120522_CO2_Forecast_PPT_SPSG - Western Electricity ...

DRAFT: CO 2 Price Forecast for
WECC Reference Case
Scenario Planning Steering Group
May 21, 2012
Amber Mahone
Katie Pickrell
Arne Olson

Objective
WECC staff asked E3 to develop a CO 2
price forecast for the generation base case
assumptions
• Forecast should be consistent with generation
levelized cost assumptions & methodology
2

Why a CO 2 Price Forecast?
CA and BC currently have laws in place that put a
price on CO 2 emissions
Policies & regulations that require, or lead to, CO 2
reductions, can explicitly or implicitly put a cost
on CO 2 emissions
• MT, OR, WA and CA all have laws limiting CO2 emissions
from new power plants & U.S. EPA has proposed a similar
emissions performance standard regulation nationwide
Most utilities are currently including a CO2 price
in their resource procurement planning (IRPs)
3

Options
1. No CO 2 price in base case
• CO 2 price treated as a sensitivity/scenario
• This is what has been done in the past
2. California-Only CO 2 Price
• Most accurately reflects current laws (CA AB 32, 2006)
• Very challenging to implement CA’s cap and trade rules
correctly in transmission models
3. WECC-Wide CO 2 Price
• Reflects possibility of future carbon regulations
• Most consistent with current utility planning practices
4

Literature Review
Review of 21 recent (‘09 – ‘12) WECC utilities’ IRPs
• 16 utilities include a CO 2 price in base case by 2020
• 2 utilities do not include a CO 2 price in base case
• 3 utilities do not clearly describe CO 2 price assumptions
Evaluate California cap & trade CO 2 policies
Other literature review studies
• Synapse “2011 Carbon Dioxide Price Forecast” 1
• EcoSecurities “Forecasting the Future Value of Carbon” 2
1. Synapse 2011 Carbon Dioxide Price Forecast, February 11, 2011. http://www.synapseenergy.com/Downloads/SynapsePaper.2011-02.0.2011-Carbon-Paper.A0029.pdf
2. EcoSecurities Consulting Limited Forecasting the Future Value of Carbon: A Literature Review of Mid- to Long-
Term Carbon Price Forecasts, January 30, 2009.
http://www.nwcouncil.org/energy/grac/20090130_Carbon%20Price%20Forecasts_NWPCC_FINAL.pdf
5

Recent Western Utility CO 2 Price
Forecasts (2012 $)
Western utility IRP base cases carbon price
forecasts between range of $0 - $75/ton in 2030
75
2012$/Short Ton CO2
50
25
0
2010 2015 2020 2025 2030 2035
Seattle PSE PSCo
Pacificorp Northwestern Nevada Power, Sierra Pacific
LADWP Idaho Avista
PGE Tri-State APS
Black Hills PNM PG&E, SCE, SDG&E
AESO NW Power and Conservation Council Synapse Mid
Synapse Low
6

Forecast Analysis (2012 $)
Un-weighted utility IRP mean, median, 25 th & 75 th
percentile of utility base cases
IRP base case un-weighted mean is ~$35/ton in 2030
(2012 $)
60
50
2012$/Short Ton CO2
40
30
20
Median
Mean
25th %
75th %
10
0
2010 2015 2020 2025 2030 2035
7

Draft Recommendation &
Implications
Draft recommendation:
Option 3, WECC-wide CO 2 price forecast in 20-
year Long-term Planning Tool (LTPT)
reference case
• CO 2 price forecast will help reduce carbon price risk
when optimizing new generation selection
• Reflects possibility of future carbon regulations
• Most consistent with current utility planning practices
What about the 10-year study cycle?
• Could include CO 2 price in reference case, but it won’t
change new generation choices
8

Next Steps
Comments? Suggestions?
The SPSG’s Metrics Definition Task Force
(MDTF) will review this work and provide
a recommendation to TEPPC’s Technical
Advisory Subcommittee (TAS) about the
potential use of carbon pricing in the
reference cases
The EDTF generally supported including
this information in the reference cases
9

