ISO-NE PUBLIC
J A N U A R Y 3 0 , 2 0 1 8 | H O L Y O K E , M A
Patricio Silva S E N I O R A N A L Y S T
Environmental Advisory Group
Greenhouse Gas Regulatory Update
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Presentation Overview
NOAA 2017 was 3rd warmest year on record for the globe
Impact of CO2 Pricing on Regional Energy Costs
Clean Power Plan (CPP) • EPA proposes rule CPP Repeal, adds additional listening sessions • EPA Seeks Options for Replacing CPP
Regional Greenhouse Gas Initiative (RGGI) • RGGI holds webinar on Virginia proposal to join RGGI by 2020
Global Warming Solutions Act (GWSA) • Massachusetts updates stakeholders on possible generator CO2 emissions cap
changes
ISO-NE PUBLIC
NOAA: 2017 was 3rd warmest year on record for the globe
3 Source: NOAA
ISO-NE PUBLIC
Fuel Prices and Relative Cost of Carbon Dioxide Pricing by Fossil Fuel Type
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0
20
40
60
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180
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 2017
Ener
gy P
rodu
ctio
n Co
sts (
$/M
Wh)
Coal No.6 Oil No.2 Oil Natural Gas
Shaded area represents the cost of emissions
Source: ISO-NE
ISO-NE PUBLIC
Carbon Dioxide Pricing Contribution to Energy Costs by Fossil Fuel Type
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0%
10%
20%
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 2017
Aver
age
Cont
ribut
ion
of E
miss
ions
to
Ener
gy C
ost
Aver
age
Cost
of E
miss
ions
($/
MW
h)
Coal Emissions Contribution (RA) No.2 Oil Emissions Contribution (RA)No.6 Oil Emissions Contribution (RA) Natural Gas Emissions Contribution (RA)Coal CO2 Costs (LA) No.2 Oil CO2 Costs (LA)No.6 Oil CO2 Costs (LA) Natural Gas CO2 Costs (LA)
Source: ISO-NE
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FEDERAL GREENHOUSE GAS MEASURES
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EPA Proposes Repeal of Clean Power Plan
• November 8, 2017: EPA extended the public comment period of the proposal to rescind the Clean Power Plan (CPP) until January 16, 2018, seeking additional feedback about appropriate replacements for the Obama administration's rule – 82 FR 51787 (11/08/2017) – Additional listening sessions will be held by EPA: February 21, 2018 in
Kansas City, Missouri; February 28, 2018 in San Francisco, California; and on March 27, 2018 in Gillette, Wyoming
• October 16, 2017: after reviewing the CPP in accordance with Executive Order 13783, (March 31, 2017), EPA proposes repeal based on the outcome of that review – 82 FR 16093 (October 16, 2017)
• EPA proposes a change in the legal interpretation as applied to section 111(d) of the Clean Air Act (CAA), on which the CPP was based: – Under this interpretation, the CPP exceeds the EPA's statutory authority
and would be repealed
Source: EPA
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EPA Seeks Options for Replacing Clean Power Plan
• December 28, 2017: EPA is considering proposing emission guidelines to limit greenhouse gas (GHG) emissions from existing electric utility generating units (EGUs) and is soliciting information on: – the proper respective roles of the state and federal governments in that
process, as well as – information on systems of emission reduction that are applicable at or to
an existing EGU, – information on compliance measures, and – information on state planning requirements under the Clean Air Act (CAA) – Comments are due by February 28, 2018, 82 FR 61507 (December 28,
2017)
• Limited to ‘inside-the-fence’ emissions reductions possible at fossil generators, rather than leveraging emissions trading between generators under the Clean Power Plan
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EPA Clean Power Plan Litigation Update – Existing Fossil Generators - Clean Air Act §111(d)
West Virginia v. EPA, No. 15-1363 (D.C. Circuit) • October 10, 2017: EPA submitted status report to D.C. Circuit, requesting
the court continue to hold the cases challenging the CPP in abeyance, noting: • “On October 10, 2017 the Administrator signed a Federal Register
notice proposing to repeal the Clean Power Plan on the grounds that it exceeds EPA’s statutory authority under a proposed change in the Agency’s interpretation of section 111 of the Clean Air Act, 42 U.S.C. § 7411.”
