Renewable Energy as a Mechanism for Reducing Pollution North Carolina DENR/DAQ Mercury/CO2 Workshop Raleigh. North Carolina April 20, 2004 Harnessing the power of voluntary markets… to improve the environment Copyright Environmental Resources Trust, Inc. (ERT), Request to reproduce all or part of this material should be made to ERT. Alden Hathaway Environmental Resources Trust, Inc.

OVERVIEW Clean Air Act (CAA) Framework Clean Air Act (CAA) Framework CAA as Drivers for Wind CAA as Drivers for Wind MWCOG Case Study MWCOG Case Study Chicago EcoPower® Report Chicago EcoPower® Report Potential Market Opportunities Potential Market Opportunities Necessary Policy Changes Necessary Policy Changes Related Marketing Innovations Related Marketing Innovations

Problem Statement How do we get more voluntary participation when most municipals and end-users are staying on the sidelines because of the increased price for Green Power? How do we get more voluntary participation when most municipals and end-users are staying on the sidelines because of the increased price for Green Power? Answer: Give them credit for pollution reduction

CLEAN AIR ACT FRAMEWORK Act drafted without renewable energy in mind Act drafted without renewable energy in mind CAA requires regional air quality plans (State Implementation Plans or SIPs) CAA requires regional air quality plans (State Implementation Plans or SIPs) To date, EPA has never approved renewable energy as an air pollution control measure under a SIP To date, EPA has never approved renewable energy as an air pollution control measure under a SIP Window of opportunity created - new quantification methods, 8-hour ozone standard, and regional haze regulations Window of opportunity created - new quantification methods, 8-hour ozone standard, and regional haze regulations

CAA POLICIES AS MARKET DRIVERS State/local governments choose from wide range of air pollution control measures State/local governments choose from wide range of air pollution control measures Emission reductions from traditional control measures largely exhausted in dirty air areas Emission reductions from traditional control measures largely exhausted in dirty air areas States and municipalities interested in air quality benefits of renewable energy (particularly wind) States and municipalities interested in air quality benefits of renewable energy (particularly wind) Lowering NOx emissions results in reduced ozone transport and less regional haze Lowering NOx emissions results in reduced ozone transport and less regional haze

CAA POLICIES AS MARKET DRIVERS State and local governments are a key market for renewable energy, for example consider wind; State and local governments are a key market for renewable energy, for example consider wind; Increasing market demand is the linchpin for wind power development Increasing market demand is the linchpin for wind power development Wind plants are financed based on the future revenue stream from wind purchases Wind plants are financed based on the future revenue stream from wind purchases Municipalities and states often serve as important anchor customers (e.g., City of Chicago) Municipalities and states often serve as important anchor customers (e.g., City of Chicago)

MWCOG CASE STUDY Metropolitan Washington (MW) area (MD- DC-VA) designated as severe ozone non- attainment area under 1-hour standard Metropolitan Washington (MW) area (MD- DC-VA) designated as severe ozone non- attainment area under 1-hour standard Met. Wash. Council of Governments (COG) submitted revised regional air quality plan (SIP) to EPA Region III in March 2004 for 60-day review Met. Wash. Council of Governments (COG) submitted revised regional air quality plan (SIP) to EPA Region III in March 2004 for 60-day review

MWCOG CASE STUDY Case demonstrates market potential of SIP emissions reduction credit under the CAA Case demonstrates market potential of SIP emissions reduction credit under the CAA Mont. Co. seeking to purchase 5% of its energy from wind Mont. Co. seeking to purchase 5% of its energy from wind Energy conservation planned to offset green power premium Energy conservation planned to offset green power premium Co. issued request for proposals in late Feb Co. issued request for proposals in late Feb. 2004

New ERT Environmental Report Prepared under a Grant from the Great Lakes Protection Fund

