Capturing the Cost of Carbon in Electricity Markets Clare Breidenich Consultant Western Power Trading Forum CPUC Reporting Workshop San Francisco, CA April.

Slides:

Advertisements

Similar presentations

Planning for a Low-Carbon Future at San Diego Gas & Electric Rob Anderson Director of Resource Planning San Diego Gas & Electric Western Resource Planners.

Advertisements

Hal T. Interactions between Carbon Regulation & Renewable Energy Policies  Thoughtpiece: The CATF is in a position to consider program.

Policy Issues in the Treatment of CO2 Emissions—Oregon+ Hal T. Nelson, Ph.D. Visiting Professor Technical Advisor to the.

California GHG policy and implications for the power sector APEX Sydney Conference October 13, 2008 Anjali Sheffrin, PhD.

World Forum on Energy Regulation IV Athens, Greece October , 2009 Energy Market Design and Promotion of Efficient Emissions Reductions John Tamblyn.

Modeling a Clean Energy Standard Karen Palmer Senior Fellow Resources for the Future USAEE/IAEE Annual Conference Washington, DC October.

Issues with Tracking Environmental Attributes Environmental Tracking Network of North America San Francisco, CA April 14-15, 2008.

Resource Adequacy in PJM

Kick-off Stakeholder Workshop "Post 2020 framework in a liberalised electricity market with large share of Renewable Energy Sources" 28 April 2014, Brussels.

Federal Cap-and-Trade Policy: Overview of Design Options Ray Hammarlund, KCC Energy Programs Division Director Presentation to Kansas Energy Council Greenhouse.

1.  What is a Renewable Energy Credit (REC)?  What are they used for?  Who uses them?  How is REC ownership tracked?  What is the Renewable Portfolio.

22 April 2010 EWEC 2010 Warsaw2 Jesper Munksgaard Ph.D., Senior Consultant Merit Order Effect of Wind Power – Impact on EU 2020 Electricity Prices.

Session 3: The Federal Question: Setting a Good Precedent & Positioning California for Competitive Advantage California Public Utilities Commission Greenhouse.

Carbon Price and the Energy Sector June 2011 Kane Thornton Director of Strategy & Operations.

Environmental Regulation in Oligopoly Markets: A Study of Electricity Restructuring Erin T. Mansur UC Berkeley and UC Energy Institute March 22, 2002 POWER.

Energy Project Development A Discussion on State and Federal Incentives Presented By Dennis Plaster, General Manager.

Emissions Trading (Cap and Trade) Kate Macauley. 1. Economics of emissions trading 2. Overview of the EU Emissions Trading Scheme (ETS)

BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON Governors’ Wind Energy Coalition November, 2011 Competitive.

The Regulatory Assistance Project 177 Water St. Gardiner, Maine USA Tel: Fax: State Street, Suite 3 Montpelier, Vermont.

CHEAPER AND CLEANER: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental and Economic.

1 RGGI WORKSHOP June 15, 2006 Gary Ferenz. Topics Presented Bethlehem – 1,092 MW’s 2 Overview of Conectiv Energy Supply, Inc. (CESI) business CESI Renewable.

Energy Production and Use in California Source: California Energy Commission

Use of Green Certificates in the Nordic power supply.

©2008 PJM EIS Emissions Tracking in the Generation Attribute Tracking System (GATS) NJ RGGI Working Group Newark, NJ June 5, 2008.

Western Governors Association Renewable Energy Certificates Initiative for the West WRAP Board Meeting October 15, 2003 Salt Lake City, Utah.

Green-e Verification and Certification Programs Green Power Webcast April 8, 2008 Alex Pennock Andreas Karelas Center for Resource Solutions.

GE Energy Asia Development Bank Wind Energy Grid Integration Workshop: Issues and Challenges for systems with high penetration of Wind Power Nicholas W.

Welfare Decomposition of a Clean Technology Standard: 3 Steps to a Carbon Tax by Anthony Paul, Karen Palmer, Matt Woerman

Regional Greenhouse Gas Initiative (RGGI) Offsets Approach Christopher Sherry New Jersey Department of Environmental Protection Linking Load-based and.

Renewable Energy Delivery, Scheduling, and Firming / Shaping

P ÁZMÁNY U NIVERSITY On the Policy and Politics of Climate Change Session VIII David Ellison Institute for World Economics (Budapest) Comments Welcome.

0 CPUC / CEC Workshop Reporting and Tracking GHG Emissions for a Load Based Cap PG&E Reporting Emissions and Estimating Emissions from Unspecified Purchases.

