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Transcript of Preparing For Future Federal Carbon Regulation APPA 2007 Engineering & Operations Technical...
Preparing For Future Federal Carbon Regulation
APPA 2007 Engineering & Operations Technical Conference
Atlanta, Georgia
April 17, 2007
Robert L. Kappelmann PE.
Energy and Environmental Policy Consultant
RLK Associates
Overview
Brief Science PrimerThe Political ScienceThe Competing Solutions and LimitationsCost ImpactsCarbon StrategiesSome Parting Thoughts and Questions
Climate Change Vs Global Warming Vs The Greenhouse Effect
The Greenhouse Effect The Earth’s Atmosphere
Traps Energy From the Sun
Greenhouse Gases Include: H20, CO2, CH4 and N2O
Adds About 60 Degrees to the Earth’s Temperature
Without the Greenhouse Effect Earth Would be an Ice Planet
Natural Greenhouse Natural Greenhouse Gases Dominate the Gases Dominate the AtmosphereAtmosphere
Water Vapor95%
Other GHG5%
Water Vapor Other GHG Natural Man Made
Total Greenhouse Gases Non-Water Vapor Greenhouse Gases
Man-made GHG’s constitute 0.3% of overall GHG’s.
Other GHG’s include CO2, methane, nitrous oxide, CFC’s, SF6
Major Factors
Affecting Climate Models
Humidity
Snow & Ice
Clouds
Ocean Circulation
Total GHG
Natural94%
Man Made
6%
Source: www.clearlight.com/~mhieb/WVFossils/greenhouse_data.htmlJanuary 2003
The “Consensus” Science
•Man made GHGs are Increasing the Greenhouse Effect and Upsetting a Delicate Natural Balance
•The Increased Greenhouse Effect is Causing Global Warming
•Global Warming is Changing the Climate.
•A Changing Climate will Lead to Environmental Armageddon
The Proof Positive
•The CO2 Levels Are Increasing
•The Average World Wide Temperatures Are Increasing
•Man’s Activities Are Increasing CO2 Levels and..
• Therefore Man’s Activities Are Increasing the Worldwide Temperature and Changing the Climate.
That Data is Overwhelming
A Little Longer Look Back
The Contrarian View
•The Last Major Ice Age Ended 20,000 Years Ago.
•The Planet Has been Warming Ever Since.
•CO2 Follows Temperature, Temperature Does Not Follow CO2.•The Climate Will Continue to Change With or Without Man’s Help.
Contrarian View Continued: “The Sun Boss, the Sun”
Political Sciences Trumps Hard Science! “A Political Solution Will Always Come Before Scientific Certainty”
What is Driving Legislation?
•Real Concerns of Risk of Climate Change.
•Environmental Activist and Fund Raising.
•And the Potential Winners.
The Potential Winners
•Carbon Trading Industry
•Control Technology Vendors
•Old Big Dirty Coal Generation
•Gas Dominated Generation
•Nuclear Generation Advocates
•Renewable Energy Advocates
•Others seeing a Competitive Advantage
National Political Solutions
Voluntary Programs: Climate Vision, Climate Leaders
Market Signal Approaches: Cap and Trade, Carbon Tax
Technology Approaches: GHG Intensity, RPS (Renewable Portfolio Standard), CEPS (Clean Energy Portfolio Standard)
Cap and Trade Vs. Carbon Tax
Nearly All Economist Agree Carbon Tax is Cheaper Per Ton of Carbon Removed.
Cap and Trade in Reality is an Inefficient Tax. However, It is More Likely to Gain Political
Support.Cap and Trade Creates Winners and Losers and
Therefore Economic Opportunity.Note: A Carbon Cost of $10/Ton = $10/MWh for
Coal and Heavy Oil at a 10,000 Btu/KWh Heat Rate and $6/MWh for Natural Gas.
How Does an Air Pollutant Compare to a GHG For Cap and Trade?
Similarities:• Problem Air Pollutants (SO2, NOx,
Mercury) and GHGs (CO2 and H2O) are combustion products
• Air Pollutants and GHGs are Generally Higher From Coal-Fired EGUs
How Does an Air Pollutant Compare to a GHG For Cap and Trade?Continued
Air PollutantsDirect Human Health
ImpactsMan Made Emission
PredominateControl Technology
Available Years Before Regulation
GHGsNo Direct Human
Health ImpactsMan Made Emissions
Minor SourceControl Technology
Available Only Years After Regulation
How Does an Air Pollutant Compare to a GHG For Cap and Trade?Continued
Actual Control Cost Less Than 5% of Energy Cost.
