1. Study Case Report PC 10 High Carbon Price PC 11 Low Carbon Price W ESTERN E LECTRICITY C OORDINATING C OUNCIL

2. Overview Study Case Descriptions Impacts to Generation Commitment and Dispatch Impacts to Path Flows Key Observations 2 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

3. Carbon Price Studies Purpose To study the effect of applying varying levels of a Carbon Price adder while keeping all other assumptions at their original values. These study cases were derived from the April 9, 2015 version (v1.5) of the 2024 Common Case. Comparisons are made to that version. 3 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

4. PC10 Carbon Tax (CO 2 ) Studies Rather than applying a high carbon tax (PC10) and a low carbon tax (PC11), a series of prices were applied. California Global Warming Solutions Act (AB32) was retained System-wide carbon tax applied 4 W ESTERN E LECTRICITY C OORDINATING C OUNCIL Case Carbon Tax ($/metric ton) Description WECC (non- California) California PC10.0027.51Common case with AB32 in California PC10-1515.0027.51Assume that California would not lower their tax PC10-2727.51 Apply AB32 tax WECC-wide PC10-4040.00 WECC-wide $40 tax PC10-5050.00 WECC-wide $50 tax PC10-6060.00 WECC-wide $60 tax

5. Generation Impacts 5 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

6. Annual Generation - Carbon Price 6 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

7. Data Metrics – Coal vs. Gas Data ElementCoalGas (CC)Gas (CT) Fuel Price ($/MMBtu)0.97 – 3.184.64 – 5.65 Heat Rate* (MMBtu/MWh)9.14 – 12.625.02 – 11.676.10 – 13.70 CO2 Emission Rate (lbs/MMBtu)200.0 – 205.2117 CO2 Emission Rate (lbs/MWh) 1800 - 2900600 – 1100800 - 1600 Average Cost ($/MWh) 15 - 4736 – 8341 – 170 7 W ESTERN E LECTRICITY C OORDINATING C OUNCIL *Ranges show the largest concentration of values. Under the assumed fuel prices and heat rates for the 2024 Common Case, coal-fired generation typically has a lower production cost than gas-fired generation. However, when a carbon tax is applied, the difference in the emission rates causes the coal-fired generation to be more heavily impacted.

8. Example of CO 2 tax – Coal vs. Gas Data ElementCoalGas (CC)Gas (CT) Fuel Price ($/MMBtu)2.005.00 Heat Rate (MMBtu/MWh)11.007.009.00 CO2 Emission Rate (lbs/MMBtu)200117 CO2 Emission Rate (lbs/MWh) 22008191053 Average Cost ($/MWh) 223545 Example 100 MWh – tons CO2 1104153 $50/ton – cost /MWh 55.020.526.5 Adjusted cost ($/MWh) 77.055.571.5 8 W ESTERN E LECTRICITY C OORDINATING C OUNCIL In this hypothetical example the $50/ton carbon tax increased the cost of the coal-fired unit approximately twice as much as the gas-fired units.

9. Comparison PC1 vs PC10-50 ($50 CO 2 tax) 9 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

10. Annual Generation Costs 10 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

11. Annual CO 2 emissions 11 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

12. Trend in Average Capacity Factors 12 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

13. Annual Energy Share by Fuel 13 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

14. Change in Energy by State – PC1 vs. PC10d 14 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

15. Path Flows 15 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

16. Path 65+66 (COI plus PDCI) 16 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

17. Path 46 17 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

18. Path 26 18 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

19. Path 8 19 W ESTERN E LECTRICITY C OORDINATING C OUNCIL The transmission associated with Path 8 was built to deliver the output of the Colstrip Power plant to the participants in Oregon and Washington. The $50 carbon tax mostly displaces that coal plant and even reverses the predominant flow. This could impact the operational limits of the path.

20. Path 27 20 W ESTERN E LECTRICITY C OORDINATING C OUNCIL The transmission associated with Path 27 was built to deliver the output of the Intermountain Power plant to the participants in California. The $50 carbon tax significantly reduces the output from that coal plant.

21. Observations 21 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

22. Observation #1 As the carbon price was increased: – More and more coal-fired generation was displaced by gas-fired generation (CO 2 emissions from burning coal are almost twice as much as from burning natural gas). 22 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

23. Observation #2 Compared to the PC1 common case, the results from the $50 carbon tax case showed a reduction in CO 2 emissions of 54 Million Metric Tons (14.9%) with an increased cost of 14.8 Billion dollars (65%). 23 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

24. Observation #3 The path flow results for the $50 carbon tax case indicate that the carbon tax caused the imports into California to decrease. The imports were replaced with additional output from gas-fired generation inside California. 24 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

25. Observation #4 The reduction in CO 2 emissions in response to a carbon tax had a cost of about 240 M$ per Million Metric Ton of reduction. The last increment suggests that a “saturated displacement ” may occur at some point. 25 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

26. Questions? And Contact Information: 26 W ESTERN E LECTRICITY C OORDINATING C OUNCIL Stan Holland (801) 883-6858 stan@wecc.biz