Market Mechanisms to Curb Greenhouse Gases: Challenges and Future Directions Joe Kruger February 20, 2007 Joe Kruger February 20, 2007.

1 Cap and Trade for Regulating Greenhouse Gases Presented by Scott Murtishaw Advisor to President Peevey, CPUC NASUCA Mid-Year Meeting San Francisco June.

1 RGGI’s Source-Based Cap-and-Trade Program MassDEP April 19, 2007 Nancy L. Seidman Division Director, MassDEP Presentation to CA PUC Symposium.

1 ELECTRICITY PRICES AND RENEWABLE ENERGY Lucia Passamonti Strategy, Research and Documentation Dept. Italian Regulatory Authority for Electricity and.

1 PURCHASING ENVIRONMENTALLY PREFERABLE ELECTRICITY Governor’s Green Government Council Commonwealth of Pennsylvania Catherine Brownlee Executive Director.

10 th June 2008 Workshop on Clean Coal Technologies Regional Office of Silesia in Brussels.

Context, Principles, and Key Questions for Allowance Allocation in the Electricity Sector Joint Workshop of the Public Utilities Commission and Energy.

Session 4: Managing Allowance Price Volatility Different Policy Mechanisms and their Emissions and Price Impact California Public Utilities Commission.

Preliminary Results with the Regional Portfolio Model Michael Schilmoeller for the Northwest Power and Conservation Council Generation Resource Advisory.

California Energy Commission Staff Paper - April 12,20071 Estimating the Generation Resource Mix of Electricity Imports to California – Energy Commission.

Banking, Imports/Exports and Reserve and the Residual Mix in NE-GIS RGGI Imports and Leakage Working Group Presented by: Patricia Stanton Conservation.

Federal Electricity Regulation and Alternative Energy: The Good, the Bad and the Ugly Presented by Scott M. Harvey Prepared for American Bar Association.

European Commission DG TREN / C: Conventional Energy Greenhouse gas mitigation and energy policy, a European perspective Presentation by Cristóbal.

1 The Sustainability Network of Washington County January 27, 2010 Jason Eisdorfer Bonneville Power Administration.

1 Clean Line Energy National Association of State Utility Consumer Advocates Charleston SC Annual Meeting June 2012.

1 Monitoring Potential Emissions Leakage under the Regional Greenhouse Gas Initiative (RGGI): Possible Lessons for Load-Based Cap-and-Trade Programs Christopher.

American Public Power Association Pre-Rally Workshop February 28, 2006 Washington, D.C. Climate Change: Making Community-Based Decisions in a Carbon Constrained.

September 21, 2005 ICF Consulting RGGI Electricity Sector Modeling Results Updated Reference, RGGI Package and Sensitivities.

PJM©2015 ATTACHMENT TO TESTIMONY OF ANDREW OTT OHIO ENERGY MANDATES STUDY COMMITTEE MARCH 18,

California Public Utilities Commission CPUC Climate Change Activities Paul Clanon Executive Director August 28, 2007 Presentation to the Senate Energy,

Clean Power Plan TENNESSEE MINING CONFERENCE AGENDA November 3, 2015 John Myers Director, Environmental Policy and Regulatory Affairs.

California Public Utilities Commission Why a Load-Based Emissions Cap for California? Julie Fitch CPUC Director of Strategic Planning April 19, 2007 Presentation.

Carbon Reduction Commitment & Carbon Trading Councils Gemma Bradshaw Policy Analyst Centre for Local Sustainability.

2/27/ % below 2005 by 2020 cap and trade 11/15/2007 set emissions targets by 11/15/08 ~60-80% cuts by ???? (2040?) cap and trade; C inventory, reporting.

Economic Assessment of Implementing the 10/20 Goals and Energy Efficiency Recommendations – Preliminary Results Prepared for : WRAP, AP2 Forum Prepared.

SCE Allowance Allocation Proposal CPUC/CEC Workshop 4/21/08.

California Environmental Protection Agency Market Advisory Committee: Process Update April 17, 2007.

Overview of Western Climate Initiative WESTAR Fall Meeting October 2008.

Slide 1 Overview of Conservation in the Pacific Northwest Energy Efficiency Options in the Northwest Post-2011Meeting March 4, 2008.

Renewables Portfolio Standard Status Report California Public Utilities Commission February 26 th, 2008.

