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?
13-‐05-‐21 Solas Energy Consulting Inc. 3
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.
13-‐05-‐21 Solas Energy Consulting Inc. 4
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?
13-‐05-‐21 Solas Energy Consulting Inc. 5
$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
13-‐05-‐21 Solas Energy Consulting Inc. 8
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.
13-‐05-‐21 Solas Energy Consulting Inc. 9
!"!!!!
!1!!
!2!!
!3!!
!4!!
!5!!
!6!!
!7!!
!8!!
0!
0.1!
0.2!
0.3!
0.4!
0.5!
0.6!
0.7!
0.8!
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
13-‐05-‐21 Solas Energy Consulting Inc. 10
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
13-‐05-‐21 Solas Energy Consulting Inc. 11
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!
13-‐05-‐21 Solas Energy Consulting Inc. 13
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
13-‐05-‐21 Solas Energy Consulting Inc. 14
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.
13-‐05-‐21 Solas Energy Consulting Inc. 16
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
13-‐05-‐21 Solas Energy Consulting Inc. 17
Concurrent solu7on – complementary
Fit with Specified Gas Emi]ers RegulaBon (SGER)
13-‐05-‐21 Solas Energy Consulting Inc. 18
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
13-‐05-‐21 Solas Energy Consulting Inc. 19
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.
13-‐05-‐21 Solas Energy Consulting Inc. 20
Refund Varies based on Retailer Performance
13-‐05-‐21 Solas Energy Consulting Inc. 21
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.
13-‐05-‐21 Solas Energy Consulting Inc. 22
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
13-‐05-‐21 Solas Energy Consulting Inc. 23