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Environmental Compliance & Generation Capacity (etc.)

Environmental Compliance & Generation Capacity (etc.). Kenneth A. Colburn New Hampshire Department of Environmental Services. NGA Center for Best Practices State Executive Policy Forum on Electricity Restructuring April 4-6, 2001 – Philadelphia, PA. First Things First.

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Environmental Compliance & Generation Capacity (etc.)

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  1. Environmental Compliance & Generation Capacity (etc.) Kenneth A. Colburn New Hampshire Department of Environmental Services NGA Center for Best Practices State Executive Policy Forum on Electricity Restructuring April 4-6, 2001 – Philadelphia, PA

  2. First Things First... • California’s problems were not caused by environmental regulation: • Several plants approved but not constructed • No supply-side or demand-side response over two decades of increasing demand? • Price-capped competition? An oxymoron! • Compulsory spot market purchases • Abuse of market power also evident...

  3. Are Environmental Regulations Stopping Plants? • NO! • Most onerous air regulations to date concern ozone nonattainment, but... • Many new power plants are being approved and built in ozone nonattainment areas! (e.g., NH, MA, CT, NY, NJ, etc.)

  4. Will Restructuring Be Good for the Environment? • Probably not, under the existing federal Clean Air Act: • Regulates input; ignores output • Built in “unlevel” playing field • Discourages improvement (e.g., NSR)

  5. Will Restructuring Be Good for the Environment? • But it would be, if the interests of the economy are aligned with the interests of the environment • Regulate based on output • Insist on Environmental Comparability • (i.e., “un-grandfathering”) to level the playing field & eliminate NSR

  6. The Bad News: Environment Will “Keep Coming” • New NAAQS for Ozone • New NAAQS for Fine Particulate Matter • 22-State NOx SIP Call / 126 / NSR Suits • New Regional Haze program • Mercury and other toxic emissions • Climate Change • Acid Rain II?

  7. The Good News: It’s Likely to Be Good for the Economy • Health care costs • Tourism (vistas, water quality, etc.) • Forest and crop productivity • “Place matters more” – Quality of Life • Greater certainty => Less Stranded Costs • Demand peaks => Highest system costs • Reliability comes with efficiency • Smaller energy projects => more jobs • More efficient => More competitive

  8. Recommendations • Pursue Integrated Air Quality Solutions • “Four-Pollutant” Approaches like NH’s Clean Power Strategy • Reduce SO2 by 75% • Reduce annual NOx by 70% • Reduce mercury by 75% • Reduce CO2 10% • Allows trading • Takes advantage of “co-control benefits” • Provides greater certainty; asset value • “First Mover” advantage

  9. Recommendations (continued) • Get the signals right (e.g., output-based; level playing field, time-of-day pricing?) • Think ahead (climate isn’t going away) • Provide greater certainty • “Do it right the first time” vs “Do it over” • Work the Demand Side too (peaks create disproportionate costs) • Use Environmental Disclosure effectively

  10. Sustainability Energy Efficiency Path Competitive Advantage Lost to Delay ECONOMIC EFFICIENCY Energy Intensity Path NOW LATER Old or New Energy Path?

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