• April 4, 2017: EPA announces review of CPP (82 FR 16329) • April 3, 2017: EPA announces withdrawal of proposed Model Trading
Rules; and Clean Energy Incentive Program (CEIP) design details (82 FR 16144)
• Sept 27, 2016: Oral arguments on litigation heard • February 9, 2016: Supreme Court stays implementation of the CPP
Sources: EPA; Climate Change Litigation Database
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REGIONAL GREENHOUSE GAS INITIATIVE 2017 Program Review and Recent Auction Activity
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ISO-NE PUBLIC
RGGI Program Overview 4th Control Period (2018-2020)
Overview, Allocations & Auction 35 (March 2017) Results • 84.3 million short tons - RGGI 2017 cap,
covers 20% of 9 RGGI States total GHG emissions inventory
– 163 affected entities (RGGI wide) – New England share 28.5 M
• 62.4 million short tons – 2017 Adjusted RGGI cap (to account for banked allowances)
– New England share 21.1 M (34% of total)
• 241 million allowances in circulation at the end of the 3rd Qtr 2017
• Auction 38 (December 6, 2017) results: All 14.68 million allowances offered purchased at clearing price of $3.80/ton
• Auction 39 (March 14, 2018): offering 2018 vintage year allowances, quantity to be determined, reserve price of $2.20
RGGI 2018 CO2 Allowance Allocation (State %)
6% 4%
4%
22%
16% 5%
39%
3% 1%
Connecticut Delaware Maine
Maryland Massachusetts New Hampshire
New York Rhode Island Vermont
11 Sources: RGGI; MJ Bradley & Associates LLC
ISO-NE PUBLIC
Monthly CO2 Emissions of New England RGGI Affected Generators (Million Short Tons)
12
0
0.5
1
1.5
2
2.5
3
3.5
1 2 3 4 5 6 7 8 9 10 11 12
2014 2015 2016 2017
Note: 4th Quarter 2017 emissions not yet available for all fossil generators on EPA Air Markets Program Data website. Total monthly emissions expected to increase once all generator data available.
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RGGI New England Auction Proceeds & Clearing Price (2008-2017YTD)
13 Source: RGGI
$-
$1
$2
$3
$4
$5
$6
$7
$8
$-
$10
$20
$30
$40
$50
$60
Auct
ion
1Au
ctio
n 2
Auct
ion
3Au
ctio
n 4
Auct
ion
5Au
ctio
n 6
Auct
ion
7Au
ctio
n 8
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ion
9Au
ctio
n 10
Auct
ion
11Au
ctio
n 12
Auct
ion
13Au
ctio
n 14
Auct
ion
15Au
ctio
n 16
Auct
ion
17Au
ctio
n 18
Auct
ion
19Au
ctio
n 20
Auct
ion
21Au
ctio
n 22
Auct
ion2
3Au
ctio
n 24
Auct
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25Au
ctio
n 26
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27Au
ctio
n 28
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29Au
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31Au
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33Au
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n 34
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35Au
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37Au
ctio
n 38
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Auct
ion
Clea
ring(
Gre
en li
ne),
Rese
rve
(Blu
e lin
e) P
rices
($do
llars
)
RGG
I New
Eng
land
Qua
rter
ly A
uctio
n Pr
ocee
ds ($
Mill
ions
)
VTRINHMAMECTClearing PriceReserve Price
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2016-2018 RGGI CO2 Allowance Auctions
Auction Auction Date Reserve Price
Clearing Price
CCR Price
Quantity Auctioned
Auction Proceeds
31 March 9, 2016 $2.10 $5.25 $8.00 14,838,732 $77,903,343.00
32 June 1, 2016 $2.10 $4.53 $8.00 15,089,652 $68,356,123.56
33 September 7, 2016 $2.10 $4.54 $8.00 14,911,315 $67,697,370.10
34 December 7, 2016 $2.10 $3.55 $8.00 14,791,315 $52,509,168.25
35 March 8, 2017 $2.15 $3.00 $10.00 14,371,300 $43,113,900.00
36 June 7, 2017 $2.15 $2.53 $10.00 14,597,470 $36,931,599.10
37 September 6, 2017 $2.15 $4.35 $10.00 14,371,585 $62,516,394.75
38 December 6, 2017 $2.15 $3.80 $10.00 14,687,989 $55,814,358.20
39 March 14, 2018 $2.20 $10.25 13,553,767
40 June 13, 2018 $2.20 $10.25 13,553,767
41 September 5, 2018 $2.20 $10.25 13,553,767
42 December 5, 2018 $2.20 $10.25 13,553,767
Source: RGGI
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RGGI Proposed Virginia Participation Stakeholder Meeting