No Adverse Impact on Energy Mix
Benefits Quantifiable
Projected Control Cost 40% to 60% of Energy Cost.
Adverse Impacts on Energy Mix
Benefits Un-quantifiable.
Cost of Carbon Control is Not Trivial!
Table A. Capital Cost and Operating Impacts for New EGUs with CSC as compared to New EGUs without CSC
EGU Nominal 500MW
Increased Capital
Cost with CSC
MW De-rating
with CSC
Heat Rate Penalty with
CSC
Increased Cost per MWH with
CSC
Est. Cost for CSC per Ton
of CO2
Removed
SCPC[1] 73% 29% 40.3% 66.2% $35.09
USCPC[2] 67% 31% 37.7% 61.6% $32.35
IGCC 47% 14% 16.6% 39.4% $23.63
Table A is based on data from EPA-430/R-06/006 July 2006. Cost for CO2 gas transport and deep injection not included in this table.
[1] Super-critical pulverized coal unit
[2] Ultra-super-critical pulverized coal unit
Technology Driven Solutions
Metric is Reduction of GHG Intensity.Technology That Produces Less GHG per Unit of
Production is Incentivized or Mandated.Less GHG Intensity Equals Less Over All GHGsBonus: Tends to Stimulate Domestic Energy
Sources.Two Possibilities: RPS and CEPS
Table A: Comparison of Key Factors and Impacts of Bingaman and Coleman Climate Proposals
Factor 2004 Baseline
2020 Reference
2020 CEPS
2020 Bingaman
2030 Reference
2030 CEPS
2030 Bingaman
(10 E9 Kwh)
Coal1977 2505 2302 2370/2362
(phased/non-phased auction)
3381 2803 2530/2500
Natural Gas
702 1103 1090 1184/1166 993 889 1190/1180
Oil 120 107 109 49/48 115 108 49/48
Dedicated Biomass
36 51 53 58/73 77 285 262
Co-fired Biomass
1 36 177 23/19 26 126 0
Retail Electric Cents/Kwh
7.6 7.2 7.3 7.51/7.65 7.5 7.5 8.31/8.48
CO2 (10 E 6 metric tons)
2299 2835 2649 2706/2691 3318 2830 2791/2756
Based on EIA Analysis of Coleman and Bingaman proposals.
Unintended Consequences Need to be Understood!
Even a Well Designed Cap and Trade Will Shift Generation To Natural Gas.
Current Domestic Supplies (80%) and Imports (20%) Are Not Sufficient.
Imported LNG From Our Good Friends Such as Algeria and Russia Must Make Up the Shortfall.
Coal to Liquids (CTL) Industry Stopped Before It Starts.
Carbon Strategies:
Ostrich ApproachQuantify Risk of Future RegulationAnticipate and Mitigate Risk of
Future Regulation
Quantify the Risk of Future Regulation
•Incorporate a carbon cost in IRP and/or “Need for Power” study.
•Already required in some states.
•Range: $5 to $10 per ton.
•Problem: May be perceived as planning to buy your way out of the problem.
Avoid debating the science if possible.Have a reasonable and proactive
responses.Participation in voluntary programs.Lower GHG Intensity by Efficiency
and RenewablesAddress possible future regulatory
programs.
Anticipate and Mitigate Risk of Future Regulation
Voluntary Programs.DOE Climate Vision*EPA Climate Leaders1605 b ReportingTree PowerOther?
A Good Example
Response to Future Regulatory Programs.Carbon Tax = Cost of carbon in IRPGHG Intensity = Renewable energy, DSM,
Supply-side efficiency, carbon offsetsCap and Trade = Cost of Carbon In IRP,
Renewable energy, DSM, Supply-side efficiency, carbon offsets
Note: 3 Clean Coal Technologies but no current commercial capture technology for any including IGCC.
Good Example continued
Parting ThoughtsParting Thought
If you don’t tell your story someone else will.
Questions?