NREL Energy Analysis Forum
Todd Litman- There's a lot of potential for companies to organize
and outsource commuting for companies, if those companies could get credit for
reduction in traffic congestion and carbon reductions. (market
my observation: often not much money in EE issues. We need to form
policies that allow businesses to capture those credits.
EPA guy: We see potential in Aluminum recycling, and in acid runoff
remediation. Iron a good way to seed it... soil starts absorbing
carbon. We're working on open standards for carbon offsets: not picking
winners, but giving guidelines fro what those would look like.
Heidi VanGenderen, Climate Change Advisor to Colorado's Governor
CO climate action plan.
- Seen and intended as living document
- Set GHG reduction goal. 20% y 2020, 80% by 2050.
- Establish Ag offset program; looking vehicle emissions standards.
- Energy Efficiency core of plan.
- New Tech (advanced coal, Renewable Energy)
- Very important that we choose the right architecture for carbon regulation.
[who gets regulated: upstream approach? allow true country wide Cap'n
Trade. RECs vs cap'n trade?; need harmonization and verification.]
- Ray Anderson: When you meet your maker, what are you going to talk
about? Will you proudly discuss your rate of return, or your profits
for shareholders? Or will you discuss your legacy for humanity.
Carbon Regulations and Implications for EE/RE
Policy options: cap'n trade, CAFE, RPS?
Howard Gruenspecht - Deputy Administrator EIA
- EIA role- data 80%-85% (statistical agency) Projections (15-20%) of
mission - not subject to review/clearance requirements.. Does not take poisons
on policy issues - should not represent views of the administration.
- Advantages of Economic instruments... works well with types of sources,
and with time and place agnosticism of CO2 emissions.
- projections based on existing laws and policies.
- First steps often come outside energy sector
- Impact of CO2 price coal 6%/$, oil .4% per $
- Implications of bad policy? If coal price falls (elec only case),
other sectors of the economy may start to use it (heating? industry?)
- EIA sees biomass as a large proportion of the RE sector under carbon
- Thinks nuclear is cheaper the IGCC w/ CCS.
- Existing coal will be phased out under carbon regulation scenario.
- at $10/tom CO2 new wind w/ gas backup wins over coal and gas alone.
- You get more bang for your buck (CO2) using biomass for cofiring in
coal rather than liquid fuels. Carbon regulation will harm cellulosic
- Q&A: Incent RE? A: We should not incent particular techs... it
looks like the prospects for nukes and biomass very good, but the goal here
is to reduce carbon, not incent particular techs. We actually show
lower cost than EPA, but both reflect "efficient" responses...
which might not reflect the real world case - outside factors. Real
people will react very differently under real policy actions.
Environmentalists may see our analysis and say how cheap it is.
- Q&A: Todd Litman: We like Carbon taxes. Have you analyzed? A:
We've done some, but lots depends on modeling approach. Wouldn't the
economy be better off under carbon tax regime? There is potential, but
depends on what you mean by better off (might be benefits of tax
reform.) Like eating cake and running around the block... hard to say
- Q: some of these bills pick winners. Do models capture that? A: we can
absolutely capture that, and do so.
- Q: you're enthusiastic about biomass What constraints? A: Yes we do
have biomass supply curve incl dedicated energy crops. WE think you
can get a fair amount at $50-$60 dry ton. That technology exists
now. They're building a big biomass plant in the UK
- Big diff between EPA/EIA Explain, A: I'm fascinated with IGCC. nuke
probably available at cost returns to scale, but IGCC has caught on because
it solves a political question... I think these choices are political
issues. CCS has broad public acceptance partly because it does not yet
Joe Kruger- Nat'l commission on energy policy
Distribution of allowances in Cap'n Trade, distribution of allowances is a sweetener
for policy. Too much leads to ineffective legislation.
- If allocated to equal cost burden not a direct function of emissions to
date (ability to pass on costs, elasticity of demand, reduction
opportunities) Allocation can be decoupled from point regulation
(upstream or downstream?... but does not matter who gets allowances)
- If allocated for free, you have potential to create large windfalls....
Produces "get paid twice" [consumers via higher revenues + from
gov't via allowances]
- Allocation decisions in power sector complicated by regulatory structures.
