NREL Energy Analysis Forum 

Side conversations

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 transformation.)

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.

Scheduled talks

Heidi VanGenderen, Climate Change Advisor to Colorado's Governor

CO climate action plan.

Carbon Regulations and Implications for EE/RE

Policy options: cap'n trade, CAFE, RPS?

Howard Gruenspecht - Deputy Administrator EIA

  1. 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.
  2. Advantages of Economic instruments... works well with types of sources, and with time and place agnosticism of CO2 emissions.
  3. projections based on existing laws and policies.
  4. First steps often come outside energy sector
  5. Impact of CO2 price coal 6%/$, oil .4% per $
  6. Implications of bad policy?  If coal price falls (elec only case), other sectors of the economy may start to use it (heating? industry?)
  7. EIA sees biomass as a large proportion of the RE sector under carbon regulation.
  8. Thinks nuclear is cheaper the IGCC w/ CCS.
  9. Existing coal will be phased out under carbon regulation scenario.
  10. at $10/tom CO2 new wind w/ gas backup wins over coal and gas alone.
  11. You get more bang for your buck (CO2) using biomass for cofiring in coal rather than liquid fuels. Carbon regulation will harm cellulosic biofuels.
  12. 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.
  13. 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 it's "better."
  14. Q: some of these bills pick winners. Do models capture that? A: we can absolutely capture that, and do so.
  15. 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 
  16. 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 exist.

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.

  1. 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)
  2. If allocated for free, you have potential to create large windfalls.... Produces "get paid twice" [consumers via higher revenues + from gov't via allowances]
  3. Allocation decisions in power sector complicated by regulatory structures. (Wholesale vs retail, passing on costs? allocate to load/distribution vs. allocate to generation?)
  4. Allowance distribution/Auction provides opportunity to advance societal interests w/o diminishing price signal.
  5. Mixed approach (free allocation vs. auction) may offer significant benefits.  RGGI study (1/3 allocation for free would compensate the sector w/o windfalls)
  6. REC: allocate foe equitable distribution of costs, 50% allocation for free; free portion should be phased out over time.
  7. National proposals generally follow this outline, break up allocation differently, and diff speed of phase out.  Both use some of auction revenues to incent EE/RE.
  8. 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.
  9. 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.

Carbon Policy and the Electric Sector

Karl S. Michael, NYSERDA

RGGI Analytical experience

Rich Cowart, Regulatory Assistance Project (VT)

"Father of the load-based cap"   

Portfolio-Based Carbon Management.

Ron Binz, Colorado PUC Chairman

Goal:  Political insights into what sort of analysis would be useful.

"Don't believe everything you think" - bumper sticker.

PUC description

CO Electricity resources

Colorado's Regulatory Response

Challenges Facing State Regulators

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&A

Transportation Sector

Liz Brown: 

Todd Litman, Victoria Transport Policy Institute (win-win emissions reduction strategies)

Mark Melaina (NREL - CA low carbon fuel standard. LCFS)

John Sheehan, VP of strategy and sustain development.  Live Fuels.  Impacts of policy on fuels and agriculture sectors.

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.

Summary-

High level takeaways- 

  1. need for comprehensive transportation model 

Monisha- Carbon markets

  1. Allocation matters - how and to whom
  2. Price signals matter... Electricity will do heavy lifting in almost any scenario
  3. Modeling assumptions matter.  Significant opptys exist to improve EE/RE technology assumptions in many of the models.

Analysis needs

  1. Improve level of info for all technology options.
  2. Improve the guidance for auction revenues.
  3. Improve analysis on impact of price signals?  Will price signals be sufficient for good incentives?

Comments from audience

  1. Should climate and geography be included in the models.   Is lack of inculsion a good assumption.
  2. Analysis need for tools to capture the full range of benefits.  That's a critical need of our analysis.
  3. Are externalities included in carbon regulation models?  Yes.  What benefits which are not included?
  4. There will not be 100% efficient implementation of whatever you do.  Models do not account for political inefficiencies.
  5. Every time we've estimated the cost of an EPA regulation, we're underestimated it.  (not quite.)
  6. We need models that are fine grained enough...
  7. Clean air act: most benefits were from small particulates, but designed for smog and acid rain.
  8. We are probably overestimating cost of carbon regulation.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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 model.
  14. 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 measure.
  15. 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

  1. Electric markets not uniform
  2. Policy design driven by political consideration.
  3. Allocations to generators may ot be best approach.
  4. Variety needed, may vary between states
  5. Federal policy needed.
  6. Is RPS low cost strategy than carbon tax to clean up electric mix?  Could be expanded to include other low carbon techs?
  7. Tracking emissions from source to load- best approach?
  8. What mix of policies can best promote efficiency?
  9. 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.]
  10. Discussion of RPS vs. Carbon tax needs to recognize that RPS has more goals than carbon pricing. 
  11. where is the best place to regulate emissions?  what are relative effectiveness of various systems.  This has never really been examined.
  12. 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?
  13. 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.
  14. 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 pay.

Transport Sector: Liz Brown

  1. substantial potential impoact from non-technology solutions, needs to be quantified.
  2. EE/RE technologies can drop CO2 per mile traveled, does not address demand.
  3. don't neglect transport, and think holistically
  4. carbon intensity of fuel is a key factor to achieve substantial emissions reductions.  LCFS tech neutral mechanism.
  5. Transport fuels policy must be comprehensively sustainable to avoid past pitfalls.
  6. What analysis is needed to bring to more holistic level?
  7. Who is the audience for transport analysis?
  8. Is there a need for new institutional models.  Delaware's sustainable energy utility is a good example.
  9. 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?
  10. Need comprehensive model of benefits and costs, and model of synergies between policy options.