Navigant Research Blog

Presidential Candidates at Odds on Climate Change

— October 6, 2016

Oil RigOne year ago, my colleague Casey Talon published a blog on the energy and climate change policies of various presidential hopefuls. With the nominees now chosen and the first official presidential debates now over, the nation’s energy future should be clearer, but widely disparate policies have instead made it more nebulous than ever. Let’s take a look at how each nominee could affect US climate policy.

  • Democratic nominee Hillary Clinton’s plan for climate action involves a heavy focus on solar panels, increasing the installed base of solar power in the United States by 700% within her first term. Clinton’s plan also includes creating a White House transmission office, which would coordinate permitting for siting transmission lines on the state and federal levels. This plan would rely heavily on either a cap-and-trade system for carbon emissions or a carbon tax. Without increased pricing for emissions, natural gas is currently too cheap for renewable energy to be competitive in some applications. One item Clinton’s plan is relatively vague about is energy storage. In order to meet the solar energy goals set forth by the presidential nominee, a large amount of storage would have to be implemented, as solar and wind are both intermittent power sources that do not necessarily produce power at the time when electricity demand is greatest.
  • Republican nominee Donald Trump promises a return to coal-fired power plants, as well as other fossil fuels. The candidate’s America First energy plan involves a dissolution of the US Environmental Protection Agency’s (EPA’s) Clean Power Plan, as well as the EPA itself. Any move toward clean power would be entirely dependent on free market adoption. Shifting back to more coal power could be problematic from an emissions perspective, as 71% of 2015 carbon emissions from the electric power sector came from coal. Meanwhile, natural gas, the second largest fossil fuel energy source, represented only 28% of emissions. Increasing CO2 emissions would not only mean a faster rise in global temperatures, but also a deviation from international agreements on climate change. In addition, due to declining renewable energy prices and the increasing prevalence of natural gas fracking, coal is not as economically attractive an option as it once was. A lack of regulation surrounding the energy sector could either result in widespread adoption of renewables on the market or a sharp rise in carbon emissions.

Electricity demand is increasing in the United States, and carbon emissions have remained fairly consistent in the past several years. It is true that cleaner energy is needed in greater quantities, both to balance out the added demand from smart metering, electric vehicles, and increasingly connected cities and to reduce emissions. In the 2015 Paris Agreement, the United States promised to cut its carbon emissions 28% below 2005 levels by 2025. It’s currently not on track to reach that goal, and a reduction in the amount of clean power being utilized would hinder the nation’s ability to meet this pledge.

The future of America’s energy policy is uncertain. November’s election could bring some much needed clarity.


If $9 Billion of Renewable Energy Is Curtailed in 2030, What Opportunities Will Emerge? Part 2

— October 4, 2016

Cyber Security MonitoringThe first part of this blog covered the growing trend of renewables curtailment. This second post will cover the solutions that are turning curtailment from a problem into an opportunity.

Many solutions have been proposed to address the integration of renewables into the energy sector. The first two, transmission upgrades and storage technologies, tend to get a lot of media attention. However, these can be seen as “necessary but not sufficient” options in the race to integrate renewables. Flexible gas generation technologies will also play a growing role in the grid of the future.

Transmission upgrades connect renewables to more loads and diversify generation resources. Germany, with 26% of its generation coming from intermittent sources in 2015, has been building out transmission to connect the windy south of the country to the industrial north. As in many global markets, transmission expansion is subject to NIMBYism, and in Germany’s case is being forced underground, which is more expensive. California, with 14% of its generation from intermittent sources in 2015, may be expanding its independent system operator (ISO) into a regional organization across the climatologically diverse Western Interconnection, though the decision has been delayed for further review. And China, generating just around 3% of its electricity from wind in 2015, still curtailed billions of dollars of wind power in recent years and is quickly pushing to interconnect it with load.

Storage technologies are growing quickly, as well. Hydroelectric storage is a cheap and clean technology that nonetheless sometimes battles drought-related, environmental, and even methane emissions concerns. Batteries, including lithium ion and other types, are rightly making news as costs fall and policies like incentives and storage mandates drive the market toward rapid growth. These and related storage technologies, including compressed air storage, are growing quickly and will become a major part of our electric grids.

Flexible Solutions

Flexible gas-based generation solutions tend to get less media attention but will also be crucially important in the flexibility of the grid.

  • A 2016 National Renewable Energy Laboratory (NREL) report suggested that for California to accommodate 50% of its generation coming from solar PV, a wide range of changes would need to take place. Notably, flexible thermal generators and combined heat and power (CHP) plants were mentioned as a key necessity, even if the amount of energy storage is boosted by more than 10 times what is outlined in the current mandate.
  • A 2015 report by the Union of Concerned Scientists on California’s grid states that under a 50% Renewable Portfolio Standard (RPS) scenario, curtailment could be cut from 4.8% to 3.2% if natural gas resources are able to turn down to half-power.
  • A 2015 report points out that Denmark was able to generate 39% of its electricity from wind thanks in large part to flexible district energy CHP resources. These district energy systems are in some way the core of Denmark’s grid and are expected to become electricity consumers rather than producers during times of high wind generation.
  • A 2016 report funded by the German government suggests that power-to-heat will be more important than batteries in balancing that country’s grid in the future.

Most of these reports suggest that fossil-based sources will fuel this generation, though carbon-neutral biogas and hydrogen are taking strides to catch up too. These gas-based technologies have the dual benefit of boosting grid flexibility while (in most cases) decarbonizing heating, an area of growing concern. As a complement to the transmission and battery storage changes making headlines, these sources are set to become key contributors in the grid of the future.