(Wholesale vs retail, passing on costs? allocate to load/distribution vs.
allocate to generation?)
- Allowance distribution/Auction provides opportunity to advance societal
interests w/o diminishing price signal.
- Mixed approach (free allocation vs. auction) may offer significant
benefits. RGGI study (1/3 allocation for free would compensate the sector
- REC: allocate foe equitable distribution of costs, 50% allocation for
free; free portion should be phased out over time.
- National proposals generally follow this outline, break up allocation differently,
and diff speed of phase out. Both use some of auction revenues to
- Q&A- will price signal be enough to make EE/RE competitive? A: decisions
on the margin not effected by allocation decision. Yes. Would be
a windfall for nukes if allocation by output rather than current emissions.
- Q: some of these bills pick winners. Do models capture that? A: longer
term much harder to capture. Can that be captured?
Eric Smith, EPA climate economics branch.
- MA vs. EPA results: EPA now regulating GHGs from vehicles. In
process, but if EPA concludes GHG is an endangerment to public, will have to
regulate more than just transport.
- great graphs of CO2 management vs carbon price. Cost curve for
- Power sector will do heavy lifting in GHG reductions
- Have very limited capability to model most RE.
- EPA assume that IGCC w/CCS cheaper than nukes, IEA the opposite.
Assume penetration rate of nukes... basically their projections here not
- Expected 2030 price CO2: $27-$32/ton
- Q&A: Todd Litman: We like Carbon taxes. Have you analyzed? A:
cap'n trade very similar to carbon tax because we assume no friction in the
model (not real world case)
- Q: some of these bills pick winners. Do models capture that? A: requires
heroic assumptions, but we currently only have 6-7 techs in model (IGCC)
- Q: Big diff between EPA/EIA Explain. A. We only have IGCC coming on
because our price assumption is high enough to let it come on.
"It's not nonfiction."
Carbon Policy and the Electric Sector
Karl S. Michael, NYSERDA
RGGI Analytical experience
- Real world policy does cont conform to models. Have to convince
people that these models are non-fiction; get people to believe it and
involve the stakeholders.
- The key is SELLING analysis to stakeholders.
- RGGI design principals: Reduce CO2, flexible, market based, least
cost. Create model for feds. Maintain affordability, reliability, fuel
diversity, expandable to other states, build on programs in place.
- MIRACLE: we actually have proposed regulations. It's really
happening, which would have been surprising 4 yrs ago.
- 100% CO2 budget auctioned. stable emissions thru 2015, to10%
reduction 2019. Approx Half offsets can be achieved by nonenergy sector
- Who should be allowed in the market? Generators want to exclude,
environmentalists want others to be included. Reservation price
similar to carbon tax.
- Auction eliminates allocation question, and creates pool of money to
incent EE, new technologies, etc.
Rich Cowart, Regulatory Assistance Project (VT)
"Father of the load-based cap"
Portfolio-Based Carbon Management.
- Not giving out allowances (RGGI) would be a great leap forward.
- Principles: Econ burden is not nec. a function by emissions. Can be
huge windfall gains by free allocation. Power sector is complex, be
very careful how you design cap'n trade.
- Power market is much bigger than carbon market. Let's be very
careful to consider effects on power markets, but must consider efects on
very complex power sector.
- Always ask: #1 -How many tons to be avoided, #2- how much will it cost
consumers per ton (political, not economic reality), What tools get the best
results for #1 and #2.
- Options: Generator Cap'n trade; Load-side Cap'n trade; portfolio
options. This will lead to almost universal winners among generators.
- BIG Q: What is the right point of regulation? Upstream (mins/wells);
midstream (generators); downstream (transition); point of use
- Best place: Load Serving entity. Has relations with both generators
and customers (can incent EE)
- LOAD SIDE CAP: Basic rule: load serving entity gets "carbon
- Lowers societal costs because LSE best suited to works with
customers. Avoids windfalls to generators, revenue diversion, and
political consequences of auction.
- Need to be very worried about what will come out o pork-barrel process in
- Leiberman Warner (best bill out there) is till chock full of pork.
