ACleanElectricity Standard(CES) forAlberta · PresentaonPurpose •...

A Clean Electricity Standard (CES) for Alberta

May 21, 2013

Version 1.3

Paula McGarrigle Solas Energy ConsulBng Inc.

Presented to the Pembina Thought Leaders Forum

PresentaBon Purpose

•  The case for a Clean Electricity Standard – Provide informa7on – Answer ques7ons – Receive feedback

13-‐05-‐21 Solas Energy Consulting Inc. 2

Agenda

•  Part I – Ra7onale – The Clean Electricity Standard

•  What is it? •  Why is it needed?

•  Part II – Opera7onalizing the Clean Electricity Standard

•  How is it implemented? •  Who does it affect?


What is Clean Electricity? •  Clean Electricity refers to

the greenhouse gas (GHG) intensity of the electricity. –  Measured in Tonnes

CO2equivalent/MWh

•  Mul7ple technologies can be considered clean electricity. –  Emissions intensity compared to

a standard.


Non GHG emiNng electricity

Solar

Geothermal

Hydro, large, small, run-‐of-‐river

Wind

Nuclear

Lower GHG emiNng electricity

Biomass

Fuel Cells

Cogenera7on

Combined Cycle Gas Turbine

Coal with CCS

Is Clean Electricity More Expensive?


$55#

$84#$92#

$114#

$157#$163#

$172#

$44#

$68#$74#

$92#

$127#$132#

$139#

$0#

$20#

$40#

$60#

$80#

$100#

$120#

$140#

$160#

$180#

$200#

Cogen# Wind# Coal# CCGT# SCGT# Coal#with#CCS# Hydro#

Levelized

#Cost#($/MWh)#

Levelized#Cost#

First#Year#Cost#of#Power#

Alberta WindVision Technical Overview Report – Solas Energy Consul7ng Inc. 2013

Alberta based genera7on levelized cost for new genera7on. Transmission costs not included. Year 2016

Alberta’s Electricity GHG Emissions have reduced since 2000

13-‐05-‐21 Solas Energy Consulting Inc. 6 Reference Na7onal Inventory Report 2013

0"

0.1"

0.2"

0.3"

0.4"

0.5"

0.6"

0.7"

0.8"

0.9"

1"

0"

10,000"

20,000"

30,000"

40,000"

50,000"

60,000"

70,000"

1985% 1990% 1995% 2000% 2005% 2010% 2015% GHG#Intensity

#T#GHG

/kWh#electricity

#Ge

nerated#

Electricity

#Sector#E

mission

s#(kT#CO2#

Equivalent)#

YEAR#

Electricity#Sector#Emissions#and#Emissions#Intensity#

Alberta's#Electricity#Emissions#Alberta's#Electricity#GHG#Intensity#

Ref: Na(onal Inventory Report 2013

0" 21" 0" 0" 1" 1" 0" 11"84"

2"75"

130" 110" 143"

0"66"

217"

88"

225"

0" 22" 22" 22" 22" 23" 23" 34"

118" 120"

196"

325"

435"

577" 577"

643"

860"

948"

1173"

1993$ 1994$ 1995$ 1996$ 1997$ 1998$ 1999$ 2000$ 2001$ 2002$ 2003$ 2004$ 2006$ 2007$ 2008$ 2009$ 2010$ 2011$ 2012$

Alberta(Wind(Power(Capacity((MW)(Annual$Capacity$Addi8ons$

Cumula8ve$Capacity$

Emission reducBons correlate with addiBonal clean power. Programs have been criBcal for development of wind power.

13-‐05-‐21 Solas Energy Consul7ng Inc. 7

WPPI

ecoENERGY

SGER

CPUC TRECS

84.74

57.35

77.18 67.25

89.05

106.96

88.88

119.41

60.75

115.50

64.44

Electricity Price $/MWh

WPPI – Wind Power Production Incentive ecoENERGY – Production Incentive SGER – Specified Gas Emitters Regulation CPUC TRECS – California Public Utility Commission Tradable Renewable Energy Certificates SPPA – Small Power Producers Act

SPPA

Changes in Alberta….. •  Provincial Regula7ons

– Renewable Fuel Standards -‐ exis7ng – Provincial GHG Targets -‐ may intensify – Alterna7ve and Renewable Strategy – Work In Progress

•  Federal Regula7ons – Coal Genera7on Re7rements – Natural Gas Power Genera7on regula7on pending


Federal regulaBons reduce grid emissions intensity. Hydro & Wind criBcal & contribute cumulaBve 104 Mt (2039)

•  Federal Regula7ons drop emissions intensity as shown in AESO LTO.

•  AESO LTO assumes:

–  incremental Wind and Hydro development

–  Repowering of end of life wind assets ader 20 years

•  Cumula7ve benefit of Wind and Hydro 104 MT by 2039. –  ~ 7.5Mtonnes p.a. (2039) –  Equivalent to 2.5 years of

today’s grid emissions.


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2015! 2020! 2025! 2030! 2035! 2040!