Key Takeaways from the CPP Oral Arguments

— September 30, 2016

AnalyticsOn Tuesday, September 27, the hottest ticket in Washington, DC was for a seat in the courtroom to hear oral arguments in the US Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP) appeals. Below are some key takeaways from the proceedings.

Oral arguments were thorough and the judges were well-prepared. The discussion took almost twice as long as scheduled; the court allotted 218 minutes for arguments, and the hearing lasted nearly 7 hours.

Transforming the Sector?

A key issue was whether or not the CPP rule is transformative to the electric sector. The EPA is walking a fine line here because it wants to tout the positive impacts the rule will have on climate change and air pollution without indicating that the CPP is transformative enough to warrant a clear directive statement from Congress. Questions included whether the Clean Air Act was intended for this purpose, and what to do when Congress fails to act. The fact that a number of utilities intervened in support of the EPA and spoke to the issue of the ongoing shift to low-carbon generation sources (e.g., natural gas and renewables) may weaken petitioners’ case that the EPA overstepped its authority, meaning congressional action is required for such a change.

At Navigant, we have been modeling regulations on CO2 from power plants since President Obama first announced that this kind of regulation would be a part of his Climate Action Plan in 2013. A number of factors, including continuing low gas prices and ever lower renewable costs, make emissions reduction actions more cost-effective. This is to say that the CPP is not as costly to achieve in our current future outlook than it appeared a few years ago. The court’s focus on this point indicates that the judges recognize the nature of the ongoing energy transformation may be in line with current trends.

Other challenges brought in front of the judges on Tuesday included whether a Best System of Emission Reduction (BSER) that extends beyond the fence line (i.e., outside of the regulated generation plant) is allowed under section 111(d) of the Clean Air Act. Based on feedback from attendees, this issue did not seem as contentious as originally expected. Discussions on differences between the House and Senate versions of the 1990 Clean Air Act amendments also seemed less contentious than originally thought.

Procedural Notice

The other challenge that I found interesting was the issue of procedural notice. Petitioners’ challenge that there are major differences between the proposed and final rules and contend that the EPA should have reissued the rule allowing for additional comments prior to finalizing it. If the judges agree, the court may not have to rule on the merits of the case and the CPP could be sent back to the EPA for additional comments. At that point, it would be up to the next president and administration to move the CPP forward. Under those circumstances, the reissued CPP would also likely see appeals through the DC Circuit and US Supreme Court, likely pushing back compliance.

The case was heard in front of 10 judges, 6 Democratic appointees, and 4 Republican appointees. Regardless of the DC Circuit’s decision (expected in early 2017), most agree that this case is likely to be appealed to the US Supreme Court. In its current makeup, the Supreme Court is largely assumed to be split 4‑4 on the issue.


Impacts of the Clean Power Plan, Revisited

— September 22, 2016

AnalyticsOral arguments in the litigation of the US Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP) are upon us. Let’s revisit what the CPP could mean for power generation in the United States.

Navigant’s Energy Market Outlook (NEMO) includes a regional CPP policy with the mass targets and compliance deadlines laid out by the EPA in the final rule. NEMO shows that impacts of the CPP are regional in nature, and in many regions are not as drastic in the early years of compliance as one might expect. In fact, most states do not see additional costs driven by the policy in the first few years of implementation. This is partly due to the fact that the EPA’s final rule includes a glidepath where targets are not as steep in the early years, partly due to expected changes that lower CO2 emissions before CPP compliance begins.

Coal Retirements

Navigant continues to forecast the retirement of significant coal capacity over the next few decades. Our current modeling shows approximately 73 MW going offline between 2017 and 2035. About 40% of these retirements have already been announced, and just over 20% are forecast based on plant age. These two categories can be ruled out as being “driven” by the CPP. The remaining 40% is shown to be uneconomic and is therefore shown to retire in our modeling.

Retiring Coal Capacity by Region, United States: 2017-2035

CPP Retirements

(Source: Navigant)

A decision to retire a plant before the end of its useful life is very complicated, and it is very rare that a single driver can be identified as causing such a decision. The more influential factors we have seen include competition with cheap natural gas and increases in costs caused by environmental regulations (including the CPP). NEMO shows that the largest shares of announced coal retirements are located in MISO and WECC, while the largest share of modeled coal retirements are located in SERC territory.

Renewable Growth

On the other side of the equation, NEMO also includes continued low natural gas prices due to shale abundance, as well as continued growth in large-scale renewables, distributed energy resources, and energy efficiency. Large-scale solar capacity additions continue to grow due to falling costs, with additions on par with wind in some regions. Early in the forecast, solar becomes the renewable of choice in California, driven by the state’s aggressive renewable and carbon goals, which go above what the CPP requires. Wind continues to be installed in areas with high potential, helping states like Texas meet their CPP targets.

Low-Cost Compliance in Early Years

NEMO includes over 29 GW of coal coming offline in the Eastern Interconnection before the CPP targets begin, making compliance in the first interim compliance period (2022-2024) relatively painless. Our modeling of the CPP uses a cap-and-trade mechanism to approximate a compliance framework. Across most of the country, carbon allowance prices are forecast to be zero for the first 2 years of compliance, meaning no additional costs are needed to meet the targets. As others have found, compliance costs are lower when regional trading is allowed. Our modeling confirms that states that go it alone tend to have higher compliance costs overall.


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