- REALITY #1: generators make money from free historic allocation Windfall
revenues. In EU system: winners: generators, traders. Losers:
- REALITY #2: Req. Generators to buy allowances helps, but problems
remain. Carbon price does not change dispatch (with existing fleet)...
large price rises will not do much to reduce carbon reductions much.
Even a CO2 prices of $50/ton would only reduce a 4% drop in emissions.
- Carbon tax and auctions create "high priced tons"
- REALITY #3: Carbon taxes and price increases will have minimal impact on
demand. (even in the long term) We are not going to get the reductions
we need by whacking consumers.
- DSM programs to deliver EE can deliver 5-13x savings per dollar spent
than a price increase.
- We need to design a Cap'n Trade program that delivers efficiency, and
hence deliver low cost tons.
- Putting cap on LSE means that capped entity can benefit by reducing
consumer usage through DSM.
- As with RPS, paying a premium for what you want is better than paying a
premium for every MWH, clean or dirty.
- We are going to be able to get more carbon reductions if we can design a
mechanism which costs less, rather than more.
Ron Binz, Colorado PUC Chairman
Goal: Political insights into what sort of analysis would be useful.
"Don't believe everything you think" - bumper sticker.
- No mention of environmental considerations in mission of PUC, very little
in enabling legislation.
- Regulates 55% of kWh in state (REAs unregulated)
- Objectives: integrated policy, meet projected demand, developing RE
resources, integrating environmental concerns, enabling econ development,
Keeping prices reasonable and equitable.
- Expected 60% growth over next 17 yrs (not counting EE gains/DSM).
Does not include transportation demand for electricity.
- Growth from pop; and growth in per-capita usage. Does not believe
projections for future growth rates. Use per consumer continues to
CO Electricity resources
- Energy basis: 70% coal, NG: 25; Renewables/hydro 5%
- Industrial/Commercial/Residential approx. evenly divided.
- Avg Residential customer... 8.2 MWH/yr
- Choices for meeting growing demand: EE/ more RE/ more traditional.
Colorado's Regulatory Response
- New resource planning rule. Prior LCP.
- New Rule: "Resource planning" (no more least cost); "Clean
energy preference", Independent Evaluator replacing utility
modeling. Optional Post-bid review instead of utility selection of
resources. New emphasis on DSM.
- Loves CFLs Two 75 equivalent CFLs will reduce CO2 emissions by
one metric ton over their lifetime. (in addition to lowering electric
- Talked about Colorado's RPS (only 13% by 2025 because of in-state
multiplier and lower standard for REAs)
Challenges Facing State Regulators
- Global warming Denial among legislatures.
- Parochialism at sector, regions, national level.
- Traditional emphasis on least cost.
- Paucity of legislative direction
- Economics of electric generation. (won't change dispatch without giant
- Continued load growth.
- Price inelasticity of consumer demand. [Like's Rich Cowart's ideas
of load side caps]
- Restructured electricity markets.
- Utility and fuel supplier opposition.
RECENT NEWS: Organization of state regulators (NARUC)
is now on record for
"preferring" national regulation of CO2 (but it was very tepid and
not strongly worded.) Previously had no position.
- Q: If you put a cap on LSE, is that an absolute cap, not dep on
population. A: Rich, yes, but you can invent all sorts of rules... it's
intended as a hard cap. The diff between a generator cap and a LSE cap
is that you don't need an auction. The LSEs represent the consumers
they are serving. Growing regions may get more allocations over time
- Q. Ron Benioff NREL. Why is Cap'n trade applied to LSE not taking
off? A. RICH: 1) cap'n trade is new invention (acid rain) was viewed
as success, but it did not do anything for EE 9tradition). 2)
Economists want carbon taxes. A credit auction is as close as you can
get to a tax and still have a hard cap. 3) We have not explored it
- Q. What's happening win CA... is LSE likely? A: (Rich) IT's up in
the air. Oregon studied this and Rec'd a load side cap, CA rec'd Load
side cap. But neighboring states are part of decision process.
- A; Karl. RGGI experience. The truth is that there are
political realities. Game plan was always a Cap'n Trade program for
generators... LSE cap never had a fair chance, was a foregone conclusion...
generator cap was a Mandate. Was not an objective analysis.
