.org)

28. 2-Phase CO2 Caps (gradual, keeps cost low) stabilization 2009 – 2014 (no absolute reductions, but reductions from business-as-usual) Phase I Regional Cap = 188,076,976 tons Phase I NH Budget = 8,620,460 tons 10% reduction 2015 - 2018 (2.5% per year for 4 years) Built-in Review of Program in 2012 RGGI Cap Levels

29. Stabilize/Reduce Emissions Energy efficiency Fuel switching Changes in dispatch Emerging control technologies GreenFuel Emissions-to-Biofuels system CO2 capture & underground injection Buy allowances or offsets RGGI Compliance Options

30. Budgeted allowances purchased at auction Early Reduction: Emission reductions made prior to the start of a program. CO2 Offsets: A reduction from an activity (sector) outside or different than the activity (sector) being regulated. Types of RGGI Allowances

31. RGGI Offsets • 1st set – methane capture, reduced loss of SF6 (electric equipment insulator), afforestation, end-use efficiency • 2nd set – forest management • Limited to 3.3% of each source’s emissions • Offsets may come from RGGI region or from another US state • Safety valves built in to increase use of offsets for economic relief if necessary

32. Compliance Flexibility Mechanisms • 3-Year Compliance Period • Banking (with typical tracking, monitoring, recordkeeping, and reporting requirements) • Early Reduction Allowances

33. Includes all major provision of MOU Conversion of PSNH allowances under the Clean Power Act Proposes to auction remaining allowances Revenues to be used for energy efficiency Clean Power Act provisions will end 12-31-2008 House Bill 1434

34. State budget of 8,620,460 tons (03-04 average emissions) By 2018, 7,758,414 tons Applicable to all fossil-fueled generation > 25 Megawatts Auction allowances (except those grandfathered to PSNH as a result of Clean Power Act) Can grant Early Reduction Allowances (Northern Wood Project) Can accept eligible offset allowances 125-O:20 Establishing a Trading Program

35. Power plants must have enough allowances to equal their emissions over a three year period Can buy allowances (regional auction) or offset allowances Limit on use of offset allowances Unlimited banking 125-O:21 Compliance

36. Allowance price <$7.00 (2005 dollars) – 3.3% Allowance price >$7.00 but <$10.00 – 5% Allowance price >$10.00 – can use for 10% of their compliance obligation – compliance period extended to four years – can use European Union Emission Trading allowances or Kyoto Clean Development Mechanism offset credits Limit on use of offset allowances

37. Administered by NH PUC with an advisory board Used for energy efficiency, conservation, and demand response State administrative costs and to pay NH’s contribution to RGGI regional organization At least 5% of monies shall be used to assist low-income residential customers to reduce total energy use (fuel neutral) 125-O:22 Greenhouse Gas Emissions Reduction Fund

38. reduce GHG emissions from all fuels used to provide electricity, heating and cooling cost-effective reduce peak electric load promote market transformation, innovation, and energy cost savings Criteria for use of fund

39. Capitol investment converted to the number of allowances that investment would have been able to pay on the “market” Unused allowances from 2007 and 2008 (PSNH emissions < Clean Power Act cap of 5,425,866) Emission reductions from the Northern Wood Project (will be granted as Early Reduction Allowances) – about 300,000 tons per year 125-O:23 Conversion of Clean Power Act Allowances (PSNH)

40. Up to 1% of allowances set aside to retire emissions for voluntary REC purchases – if not used in any one year, put up for auction NH and NE businesses buy RECs to reduce their carbon emissions This provision protects the value of the RECs developed in NH, otherwise they will not be “certified” and have little or no value 125-O:24 Set Aside for Voluntary Purchases of RECs

41. Tom Burack thomas.burack@des.nh.gov 271- 2958 Bob Scott robert.scott@des.nh.gov 271-1088 Joanne Morin joanne.morin@des.nh.gov 271-5552 Contacts