Commodity Market Impacts of EPA’s Clean Power Plan - 1
Trevor HouserRhodium Group
Sarah LadislawCSIS
Whitney KetchumRhodium Group
Michelle MeltonCSIS
Shashank MohanRhodium Group
John LarsenRhodium Group
February 9, 2015
Commodity Market Impacts of EPA’s Clean Power Plan
Commodity Market Impacts of EPA’s Clean Power Plan - 2
EPA Clean Power Plan (CPP) Proposal
National Energy Modeling System (NEMS)
RHG and CSIS interpretation of proposal
Goal: assess the impacts of EPA’s proposal on the US energy system
• Industry standard multi-sector energy system model• Detailed data on US technology costs and performance,
energy supply and demand, electric power markets, macroeconomic factors, etc.
• Solves for the least-cost pathway to meet a given policy goal
National and Regional Results
RHG and CSIS analysis of outputs
• Emissions rate targets• Building blocks• Compliance timeline
Commodity Market Impacts of EPA’s Clean Power Plan - 3
Policy ScenariosNational Cooperation Regional Fragmentation
No States Include EE in Plans National w/o EE Regional w/o EE
All States Include EE in Plans National w/ EE Regional w/ EE
Scenarios
Reference Case: AEO2014 plus EPA’s proposed New Source Performance Standards (coal plants must meet emissions rate of 1,100 lbs./MWh).
Policy Scenarios: CPP represented as an emission rate-based tradable performance standard. Scenarios explore the impacts of two key decisions for CPP implementation: Multi-state Cooperation and Crediting of Demand-side Energy Efficiency
Sensitivity Scenarios: Explore the impacts of the CPP (National w/o EE scenario) under different natural gas futures:
• Low oil and gas resource• High oil and gas resource• High LNG Exports (9 bcf/day by 2020, 18 bcf/day by 2030)
Full Report: http://csis.org/program/remaking-american-power
Commodity Market Impacts of EPA’s Clean Power Plan - 4
Fuel prices and power generationUSD per MMBTU delivered to power plants and billion kWh 3mma
FUEL PRICES POWER GENERATION
Natural Gas
Coal0
2
4
6
8
10
12
14
Oct-04
May-05
Dec-05
Jul-06
Feb-07
Sep-07
Apr-08
Nov-08
Jun-09
Jan-10
Aug-10
Mar-11
Oct-11
May-12
Dec-12
Jul-13
Feb-14
Sep-14
Source: EIA
Natural Gas
Coal
0
20
40
60
80
100
120
140
160
180
200
Oct-04
May-05
Dec-05
Jul-06
Feb-07
Sep-07
Apr-08
Nov-08
Jun-09
Jan-10
Aug-10
Mar-11
Oct-11
May-12
Dec-12
Jul-13
Feb-14
Sep-14
Commodity Market Impacts of EPA’s Clean Power Plan - 5
Natural gas prices2012 USD per MMBTU at Henry Hub
$0
$2
$4
$6
$8
$10
$12
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Historical
AEO 2014 Reference
Commodity Market Impacts of EPA’s Clean Power Plan - 6
Electric generation change from AEO 2014 OutlookBillion kWhs
Source: Rhodium Group/CSIS.
-1,000-800-600-400-200
0200400600800
1,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Fossil w/CCS Coal NGCC O&G Steam and CTs Nuclear Renewables Other
-1,000-800-600-400-200
0200400600800
1,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
-1,000-800-600-400-200
0200400600800
1,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
-1,000-800-600-400-200
0200400600800
1,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
NATIONAL W/O EE
REGIONAL W/O EE
NATIONAL W/ EE
REGIONAL W/ EE
Commodity Market Impacts of EPA’s Clean Power Plan - 7
PRODUCER REVENUE, BILLION 2012 USD (RHS), % (LHS)
Natural gas demand and producer revenue, 2020-2030Annual average change from reference
DEMAND, BCF/DAY (RHS), %(LHS) 10.7
3.1
10.9
5.5
0
2
4
6
8
10
12
National w/o EE National w/EE Regional w/o EE Regional w/ EE
13.8%
4.0%
14.1%
7.1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
$32.0
$5.9
$34.5
$10.0
$0
$5
$10
$15
$20
$25
$30
$35
$40
20.1%
3.7%
22%
6%
0%
5%
10%
15%
20%
25%
Commodity Market Impacts of EPA’s Clean Power Plan - 8
PRODUCER REVENUE, BILLION 2012 USD (RHS), % (LHS)
Coal demand and producer revenue, 2020-2030Annual average change from reference
DEMAND, MILLION SHORT TONS (RHS), %(LHS)
-463
-299
-460
-366
-500
-450
-400
-350
-300
-250
-200
-150
-100
-50
0
National w/o EE National w/EE Regional w/o EE Regional w/ EE
-46.9%
-30.3%
-46.6%
-37.0%
-50%
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
-$20.6
-$13.9
-$18.7
-$15.0
-$25
-$20
-$15
-$10
-$5
$0
-37.1%
-25.0%
-33.7%
-27.0%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Commodity Market Impacts of EPA’s Clean Power Plan - 9
Alternative gas price futures2012 USD per MMBTU at Henry Hub
$0
$2
$4
$6
$8
$10
$12
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Historical
AEO 2014 Reference
Low Gas Resource
High Gas Resource
High LNG Exports
Commodity Market Impacts of EPA’s Clean Power Plan - 10
Dispatch change under different gas futuresAverage annual change in generation, National w/o EE scenario under AEO 2014 Reference and alternative scenarios, 2020-2030, billion kWhs
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
Reference Low Resource High Resource LNG Export
Coal Fossil w/CCS NGCC Oil/Gas Steam and CTs Nuclear Renewables OtherSource: Rhodium Group/CSIS.
Commodity Market Impacts of EPA’s Clean Power Plan - 11
Natural has price impacts of CPP2012 USD per MMBTU, 2020-2030
Source: Rhodium Group/CSIS.
$5.27
$6.80
$4.34
$5.67$5.73
$7.29
$4.54
$6.24
$0
$1
$2
$3
$4
$5
$6
$7
$8
AEO 2014 Low Gas Resource High Gas Resource High LNG Exports
Reference National w/o EE
Commodity Market Impacts of EPA’s Clean Power Plan - 12
Projected inter-regional natural gas pipeline capacity additionsBcf/d
Source: ICF/INGAA
Originating region 2014-2035
US 39.9
Central 7.2
Midwest 3.5
Northeast 10.1
Southeast 7.9
Southwest 10.2
Western 1.0
Commodity Market Impacts of EPA’s Clean Power Plan - 13
Compliance:
January 2020-December 2029: States meet interim CPP goal on average
January 2030: States must meet final CPP goal
Implementation:
Summer 2016: Initial deadline for state plan submittal
Summer 2017: Extended deadline for state plan submittal at states’ request
Summer 2018: Extended deadline if states choose to submit multi-state plans
Design:
December, 2014: EPA CPP comment period ended
Summer 2015 (expected): EPA finalizes CPP
What Comes Next
Commodity Market Impacts of EPA’s Clean Power Plan - 14
Trevor HouserRhodium Group
Sarah LadislawCSIS
Whitney KetchumRhodium Group
Michelle MeltonCSIS
Shashank MohanRhodium Group
John LarsenRhodium Group
February 9, 2015
Commodity Market Impacts of EPA’s Clean Power Plan
