Electric System Cost, Reliability and the Environment

1. Electric System Cost, Reliability and the Environment Richard B. Kennelly, Jr. Conservation Law Foundation December 1, 2000 rkennelly@clf.org 617/350-0990 www.clf.org

2. Electric Reliability Issues • Each type of plant and fuel source has own risk profile • System reliability can be improved at some cost -- through, e.g., redundancy of plants, fuel transportation and backup fuels • Public policy challenge: properly assess and plan for system reliability using market mechanisms and regulation to balance cost against the market’s willingness to pay Conservation Law Foundation

3. Some Gas Reliability Issues • As the number of days of non-firm gas availability decrease, incentive to increase firm supply • Fuel-switching capability is important • Evaluate siting and permitting of dual-fuel combined-cycle and combustion turbine units • Compare emissions of distillate versus older sources (e.g., 0.23 lbs/MWh NOx) Conservation Law Foundation

4. Reliability vs. Environment? • What is the least cost way to meet desired environmental goals while maintaining system reliability at the desired level? • Optimum strategy will include: • increased dual-fuel capability • greater fuel storage -- oil and gas • increased number and flexibility of inter-pipeline interconnections • Demand side options (pricing, efficiency, DG) Conservation Law Foundation

5. Production Cost Comparison • Coal is cheap -- $23 to $30 per MWh • With new emissions standards -- $27 to $35 • Existing oil and gas -- $40 to $58 or more • New gas combined-cycle -- $20 to $27 • All-in cost -- $27 to $39 • Bottom line: coal will rarely (if ever) be the marginal fuel, even with tighter standards Conservation Law Foundation

6. Emissions Comparisons • Average older coal- and oil-fired units: • 3 lbs/MWh NOx, 12 lbs/MWh SO2 • New Standards: • 1.5 lbs/MWh NOx, 3 lbs/MWh SO2 • AES Thames, Connecticut (merchant coal): • 0.4 lbs/MWh NOx, 2.6 lbs/MWh SO2 • New gas combined-cycle: • 0.06 lbs/MWh NOx, 0.0065 lbs/MWh SO2 Conservation Law Foundation

7. Public Health Costs • Old power plants cause 30,000 premature deaths annually in US (Abt Associates) • Cutting SO2 emissions 75% would reduce mortality by two-thirds • Boston is in the top 10 metro areas nationally for health impacts • See www.cleartheair.org (October 2000) Conservation Law Foundation

8. Public Health Costs II • Harvard School of Public Health: Salem Harbor and Brayton Point are responsible annually for: • 159 premature deaths • 1,710 emergency room visits • 43,300 asthma attacks • Reducing emissions to target levels would save $810 M/year in avoided health costs • See www.hsph.harvard.edu/papers/plant/plant.pdf Conservation Law Foundation

9. Level Playing Field -- Internalize Externalities • Air pollution regulations -- close loophole and associated regulatory subsidy • Toxic waste -- water pollution and solid waste disposal • Water impacts (thermal discharge, etc.) • Regulations should not favor old units against new market entrants -- let competition work Conservation Law Foundation