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Environmental Benefits of Renewable Portfolio Standards in an Age of Coal Plant Retirements
September 10th, 2015Energy Policy Research Conference
Denver, COJosh Novacheck
Jeremiah Johnson
Michigan’s Renewable Portfolio Standard
• Under the Clean, Renewable, and Efficient Energy Act of 2008, Michigan’s load serving entities are responsible for generating 10% of their retail electricity sales from renewable sources by 2015.
• Through new utility-owned generation, existing generation, and power purchase agreements, it is expected that this target will be met.
• Costs of the existing RPS were below expectations, with utilities reducing and eliminating renewable energy surcharges.
• In 2012, groups advocating for higher targets failed to pass Proposition 3, which would have added a constitutional amendment mandating higher penetrations of renewable energy.
Study: Expanding Michigan RPS
University of Michigan Energy Institute funded a study to assess the environmental impacts and costs of RPS expansion in Michigan.
3http://energy.umich.edu/news-events/news/2015/01/13/new-study-details-costs-environmental-impact-raising-michigan%E2%80%99s
Objectives of the Study
• This research project employed and advanced power systems modeling to evaluate design considerations for an updated Renewable Portfolio Standard for Michigan.
• In addition to methodological development, the project provided an objective analysis on the impact on emissions, generation mix, and costs of RPS designs to better inform stakeholders across the state.
• This part of the broader study aimed to understand the impacts of future coal plant retirements on the effectiveness of RPS emissions mitigation.
Renewables Build Plan
Wind Project Costs
($/MWh)
Debt Servicing 30
Return on Equity 24
Net Taxes 7Operations &
Maint 12
Wind Project
Revenues ($/MWh)
40 Energy Market Revenues
31 Above Market Cost
Sample Wind Site Evaluation
4 Capacity Value
Output of dispatch model, based on time of day of generation
14% capacity credit for wind
Selected projects to minimize above-market costs
Total: 74
Note: Baseline assumptions do not include PTC or ITC
Power Systems Model
Eastern Interconnection • 35 zones• Inter-zonal
transmission interface limits
• ~10,000 generators with detailed operational constraints
• Environmental control equipment
• Zonal fuel prices• Hourly load
Least cost firm capacity added to maintain reserve
requirement
Constrained by RPS Design
Study Design
Power System Representation
Dispatch Model
Renewable Resource Data
Cost of New Renewables
Operational behavior
Market Energy Prices
Renewable Revenue
Requirement Model
Renewable Build Plan
Five-year iterations; 2015-2035
Coal Retirement Scenarios
• Base Case– MATS compliance
cost– Compared to cost of
new NGCC
• High Coal Retirements– Generators older
than 50 years are retired
Coal Retirement Scenarios: Base Case
Retire
Comply with MATS
Coal Retirement Scenarios: High Retirements
~32% of MI Coal Capacity >50 years old
Michigan Generation
(1) = BaseCase
(2) = High Retirement
Displaced Generation: 20% by 2030
Displaced Generation: 25% by 2025
Displaced Generation: 40% by 2035
Michigan Emissions Rate
Base Case High Coal Retirements Retirements
Total CO2 Emissions
Discussion
• Emissions reductions from RPS heavily dependent on future energy infrastructure
• EPA’s Carbon Rule will likely instigate RPS expansions and coal retirements
• Age of coal fleet in Michigan and much of the Midwest is old
• There has been significant investment to keep the generators operational beyond there expected lifetime
Acknowledgements
This work was conducted with financial support from the University of Michigan’s Energy Institute.
The authors thank Profs. Mark Barteau and Thomas Lyon for their invaluable insights, in addition to Rachel Chalat and Nicole Ryan for their research assistance.
University of Michigan Energy Institute
Thank You!
Questions?