Generators didn't like it because LSEs had power, but they had to take the
action. Generators felt pushed around... lots of resistance.
LSEs didn't like it either because of the additional responsibilities...
didn't like the idea of one more set of requirements.
- A: Ron Binz: hangover from acid rain rules. Also: two kinds
of electric power rules in this country. What actually happens at
state level is very heterogeneous. there is no reason that this cannot
be handled by regulatory system. Xcel DSM plan will meet
"modest but very real goals."
Todd Litman, Victoria Transport Policy Institute (win-win emissions reduction
- Walkability is a hidden asset of communities... it never shows up in
accounting numbers, but is invisible to most transport planning.
- Sustainability requires integrated planning process that takes into
account indirect and long term impacts
- Current planning is reductionist.
- Reductionist planning often leads to solutions to one problem but
exacerbate others. (ex: fuel eff vehicles, widening roads)
- Costs per vehicle: 1. Ownership, crashes, parking subsidies,
vehicle ops, road costs, resid parking, traffic congestion,
pollution/emissions, roadway land values, fuel extern, traffic
services. (in order of cost)
- "Mobility management"
- Great graphs..
- Walking pic: people riding escalator into 24h fitness.
- Strategies to reduce mileage are expensive in terms of energy savings:
MUST TAKE INTO ACCT OTHER BENEFITS.
- Market reform strategies (improved travel options, incentives to use efficient
modes, accessible land use, policy market reforms)
- Cisco Systems (CSCO) working with VTPI to create enabling technology for
- Subsidize ridesharing/vanpooling (tremendous market potential.)
- 80% of the cost of a bus is the driver... so very cheap to go from a cheap
bus to a luxury bus.
- Distance based pricing (Pay-as-you drive.)
- fuel price is an essential component for reductions in vehicle use.
Mark Melaina (NREL - CA low carbon fuel standard. LCFS)
- 10% reduction in carbon intensity of transport fuels by 2020.
- Other states considering, and some federal and int'l bills as well.
- LCFS: lifecycle redction in CO2 equiv/ MJ of fuel adjusted for relative drive train
efficiency. (Gas=1; Diesel=.78; Elec .2; H2 .47)
- regulation at oil refineries and oil importers.
- performance standard (don't pick winners)
- Trading and banking of LCFS credits. Could be implemented in
addition to carbon pricing schemes.
- Goals: create framework for transition to lcfuels; flexibility in broad
range of reductions; total fuel use may increas or decrease; LCFS combines a
technology standard with a flexible compliance mechanism.
- LCFS needs to be accompanied by reduction for use with lower carbon
intensity to create significant carbon reductions.
- Will only effect techs close to current implementation.
- How will regulated entities comply? (improve efficiencies; blending of low
carbon fuels; sell other low carbon fuels; buy credits from other fuel
providers e.g. electricity).
- Drivetrain efficiency is an inherent characteristic of fuels, because it
depends on the energy quality of hte fuel (eta)
- Carbon intensity has baseline for each fuel, but has opt-in for a well to
wheels study for production facilities.
John Sheehan, VP of strategy and sustain development. Live Fuels.
Impacts of policy on fuels and agriculture sectors.
- Policy implication (past mistakes)
- measuring sustainability
- Policy and risk --- what do we want and ho do we accomplish it?
- A new face for agriculture
- Past misguided policies: Ethanol Blenders' tax ($.50/gal) Cost $20B
in lost revenue, currently 2.5B per yr. It has been a total failure in
terms of producing cellulosic ethanol.
- Biodiesel tax credit. $1/gal blending. Fight over who gets to
be called biodiesel. Biodeisel industry trying to close the door
behind. "Splash&Dash" with outside producers importing
B100, blend to B99.9999, and exporting to EU.
- E85: large flex fuel CAPABLE vehicles.
- Policy post mortem- Narrowly defined incentives leads to probs.
- Purposeful policy: must take energy security, climate change, etc
- EO Wilson- ethic of sustainability.
- We need a low carbon Analysis process that addresses all sustainability
- Water is the 800-pound gorilla we need to add to the equation.
