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A Utility Model for

Californian Refineries

E. Grubert

ES2010-90027

19 May 2010

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Outline

main conclusions

transportation and climate change

refineries as transportation utilities

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Conclusions

transportation is a major, difficult-to-regulatesource of greenhouse gases

Californias refineries are like transportationutilities

utilitymodel could improve planning

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Transportation is Californias Main Source of

Greenhouse Gas Emissionstrans ortation

in ustry

ele tri ityeneration

resi ential

ommer ial

a ri ulture anforestry

not s e ifie

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California Cannot Easily Regulate

Transportation Emissions California is uniquely allowed to set its own

environmental standards

attempts to regulate fuel economy have failed major vehicle market

California uses an expensive boutique fuel

CA refineries are comm

itted to the CAm

arket

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Greenhouse Emissions from Transportation

Fuels Can Be Reduced

0

20

0

60

80

100

CO2e/MJ

9 .9 9 . 6 . 61.8 1.

CaRFG et anol CNG y ro en ele tri ity

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Californian Refineries are Like

Transportation Utilities refineries are heavily regulated natural monopolies

minimum throughput for supply

maximum throughput for pollution control

refineries supply almost all transportation fuels

product is highly standardized

refining is not particularly profitable

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...ButThey Are Not Utilities

customer base is not consistent

existence is threatened by low-carbon future

refineries compete on crack spreads

specialized infrastructure

refineriesmay be part of a vertically integratedcompany

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California is a Fuel Island

16 of CAs 21 refineriesproduce boutique CaR G

refineries submit to costlyregulation because CA

market is huge

as utilities, would havemore control

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Alternative Fuels Penetrate Slowly

0

12

million200

$/b

illionGGE

is

la

e

fuelin stations 0. 2.1 2. 0

istributioninfrastru ture

1 0 0.9 0.

ro u tionfa ilities

. 0 1 0

E8natural

asy ro en ele tri ity

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Utilities Can Decouple Sales from Revenues

transportation fuels have a principal agent problem

California has a long history of utility decoupling

electricity, natural gas

transportation utilities could house planning

decoupling reduces investment risk

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Refineries Could Supply Alternative Fuels

Diesel, Ethanol,ydrogen

Electricity, aturalGas

access to distributionnetworks

long capital turnovertime

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Centralized Planning Streamlines Investment

not every fuel stationneeds to carry all

alternatives

no planning could meanchaos

fuel taxes

monopolization in

emergingmarkets: Prop.

10

CA electric utilities are

stressed

G6 6

gl7

M8 9 @

, 19 M8

y 2010

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The University of Texas at Austinhttp://www w bb gyg p.com

Thanks! Any Questions?

please see paper for references