Renewable Energy and Energy Efficiency Findings and Policy Recommendations of the Air Pollution Prevention Forum Western Regional Air Partnership Board Meeting Tempe, Az. November 12, 2002

Outline of Presentation Background on the AP2 ForumBackground on the AP2 Forum AP2 Findings and Policy RecommendationsAP2 Findings and Policy Recommendations Discussion of WRAP Policy StatementDiscussion of WRAP Policy Statement 1. Reaffirm GCVTC findings 2.WRAP Policy on Renewable Energy/Efficiency 3. Management directive to implement policies Questions and DiscussionQuestions and Discussion

AP2 Charter Recommend legislative actions, economic incentives and regulatory policies States and Tribes can adopt to meet the GVCT 10/20 renewable energy goal and increase the use of energy efficiency technologies in the region.

Objectives Identify market barriers,Identify market barriers, Examine policies that can overcome market barriers,Examine policies that can overcome market barriers, Quantify emissions reductions, and economic impacts, andQuantify emissions reductions, and economic impacts, and Recommend a portfolio of policies and “best practices” to states and tribes.Recommend a portfolio of policies and “best practices” to states and tribes.

Air Pollution Prevention Forum Prevention Forum Work Plan Renewable Energy Recommended Policies (June 2000) Energy Efficiency Policies and “Best-Practices ( August 2001 ) IPM Model Demand Fuel Costs Gen Capacity Electricity Costs Gen Output Emissions (June 2002) Model Visibility Impacts REMI Model Employment Income GRP (August) 2002) Policy Recommendation s IOC WRAP (November 2002) AP2 Report to States & Tribes ! We are here!

WRAP Policy Statement Affirmation of GCVTC findingsAffirmation of GCVTC findings Policy endorsing renewable energy and efficiency as regional P 2 strategiesPolicy endorsing renewable energy and efficiency as regional P 2 strategies WRAP actions to implement policies.WRAP actions to implement policies.

Affirm GCVTC Findings GCVTC concluded that renewable energy and efficiency can be effective tools to reduce haze and if adopted could result in “…emissions reductions, improvements in visibility, and provide secondary environmental and economic benefits to the region.” (Report of the GCVTC to the U.S. Environmental Protection Agency: Recommendations for Improving Western Vistas, June 1996, pg. 28)

Cost Savings From RE and EE Between $700 million to $1 Billion Levelized Annual Production Cost (2005 –2022) Includes cost of implementing EE and avoided transmission distribution cost from EE use $15,811 $14,830$15,131 $0 $5,000 $10,000 $15,000 $20,000 BAU EE Only With EE and 10/20 Goals Million 1997 $

NO x Emissions Reductions of 2% in Utility Sector Thousand Tons of NOx Saved

SO 2 Emissions SO2 ('000 tons) Because of the trading program, there will be no changes in SO 2 emissions under the 10/20 goals or EE Emissions limited through the regional SO 2 trading program

Secondary Economic and Environmental Benefits Lowers SO 2 compliance cost of Annex cap-and-trade program.Lowers SO 2 compliance cost of Annex cap-and-trade program. Reduces risk of electricity price increases due to natural gas prices.Reduces risk of electricity price increases due to natural gas prices. Mitigates costs of compliance with potential CO 2 regulations.Mitigates costs of compliance with potential CO 2 regulations. Small positive or no impact on the economy of the transport region.Small positive or no impact on the economy of the transport region.

WRAP Action Item No. 1 “WRAP reaffirms findings of the GCVTC that renewable energy and energy efficiency are tools that result in emissions reductions, energy costs savings and provide secondary environmental and economic benefits. In conjunction with other WRAP emissions control strategies, renewables and energy efficiency can contribute to improving visibility in the transport region.”

WRAP Policy on Renewable Energy and Efficiency Ten policy findings for WRAP to consider.Ten policy findings for WRAP to consider. Linked to AP2 Forum findings and recommendations.Linked to AP2 Forum findings and recommendations.

WRAP Policy on Renewable Energy and Efficiency 1.Joint implementation of AP2 Forum’s RE and EE policy and program recommendations result in the greatest benefit. 2.Economic incentives are necessary for states and tribes to make progress towards “10/20 goal”. 3.Electricity consumers should be able to voluntarily chose renewable electricity products and services. 4.States and tribes should take policy actions that improve efficiency of the market place.

WRAP Policy on Renewable Energy and Efficiency 5.States and Tribes should support utility/state sponsored DSM programs; raise efficiency standards for buildings; and acknowledge emissions benefits of EE in SIPS/TIPS. 6.Actions should be taken to reform transmission policies. 7.An emissions cap-and-trade program is an economically efficient method to achieve emissions reductions. 8.States, Tribes and regional energy organizations should act in concert to implement regional policies.

WRAP Policy on Renewable Energy and Efficiency 9.Federal policies that provide incentives to increase development of renewable energy in the region should be supported. 10.States, Tribal governments and federal agencies should “lead-by-example”.

WRAP Action Item No. 2 Adopt “WRAP Policy” findings supporting State, Tribal and regional actions that increase renewable energy generation and deployment of energy efficient technologies, products and services in the transport region.