- Cadillac Desert Book recommendation for understanding water
- Live fuels - expects to come in at $40 bbl oil. (other sources)
- model focuses on risk, based on old data, don't believe your own models.
- CONCLUSIONS: Carbon tax has little effect on biofuel production.
- Considered variable tax credit based on risk differentials: not practical
policy, but instructive b/c can effectively incentivize cellulosic, and
incentives phase out over time.
- Considered: reward early risk-takers (GM idea). sunset after fixed
number of gallons, and limits total cost.
- When energy crop price goes up, you are back to food vs. fuel but at a
higher part of the food chain. (reduction in food cultivation)
- Avoid using rainforest for fuel OR food production.
- Demand is the biggest lever we have. 2/3 of reduction is on demand
side, biofuels can only hadle 1/3 of the problem... this is a misleading
- RECS: think holistically. Focus on societal needs, not tech
specific, manage risk, don't repeat past mistakes,
Q&A: Where do you draw the circle on Well to Wheels? What's the
"well" for biofuels? A (Mark): draw the line around anything
that will influence climate change (including albedo, land use is a significant
factor. will be part of LCFS. Can be very complex. start with
simplified assumptions, incorporate nuances later.)--- John: Tillman at U of MN
doing study on global changes in agriculture - hard problem. Litman: SUV gets
about 10 tortillas per mile. Subsidies for biofuels are gignatic.
Recycling waste products is probably a good use for biofuel, but growing plants
for biofuel is probably bad policy.
Jet fuel not under LCFS. Marine bunker? Any thought in including jet
fuel. A (Mark) has to be federal LCFS. John: civil aviation low
carbon fuels initiative. huge in long term... CTL being considered...
biiofuels not in the picture.
Lori Bird: Mix modal trans is the way to go. is there empirical
evidence that people will drive more ee vehicles. Todd Litman: This is the
"law" of demand... it will happen. If a statement is
repeated often enough people will believe it. While the wholesale price of
oil has gone up, retail price only up 50%, and that has flattened feul
production growth. that's the short term effect. Long term elasticity
is usually 3x short term elasticity. There is an effect of lower costs,
and more eff vehicles will lead to the rebound and takeback effect. all
over the energy efficiency literature. Ex. better insulated homes will
turn up the thermostat. You will have significant net energy gains, but
losses due to externalities. US has low fuel prices and double per capita
travel than EU.
Any data on programmatic data on impacts of mobility strategies? Litman:
go to online TDM encyclopedia at
VTPI.org. We don't have a comprehensive
model that takes in all these benefits and costs, but they are not
integrated. We don not yet understand the synergistic effects of multiple policies
(i.e. more travel options COMBINED with better price incentives). Mark:
rebound effect: it is documented, but not significant for some policy
objectives. Todd: rebound is usu. 10-30% savings consumed through
increased consumption... external costs can increase this and totally wipe out
the gains since externalities are very large in value compared to energy
impacts. So, rebound only insignificant if you limit your scope to energy.
Q: Do you know any cities using parking policies to stimulate hybrids.
Todd: Dumb policy (does happen). A gallon of gas saved by reducing vehicle
travel has 10x reduced by fuel efficient vehicle, which is 10x more valuable
than displacing gas via ethanol.
Q: contrast eclectic sector with transport sector. Clear policy options
in electric sector + institutional actors. In transport sector, the list
is very long for both options and the institutional actors that have to be
involved. A: Todd: one of the biases against transport is that
interventions are messy. many suppliers, consumers, hard to track,
emotional baggage (people love your cars) don't present as taking drive.
Presentation is very important... you will be happier and healthier.
"mobility management" and "smart growth" encompass these
policies. you have much more effect with integrated policies. If
employers take some responsibility to encourage all these things, they will work
better. don't use stand alone policies.
High level takeaways-
- need for comprehensive transportation model
Monisha- Carbon markets
- Allocation matters - how and to whom
- Price signals matter... Electricity will do heavy lifting in almost any
- Modeling assumptions matter. Significant opptys exist to improve
EE/RE technology assumptions in many of the models.
- Improve level of info for all technology options.
- Improve the guidance for auction revenues.
- Improve analysis on impact of price signals? Will price signals be sufficient
for good incentives?