Appendix

Utility Survey
Utility
IRP
year
Non-zero base CO2
price assumption?
Cases described (base followed by any sensitivities)
1 AESO 2011 Y Base
2 APS 2012 Y Base, high, low
3 Avista 2011 Y Expected
4 Black Hills 2008 Y Base, high
5 Eugene 2011 ? IRP does not include details of CO2 cases
6 Idaho Power 2011 Y Expected, high, low, zero
7 LADWP 2010 Y Medium, high, low
8 Nevada Power 2009 Y Mid, high, low
9 NorthWestern 2011 Y Expected
10 PacifiCorp 2011 Y Medium, high, low to very high
11 PG&E, SCE, SDG&E 2011 Y Base
12 PGE 2009 Y Base case, low, mid-low, mid-high, high
13 PNM 2011 Y Base, high, low, cap and trade
Base case (zero), 3 source blend, 3 source blend with low escalation,
14 PSCo 2011 N
early CO2
15 PSE 2011 N Base case (zero), base case + CO2, green world
16 Seattle City Light 2010 Y Basic, high offsets, no international
17 Sierra Pacific 2010 Y Mid, high, low
18 SMUD -- Y No IRP found
19 SRP 2011 ? IRP does not include details of CO2 cases
20 Tacoma 2010 ? IRP does not include details of CO2 cases
21 Tri-State 2010 Y Base, medium, high
11

California’s cap and trade program
Under state law (AB 32) California is implementing
a cap-and-trade program
• 2012: price on electricity sector & industrial emissions
• 2015: price on emissions in natural gas & transportation
WECC should apply a California-specific CO 2 price
to CA generation resources
• CA’s cap-and-trade program will affect power flows across
the WECC
• Specifics of cap and trade rule, especially treatment of
electricity imports, are complex for WECC to model, but
may not be necessary to reflect all of the details in model
12

California Price Forecast (2012 $)
• Long Term Planning Proceeding (LTPP) for CA IOUs uses
implied CO 2 prices embedded in electricity price forwards
• IOU forecast falls between regulated price floor and price
ceiling of California’s cap & trade program under AB 32
140
120
2012$/Short Ton CO2
100
80
60
40
PG&E, SCE,
SDG&E LTPP
CARB Floor
CARB ceiling
20
0
2010 2015 2020 2025 2030 2035 2040
13

Emissions Performance Standards
in WECC
Montana: HB 25
• The Public Service Commission may not approve applications for new
plants that are primarily fueled by coal unless the plant captures and
stores at least 50 percent of its CO2 emissions (as of 2007).
Oregon: SB 101, Washington: SB 6001, California: SB 1368
• Generators of baseload power must have emissions equal to or less
than 1,100 lbs CO2e/MWh, and utilities may only make long-term
purchase agreements for baseload power with generators that meet
this standard
Washington: RCW 80-70-010
• New fossil-fueled electric generation facilities must mitigate at least
20 percent of their total carbon dioxide emissions. This may be
accomplished through 1) payment to a third party to provide
mitigation; 2) direct purchase of permanent carbon credits, or 3)
investment in applicant-controlled carbon dioxide mitigation projects.
14

British Columbia’s Carbon Tax
Carbon tax = C$30/tonne CO2e
• Fixed tax level as of 2012 and going forward
Fossil fuel emissions are taxed “upstream” on coal,
oil and natural gas
Carbon tax revenue is used to reduce other taxes
BC’s carbon tax does not have a large effect on the
electricity sector; provincial generation is 90%
hydroelectric
Conclusion: It is not an urgent priority for WECC to
explicitly model BC’s carbon tax
15

Regional Western Utility CO 2 Price
Forecasts (2012 $)
Rockies
2012$/Short Ton CO2
80
70
60
50
40
30
20
10
0
2010 2015 2020 2025 2030 2035
Pacificorp
PSCo
Northwestern
Idaho
Tri-State
Black Hills
AESO

Regional Western Utility CO 2 Price
Forecasts (2012 $)
Northwest
2012$/Short Ton CO2
80
70
60
50
40
30
20
10
0
2010 2015 2020 2025 2030 2035
Seattle
PSE
Avista
PGE
Pacificorp

Regional Western Utility CO 2 Price
Forecasts (2012 $)
California
80
70
2012$/Short Ton CO2
60
50
40
30
20
LADWP
PG&E, SCE,
SDG&E
10
0
2010 2015 2020 2025 2030 2035 2040

Regional Western Utility CO 2 Price
Forecasts (2012 $)
Southwest
2012$/Short Ton CO2
80
70
60
50
40
30
20
10
0
2010 2015 2020 2025 2030 2035
Nevada Power,
Sierra Pacific
APS
PNM