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Preparing For Future Federal Carbon Regulation

Preparing For Future Federal Carbon Regulation. APPA 2007 Engineering & Operations Technical Conference Atlanta, Georgia April 17, 2007 Robert L. Kappelmann PE. Energy and Environmental Policy Consultant RLK Associates kapprl@juno.com. Overview. Brief Science Primer The Political Science

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Preparing For Future Federal Carbon Regulation

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  1. Preparing For Future Federal Carbon Regulation APPA 2007 Engineering & Operations Technical Conference Atlanta, Georgia April 17, 2007 Robert L. Kappelmann PE. Energy and Environmental Policy Consultant RLK Associates kapprl@juno.com

  2. Overview • Brief Science Primer • The Political Science • The Competing Solutions and Limitations • Cost Impacts • Carbon Strategies • Some Parting Thoughts and Questions

  3. Climate Change Vs Global Warming Vs The Greenhouse Effect • The Greenhouse Effect • The Earth’s Atmosphere Traps Energy From the Sun • Greenhouse Gases Include: H20, CO2, CH4 and N2O • Adds About 60 Degrees to the Earth’s Temperature • Without the Greenhouse Effect Earth Would be an Ice Planet

  4. Natural Greenhouse Gases Dominate the Atmosphere Man-made GHG’s constitute 0.3% of overall GHG’s. Total GHG Total Greenhouse Gases Non-Water Vapor Greenhouse Gases Major Factors Affecting Climate Models Humidity Snow & Ice Clouds Ocean Circulation Natural94% Man Made6% Other GHG’s include CO2, methane, nitrous oxide, CFC’s, SF6 January 2003 Source:www.clearlight.com/~mhieb/WVFossils/greenhouse_data.html

  5. The “Consensus” Science • Man made GHGs are Increasing the Greenhouse Effect and Upsetting a Delicate Natural Balance • The Increased Greenhouse Effect is Causing Global Warming • Global Warming is Changing the Climate. • A Changing Climate will Lead to Environmental Armageddon

  6. The Proof Positive • The CO2 Levels Are Increasing • The Average World Wide Temperatures Are Increasing • Man’s Activities Are Increasing CO2 Levels and.. • Therefore Man’s Activities Are Increasing the Worldwide Temperature and Changing the Climate.

  7. That Data is Overwhelming

  8. A Little Longer Look Back

  9. The Contrarian View • The Last Major Ice Age Ended 20,000 Years Ago. • The Planet Has been Warming Ever Since. • CO2 Follows Temperature, Temperature Does Not Follow CO2. • The Climate Will Continue to Change With or Without Man’s Help.

  10. Contrarian View Continued: “The Sun Boss, the Sun”

  11. Political Sciences Trumps Hard Science!“A Political Solution Will Always Come Before Scientific Certainty”What is Driving Legislation? • Real Concerns of Risk of Climate Change. • Environmental Activist and Fund Raising. • And the Potential Winners.

  12. The Potential Winners • Carbon Trading Industry • Control Technology Vendors • Old Big Dirty Coal Generation • Gas Dominated Generation • Nuclear Generation Advocates • Renewable Energy Advocates • Others seeing a Competitive Advantage

  13. National Political Solutions • Voluntary Programs: Climate Vision, Climate Leaders • Market Signal Approaches: Cap and Trade, Carbon Tax • Technology Approaches: GHG Intensity, RPS (Renewable Portfolio Standard), CEPS (Clean Energy Portfolio Standard)

  14. Cap and Trade Vs. Carbon Tax • Nearly All Economist Agree Carbon Tax is Cheaper Per Ton of Carbon Removed. • Cap and Trade in Reality is an Inefficient Tax. • However, It is More Likely to Gain Political Support. • Cap and Trade Creates Winners and Losers and Therefore Economic Opportunity. Note: A Carbon Cost of $10/Ton = $10/MWh for Coal and Heavy Oil at a 10,000 Btu/KWh Heat Rate and $6/MWh for Natural Gas.