• January 26, 2018: RGGI states requested feedback from stakeholders on the implications of Virginia’s potential participation in RGGI and how to optimize compatibility between Virginia’s proposed regulation and the 2017 RGGI Model Rule established through program review
• Virginia proposed a CO2 Trading Program Regulation would include a relatively large number of compliance entities with significant emissions comprising a significant portion of the expanded regional compliance obligation. Topics for stakeholders include: – Proposing that compliance entities consign allowances to auction – Many Virginia source under common ownership, what are the market
dynamics impact – Virginia has a regulated power sector, while most RGGI states have a
deregulated power sector
• RGGI States seeking written comments by February 9, 2018
Source: RGGI
ISO-NE PUBLIC
Possible Expansion of RGGI Member State Membership Potential Impact of Adding Members to RGGI Program • November 16, 2017: Virginia State
Air Pollution Control Board approved draft rule to link with RGGI
• Adding Virginia to the RGGI market would be a significant expansion of the program. The bar chart plots 2016 power plant emissions for each RGGI state as well as Virginia and New Jersey (another potential addition to the RGGI market)
• Virginia is the largest source of emissions among the current and potential future RGGI States (see bar chart far right)
2016 State Power Sector CO2 Emissions (Million Short Tons)
16 Sources: MJ Bradley & Associates LLC; VA DEQ Graphic Source: MJ Bradley & Associates LLC
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MASSACHUSETTS GLOBAL WARMING SOLUTIONS ACT Generator Emissions Cap (310 CMR 7.74) Overview & Impacts Analysis
17
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GWSA Affected Generator Operations (2018) Estimated CO2 Emissions thru 1/23/18 ~ 805,014 short tons
Generation by Reported Primary Fuel (%)
Generation by Primary Mover (%)
18 Source: ISO-NE
Note: CO2 emissions estimated with individual unit settlements data and historical emissions rates
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GWSA 310 CMR 7.74 – January 2018 Update
• January 23, 2018: EEA and MassDEP notified interested parties they will consult with an independent market monitor regarding the availability and pricing of allowances. EEA and MassDEP will also continue to consult with ISO-NE and market participants about market conditions
• Depending on the results of those consultations, the agencies may consider options regarding allowance supply and price formation throughout the calendar year, including: – In the short term, creating a notice of transfer form to allow facilities to finalize
allowance transfers before the allowance tracking system becomes available – If allowances are not available at reasonable prices in the early part of the year and
under certain “emergency” conditions, as that term is defined in the regulations, consider amending 310 CMR 7.74 to extend the availability of the “emergency deferred compliance” option for “emergencies” that occur throughout the calendar year
– In the longer term, consider auctioning allowances before the beginning of each compliance year, or consider other measures to address market liquidity.
Source: MA DEP
ISO-NE PUBLIC
Final GWSA Generator CO2 Emission Total Cap (2018 – 2050)
Year Total Cap
(Million Metric Tons) Total Cap
(Million Short Tons)
2018 8.95 9.86
2019 8.73 9.61
2020 8.50 9.36
2025 7.38 8.13
2030 6.26 6.90
2040 4.02 4.43
2050 1.79 1.96
20 Source: MA DEP
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GWSA 310 CMR 7.74 Auction Design and Implementation Timeline 2017 • Develop 310 CMR 7.74 compliance forms • Complete allowance tracking system procurement • Solicit stakeholder input on auction design parameters such as:
auction timing, reserve price, eligibility • Initiate procurements for: auction platform provider, market
monitor 2018 • Test and deploy allowance tracking system (early 2018) • Complete auction procurements • Create auction documents including: bidder requirements and
instructions, auction notice • Propose and finalize amendments to 310 CMR 7.74 as necessary
Source: MA EOEEA
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