Methodology Methodology Breakthrough in Chicago Report Methodology Breakthrough in Chicago Report Confidentiality agreements with utilities provide access to previously unavailable data to generate emissions avoidance report Confidentiality agreements with utilities provide access to previously unavailable data to generate emissions avoidance report

Results of Chicago Report Analysis proves that renewable energy backs down fossil fuel plants, coal, oil, gas rather than nuclear or hydro; Analysis proves that renewable energy backs down fossil fuel plants, coal, oil, gas rather than nuclear or hydro; Renewable energy backs down fossil fuel plants because of zero or near zero marginal operating costs; Renewable energy backs down fossil fuel plants because of zero or near zero marginal operating costs; Analysis utilizes actual power plant dispatch ranking data – specific plants dispatched in order of economic cost; Analysis utilizes actual power plant dispatch ranking data – specific plants dispatched in order of economic cost; Analysis compares actual power plant dispatch ranking data and actual continuous emissions monitor data to verify emission and operational changes; Analysis compares actual power plant dispatch ranking data and actual continuous emissions monitor data to verify emission and operational changes; Data based on continuous monitors are current vs. time lag (up to two years) with other methodologies; Data based on continuous monitors are current vs. time lag (up to two years) with other methodologies; Data in Chicago shows 2300 lbs CO2 per MWh vs. 815 lbs per MWh System Mix methodology Data in Chicago shows 2300 lbs CO2 per MWh vs. 815 lbs per MWh System Mix methodology

How Chicago Methodology Can Help Provide an Example Use ERT Environmental Impact methodology to validate NOx emission reductions created through renewable energy back down of fossil plants. Use ERT Environmental Impact methodology to validate NOx emission reductions created through renewable energy back down of fossil plants. Use NC New Generation NOx Set-Aside to provide SIP credit to NOx emission reductions resulting from renewable energy. Use NC New Generation NOx Set-Aside to provide SIP credit to NOx emission reductions resulting from renewable energy.

NECESSARY ACTION MOUs between DOE and EPA Regional Offices to support EERE MOUs between DOE and EPA Regional Offices to support EERE Revision of CAA regulations and policy to place RE on level playing field; Revision of CAA regulations and policy to place RE on level playing field; Comments on EPAs proposed Interstate Air Quality Rule and planned supplemental rule Comments on EPAs proposed Interstate Air Quality Rule and planned supplemental rule EPA issuance of improved guidance and training for Regions, States, & local govrmt. EPA issuance of improved guidance and training for Regions, States, & local govrmt. Development of model documentation Development of model documentation

POTENTIAL MARKET OPPORTUNITIES Regional air quality plans to meet 8-hour ozone standard in Midwest and East Regional air quality plans to meet 8-hour ozone standard in Midwest and East Marketing window of opportunity in next few years Marketing window of opportunity in next few years Wind energy as important option Wind energy as important option SIP plans due April 2007 SIP plans due April 2007 Regional air quality plans to meet regional haze regulations in West Regional air quality plans to meet regional haze regulations in West

RELATED MARKETING INNOVATIONS Promote increased cost-effectiveness of wind purchases through: Promote increased cost-effectiveness of wind purchases through: Bundling with energy efficiency and innovative financing approaches Bundling with energy efficiency and innovative financing approaches Blending with landfill gas & other lower-priced renewable energy Blending with landfill gas & other lower-priced renewable energy

Chicago Leads the Way City of Chicago to began purchasing over 120,000 MWh of Wind from Mendota Hills Wind Plant. 2 Largest Wind Plants in Midwest coming on line 2004? Chicago Mayor Richard Daley receives a ceremonial EcoPower ® Certificate from Commonwealth Edison CEO John Rowe.

Questions? Copyright Environmental Resources Trust, Inc. (ERT), Request to reproduce all or part of this material should be made to ERT. Alden Hathaway Director Green Power Programs ERT, Inc Debra Jacobson Lecturer in Energy Law, GWU Law School