AB 32 Update December 6, Outline Cap and Trade Program 2013 Update to Scoping Plan Looking ahead to

The Low Carbon ambition in a difficult context Brussels. June 2013.

Sixth Northwest Conservation & Electric Power Plan Draft Wholesale Power Price Forecasts Maury Galbraith Generating Resource Advisory Committee Meeting.

PJM Restructuring Roundtable Panel I: The Integration of Variable Energy Resources in PJM Markets, Planning, and Operations March 30, 2016 Eric Thumma,

Connecting the Dots in New England: NEPOOL’s IMAPP Initiative

EU’s CO2 Emissions Trading Scheme – Benchmarks for Free Allocation from 2013 Onwards 9 September 2010 Hans Bergman DG Climate Action European Commission.

Regional Climate Alliances Spring 2008

Wholesale Electricity Costs

Presentation transcript:

Capturing the Cost of Carbon in Electricity Markets Clare Breidenich Consultant Western Power Trading Forum CPUC Reporting Workshop San Francisco, CA April 13, 2007

Trade association started in March 1998 Promotes trading of power and ancillary products throughout the Western States Currently 55 members: Investor-owned and public utilities, power marketing companies, banks and financial institutions Presentation does not necessarily represent the views of WPTF

Overview Importance of Price Signal How a source-based system captures price signal Load-based approach Problems with contract-path model in load-based approach An alternative model

Issues for the Electricity Sector General concerns: Clear rules to provide certainty for investment Long-term policy direction to enable investment decisions Broad sectoral coverage and linkage to other markets Does not interfere with electric system reliability or competitiveness of electricity markets Price signal key

Two different approaches Source-based cap & trade Emission responsibility falls on generators EU ETS, RGGI Load-based cap and trade Emission responsibility falls on load-serving entities (LSEs), e.g. utilities, energy service providers California Public Utilities Commission, Oregon Governor’s Initiative Western Regional Climate Action Initiative?

Price Signal in Source-based Cap Allowance price increases variable cost of generation for dirty generators Higher market prices required to dispatch Reduces variable cost differential between dirtier and cleaner generators (i.e. coal and gas) Cleaner generators dispatch more frequently compared to BAU, displacing dirtier generation

Oregon Model (Contract-path) Attribute emissions to load based on mix of generators supplying load Generator-specific emission rate for specified contracts Average emission rate for system power Emissions rate of residual (non-contracted) power in Northwest Power Pool

Problem with Contract-path Model Contracts do not determine which generators actually dispatch LSEs can meet target through contract shuffling of imported power Forcing generation to follow contracts will add cost and inefficiency to electricity markets Carbon price not captured for system power Clean and dirty generators have same rate Dirty generation can hide behind system emission rate

An alternative model: Tradable Emission Attribute Certificates (TEACs) Emission attributes of generators used as tracking mechanism rather than contract- path Certificates reflect an emission rate per MWH, sold in MWH increments, e.g: 1100 lbs/MWH gas generator 0 lbs/MWH renewable or hydro Tracking capacity in existing and planned systems, e.g. NEPOOL, PJM GATS, WREGIS

TEACs in Load-based caps LSEs must surrender allowances for all emissions attributed to load-served All load assigned a high default emission rate, e.g lbs/MWH LSEs can reduce emission budget by purchasing TEACs from less GHG-intensive generators TEAC rate applied to corresponding MWH Decreases quantity of allowances the LSE must surrender

LSE Compliance Example Default emission rate: 2,250lbs CO 2 /MWH Load-served: 100 MWH Starting obligation: 225,000 lbs (100 MWH * 2,250 lbs/MWH) TEACs purchased and surrendered: 50 gas certificates at 1100lbs/MWH 20 hydro certificates at 0 lbs/MWH Allowances surrendered: (50 MWH * 1100 lbs/MWH) + (20 MWH * 0 lbs/MWH) + (30 MWH * 2250 lbs/MWH) = 122,500 lbs

Relationship of Certificate to Allowance Prices Maximum Certificate price = Allowance Price (Default emission rate – certificate emission rate)

Advantages of TEAC Approach Captures value of carbon at generator level for all power sales Less GHG-intensive generators get additional revenue stream from certificates Allows cleaner generators to dispatch at lower market prices Encourages shift to cleaner generation

Challenges Supply of certificates (i.e. certified generation) should be approximately equal to load-served in capped area If supply of emission certificates too large, then certificate prices will be driven too low to encourage displacement Determining appropriate default emission rate Higher emission rate provides better incentive LSEs will prefer lower rate

Thank you