WRAP Management Directive 1.Forward AP2 Forum’s recommendations and reports to States and Tribes. 2.Monitor Transport Region’s progress implementing AP2 recommendations and meeting 10/20 goal. 3.Support States and Tribes preparing regional haze SIPS/TIPS with analytical tools and technical assistance. 4.Assist WGA efforts to establish a viable renewable energy certificates market in the West.

WRAP Action Item No. 3 In consideration of the WRAP’s policy on renewable energy and energy efficiency and recommendations of the AP2 Forum, direct the IOC to implement actions identified in the Management Directive of the WRAP Policy Statement.

Questions and Discussion

Secondary Regional Economic Impacts Small, and mostly positive regional economic impactsSmall, and mostly positive regional economic impacts Local economic impacts more significantLocal economic impacts more significant Driven by investment/employment linkageDriven by investment/employment linkage Meeting 10/20 goal with EE increases….Meeting 10/20 goal with EE increases….

Regional Employment 4,097 ave. annual increase in employment4,097 ave. annual increase in employment Most jobs created in periodMost jobs created in period Colorado, Arizona, and Wyoming experience largest growth in employment…..Colorado, Arizona, and Wyoming experience largest growth in employment… : - Please see comments below : - Please see comments below. 5,050 8,441 -1,389 4,097 -2, ,000 4,000 6,000 8,000 10, Average

Real Disposable Income (Thousand $) Pursuing 10/20 goal and EE increases annual levelized disposable income.Pursuing 10/20 goal and EE increases annual levelized disposable income. Regional income increases by an average of $547 million.Regional income increases by an average of $547 million. Largest increase occurs in the period.Largest increase occurs in the period : Please see comments below 12047: Please see comments below $277,557 $787,882 $853,638 $546,600 $0 $200,000 $400,000 $600,000 $800,000 $1,000, Average

Gross Regional Product ( Thousand Dollars) $58 million annual average decrease in gross regional product (less than 0.01%)$58 million annual average decrease in gross regional product (less than 0.01%) 7 of 9 states in Transport Region experience increase in gross regional product.7 of 9 states in Transport Region experience increase in gross regional product. 29, , , , , , , , , , , , Average 12047: Please see comments below 12047: Please see comments below

10/20 RE Goal Increases Annual Electricity Production Cost 2% - 5% Levelized Annual Production Cost (2005 –2022) $15,811 $16,067 $ 16,630 $- $5,000 10,000 $10,000 $15,000 $20,000 BAU 10/20 Goals 10/20 Goals with no change in wind costs Million 1997 $ 12047: Please see comments below 12047: Please see comments below

Renewable Generation Mix 2018 GCVTC Generation Mix % 0% 26% 7% 6% 14% 18% Renewable Energy Generation Mix in : Please see comments below 12047: Please see comments below

Fossil-Fuel Capacity Displaced Region Meets 10/20 Goal (10,000) (8,000) (6,000) (4,000) (2,000) - 2,000 Coal Oil/Gas Turbines Combined Cycle CoGen MegaWatts

10/20 Goals – Impact on Wholesale Energy Prices Wholesale energy prices under 10/20 goals BAU 10/20 Goals 1997 $/MWh BAU10/20 GoalsAdded cost to meet 10/ : Please see comments below 12047: Please see comments below

Energy Efficiency Modeling Results Implementation of the energy efficiency recommendations would reduce power demand in the Western states by 1.0 % in 2005 and 8% in 2018.Implementation of the energy efficiency recommendations would reduce power demand in the Western states by 1.0 % in 2005 and 8% in Represents 54,000 (56,000) GWH of saved energy and 6,100 (15,000) MW of capacity (in 2018).Represents 54,000 (56,000) GWH of saved energy and 6,100 (15,000) MW of capacity (in 2018). Net savings in electricity production costs range from $200 ($150) million in 2005 to $2.1 ($2) billion in 2018.Net savings in electricity production costs range from $200 ($150) million in 2005 to $2.1 ($2) billion in : Edits in Bold Red, please see edits below 12047: Edits in Bold Red, please see edits below

Summary of Modeling Results RE/EE strategies reduce haze-causing pollutantsRE/EE strategies reduce haze-causing pollutants Visibility improvements not largeVisibility improvements not large –SO2 cap –“Cleaner” gas-fired generation is displaced Benefits beyond regional hazeBenefits beyond regional haze –Energy savings –Downward pressure on gas prices –Lowers SO2 compliance costs –Significant CO 2 reductions Positive impact on region’s jobs, income and economic activity.Positive impact on region’s jobs, income and economic activity.

Final Observations Energy efficiency cost-effective emissions control strategyEnergy efficiency cost-effective emissions control strategy Cost of meeting 10/20 renewables goal lower than expected.Cost of meeting 10/20 renewables goal lower than expected. Federal actions (e.g., production tax credit, RPS) can helpFederal actions (e.g., production tax credit, RPS) can help Regional action desirableRegional action desirable –Need regional RE credit trading system –Need regional action on transmission reform –Don’t exclude out-of-state RE power in state RPS’s