Comments from audience
- Should climate and geography be included in the models. Is
lack of inculsion a good assumption.
- Analysis need for tools to capture the full range of benefits.
That's a critical need of our analysis.
- Are externalities included in carbon regulation models? Yes.
What benefits which are not included?
- There will not be 100% efficient implementation of whatever you do.
Models do not account for political inefficiencies.
- Every time we've estimated the cost of an EPA regulation, we're underestimated
it. (not quite.)
- We need models that are fine grained enough...
- Clean air act: most benefits were from small particulates, but designed
for smog and acid rain.
- We are probably overestimating cost of carbon regulation.
- if you don't put EE/RE in the model, they won't make it into regulation...
and good regulation matters. Modeling is a POLITICAL gain... must
avoid marginalizing small technologies by leaving them out of the model.
- RGGI: early on in model, EE was only a response to price elasticity.
Looked too expensive and not accomplishing much. Stakeholders said
include EE as a program. then results cam back with EE and ramping up
efficiency back to mid 1990s levels. This made the governors
sign. If you don't model the resources right, analysis will be elegant,
but totally miss the target.
- In the real world you have to make best on technologies. "EIA is not
able to relate the state of future technology to policy initiatives."
Technology assumptions matter.
- Remember PURPA- brought us LCP, brought us to competition, but lead to big
problems, which made people willing to swallow the snake oil. too much
advocacy analysis, not analysis analysis.
- Average voter won't believe any of us. If we're trashing each
other's models, we're going to damage our credibility, and commonsense,
meaningful insights. Commonsense, meaningful insights are what we
need. Bring in nonexperts and opposing views in the design of the
- Missing today were the measures of success. Better baselines.
What is the endpoint? Did you lower the global temp, or reduce rate of
change? Very important to have measure that everyone can recognize and
- Analysis vs. Values. Legislatures take into account cost, but also
what constituents want. Germany's solar success is not based on cost
analysis, it is based on value system.
Lori Bird: Session 2 Carbon policy and electricity sector
- Electric markets not uniform
- Policy design driven by political consideration.
- Allocations to generators may ot be best approach.
- Variety needed, may vary between states
- Federal policy needed.
- Is RPS low cost strategy than carbon tax to clean up electric mix?
Could be expanded to include other low carbon techs?
- Tracking emissions from source to load- best approach?
- What mix of policies can best promote efficiency?
- Would states be willing to cede their rights around carbon if there were
federal legislation? [there are to competing pts of view: state which
want to be stricter than national standard.. .they want to make sure that if
they ratchet down and other states don't just add to other own
emissions. Other: will distribution of allowances be allocated on
national or state levels? Will states have discretion to distribute
allowances... this will be a huge fight.]
- Discussion of RPS vs. Carbon tax needs to recognize that RPS has more
goals than carbon pricing.
- where is the best place to regulate emissions? what are relative
effectiveness of various systems. This has never really been examined.
- Xcel is fighting Energy Efficiency, could this be because they will be
seen as less "successful" if they are selling less. How to
get utilities aligned with incentives... will they actually respond?
- If states have stricter standards, would they retire allowances?
States are more likely to want to get a part of the revenues to be raised to
use for thie pet products.
- At the end of the day we don't get anywhere unless some plants shut
down. Shutdown is very complex. There is a need for modeling
shutdown economics. Xcel is planning on shutting 4 plants. Could
be b/c those plants have been fully depreciated, so shareholders do not get
Transport Sector: Liz Brown
- substantial potential impoact from non-technology solutions, needs to be
- EE/RE technologies can drop CO2 per mile traveled, does not address
- don't neglect transport, and think holistically
- carbon intensity of fuel is a key factor to achieve substantial emissions
reductions. LCFS tech neutral mechanism.
- Transport fuels policy must be comprehensively sustainable to avoid past
- What analysis is needed to bring to more holistic level?
- Who is the audience for transport analysis?
- Is there a need for new institutional models. Delaware's sustainable
energy utility is a good example.
- Good news on PHEVs is that it's not much extra electricity... can be
handled by current infrastructure 10 million is a couple percent. 8kwh
= 40 mi?
- Need comprehensive model of benefits and costs, and model of synergies
between policy options.