  15. How Does an Air Pollutant Compare to a GHG For Cap and Trade? Similarities: • Problem Air Pollutants (SO2, NOx, Mercury) and GHGs (CO2 and H2O) are combustion products • Air Pollutants and GHGs are Generally Higher From Coal-Fired EGUs

  16. Air Pollutants Direct Human Health Impacts Man Made Emission Predominate Control Technology Available Years Before Regulation GHGs No Direct Human Health Impacts Man Made Emissions Minor Source Control Technology Available Only Years After Regulation How Does an Air Pollutant Compare to a GHG For Cap and Trade?Continued

  17. Actual Control Cost Less Than 5% of Energy Cost. No Adverse Impact on Energy Mix Benefits Quantifiable Projected Control Cost 40% to 60% of Energy Cost. Adverse Impacts on Energy Mix Benefits Un-quantifiable. How Does an Air Pollutant Compare to a GHG For Cap and Trade?Continued

  18. EGU Nominal 500MW Increased Capital Cost with CSC MW De-rating with CSC Heat Rate Penalty with CSC Increased Cost per MWH with CSC Est. Cost for CSC per Ton of CO2 Removed SCPC[1] 73% 29% 40.3% 66.2% $35.09 USCPC[2] 67% 31% 37.7% 61.6% $32.35 IGCC 47% 14% 16.6% 39.4% $23.63 Cost of Carbon Control is Not Trivial! Table A. Capital Cost and Operating Impacts for New EGUs with CSC as compared to New EGUs without CSC [1] Super-critical pulverized coal unit [2] Ultra-super-critical pulverized coal unit Table A is based on data from EPA-430/R-06/006 July 2006. Cost for CO2 gas transport and deep injection not included in this table.

  19. Technology Driven Solutions • Metric is Reduction of GHG Intensity. • Technology That Produces Less GHG per Unit of Production is Incentivized or Mandated. • Less GHG Intensity Equals Less Over All GHGs • Bonus: Tends to Stimulate Domestic Energy Sources. • Two Possibilities: RPS and CEPS

  20. Factor 2004 Baseline 2020 Reference 2020 CEPS 2020 Bingaman 2030 Reference 2030 CEPS 2030 Bingaman (10 E9 Kwh) Coal 1977 2505 2302 2370/2362 (phased/non-phased auction) 3381 2803 2530/2500 Natural Gas 702 1103 1090 1184/1166 993 889 1190/1180 Oil 120 107 109 49/48 115 108 49/48 Dedicated Biomass 36 51 53 58/73 77 285 262 Co-fired Biomass 1 36 177 23/19 26 126 0 Retail Electric Cents/Kwh 7.6 7.2 7.3 7.51/7.65 7.5 7.5 8.31/ 8.48 CO2 (10 E 6 metric tons) 2299 2835 2649 2706/2691 3318 2830 2791/2756 Table A: Comparison of Key Factors and Impacts of Bingaman and Coleman Climate Proposals Based on EIA Analysis of Coleman and Bingaman proposals.

  21. Unintended Consequences Need to be Understood! • Even a Well Designed Cap and Trade Will Shift Generation To Natural Gas. • Current Domestic Supplies (80%) and Imports (20%) Are Not Sufficient. • Imported LNG From Our Good Friends Such as Algeria and Russia Must Make Up the Shortfall. • Coal to Liquids (CTL) Industry Stopped Before It Starts.

  22. Carbon Strategies: • Ostrich Approach • Quantify Risk of Future Regulation • Anticipate and Mitigate Risk of Future Regulation

  23. Quantify the Risk of Future Regulation • Incorporate a carbon cost in IRP and/or “Need for Power” study. • Already required in some states. • Range: $5 to $10 per ton. • Problem: May be perceived as planning to buy your way out of the problem.

  24. Anticipate and Mitigate Risk of Future Regulation • Avoid debating the science if possible. • Have a reasonable and proactive responses. • Participation in voluntary programs. • Lower GHG Intensity by Efficiency and Renewables • Address possible future regulatory programs.

  25. A Good Example Voluntary Programs. • DOE Climate Vision* • EPA Climate Leaders • 1605 b Reporting • Tree Power • Other?

  26. Good Example continued Response to Future Regulatory Programs. • Carbon Tax = Cost of carbon in IRP • GHG Intensity = Renewable energy, DSM, Supply-side efficiency, carbon offsets • Cap and Trade = Cost of Carbon In IRP, Renewable energy, DSM, Supply-side efficiency, carbon offsets Note: 3 Clean Coal Technologies but no current commercial capture technology for any including IGCC.

  27. Parting Thought Parting Thoughts • If you don’t tell your story someone else will. • Questions?

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