MTo

nnes'COEe'

Grid'Average'(T

onne

s'CO2e/M

Wh)'

Year'

Comparison'of'AESO'LTO'and'LTO'without'addiBonal'Wind'or'Hydro'

Grid'Average,'No'addiBonal'Hydro'or'Wind'Grid'Average,'AESO'LTO'

Tonnes'Delta'

Unique Aspects of the Alberta Electricity Market

•  De-‐regulated •  Fair Efficient Openly Compe77ve Regula7on •  Energy Only Market •  Facility Based Emission Reduc7on Obliga7ons •  Large coal genera7on base •  Few physical contracts •  Few long term contracts •  Transforma7onal change pending •  ~7,000 MW of addi7onal genera7on required with pending coal re7rement, and demand growth


Three challenges in Alberta’s Electricity Sector

•  Cleaning the grid – Reducing emissions from our electricity sector

•  Avoiding ‘sole fuel’ dependency in the grid – Reliance on a single fuel adds significant risk to all industrial sectors in the Alberta economy.

•  Financing the growth – Balance sheet/ project financing for ~7,000 MW


What is the Problem?

13-‐05-‐21 Solas Energy Consul7ng Inc. 12

Lack of Long Term Power Purchase Agreement (PPA)

Capture Rate

Project Financing

Credit & Risk Requirements

A PotenBal SoluBon!


A mechanism is needed that is: þ  Technology neutral, þ  Revenue Neutral, þ  FEOC compliant, þ  Fits the exis7ng market

design, þ  Compliments the Specified

Gas Emimers Regula7on, þ  Produces predictable

changes in the grid intensity,

þ  Transparent, and þ  Simple to administer and

understand.

FEOC – Fair Efficient and Openly Compe77ve

What is CES trying to achieve?

Alberta Electricity Market Challenges q  Cleaning the grid q  Avoiding ‘sole fuel’ dependency in the grid

q  Financing the growth

CES Scorecard? þ  þ  þ 


Clean Electricity Standard (CES)


Clean Electricity Standard •  Clean Electricity Standard would be

set by the government on a pornolio intensity basis (Tonnes CO2e/MWh)

•  Standard would apply to Retailers in Alberta –  Any one who purchases power to

supply load

•  Intensity level decreases over 7me. •  Retailers choice on genera7on

technologies as part of pornolio. •  Retailers choose to comply as much

or as limle as desired.


2010$ 2015$ 2020$ 2025$ 2030$ 2035$

Retailer(P

or+o

lio(In

tensity

((ton

nes(

CO2e/M

Wh(

Year(

Clean(Electricity(Standard(

Who is Regulated under CES?

•  Retailers •  Self-‐Retailers •  Rural Electrifica7on Associa7ons (REAs)

•  Based on semlement physical volumes with the AESO


Concurrent solu7on – complementary

Fit with Specified Gas Emi]ers RegulaBon (SGER)


Power Pool

SGER: Generators/Facili7es CES: Par7cipants (Purchaser/Retailers/Marketers)

Retailers

Self-‐Retailers

REAs

Comparison of CES and SGER

SGER •  Focus on all facility emissions –

mulB sector •  Reduc7on of emissions intensity

from facility •  Compliance through facility

emission reducBons •  Financial Compliance Alterna7ve

(CCEMC) •  Compliance funds used to s7mulate

long term emission reduc7ons •  Tradable Units •  Offsets

CES •  Focus on retailer pornolio intensity

– single sector •  Reduc7on in emissions intensity of

por_olio •  Compliance through contracBng

for cleaner por_olio. •  Financial Compliance Alterna7ve

(Deposit) •  Compliance funds used to s7mulate

shorter term market reponse •  No tradable units generated •  No Offsets


Achieving Compliance

•  Each retailer will be required to pay a deposit to a fund at a set amount ($/MWh).

•  At the end of the year, retailers who meet the CES will receive a refund equal to their deposit.

•  For retailers with pornolio intensi7es less than the CES, will receive a greater refund.

•  For retailers with pornolio intensi7es more than the CES, will receive a less of a refund.


Refund Varies based on Retailer Performance


AT THE STANDARD, THE REFUND IS EQUAL TO THE DEPOSIT

A Contextual Example: Bo]le Recycling in Alberta

•  A deposit is paid on the purchase of a beverage container

•  Albertans return 82% of containers purchased for a refund

•  Benefit: 390,000 cubic metres of landfill space saved

•  Managing Agency funded en7rely from deposit paid on beverage container purchases

•  Deposit and refund system cri7cal to creaBng culture of recycling and improving environment

•  Alberta’s beverage container recycling industry in best in class in North America.


Direct Benefits the CES þ  Reduces grid intensity in Alberta þ  Drives demand for low emiqng genera7on þ  Increases the diversity and amount of low emiqng genera7on þ  Uses market mechanisms to achieve reduc7ons in grid intensity þ  Provides long-‐term financing for low emiqng genera7on þ  Simple to administer


QuesBons?


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