RGGI 101. Webinar for NEPOOL Participants IMAPP Proceeding. August 19, 2016
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1 RGGI 101 Webinar fr NEPOOL Participants IMAPP Prceeding August 19,
2 Why Market-Based Multi-State Cap? Prven mdel (see EPA webpage What is emissins trading? including vide - Emissins Trading 101 ) Cst-effective Limit n emissins Prvides ecnmic benefits Clsely aligns with the reginal nature f the electricity grid Fsters reginal cperatin Simple, transparent, and verifiable tracking and cmpliance system 2
3 RGGI Prgram Scpe (see fr mre details) Nine states participating in RGGI, spanning three RTOs States cllectively establish a reginal budget ( cap ) n CO2 emissins frm pwer plants Cvers new and existing fssil fuel-fired generatrs with capacity 25MW and abve Cvered pwer plants in each state must hld allwances equal t their CO2 emissins during a three-year cntrl perid Three-year cntrl perids starting with , currently in third cntrl perid ( ) Allwances up t the amunt f the cap are distributed by the states, primarily thrugh quarterly allwance auctins Prceeds frm the sale f allwances are strategically invested by each state in cnsumer benefit prgrams RGGI maintains an emissins and allwance tracking system (RGGI COATS) t track RGGI market & prgram data 3
4 RGGI Emissins Cap CO 2 Cap: 86.5 millin shrt tns in 2016, and declines 2.5 percent each year until 2020 Tw interim adjustments t the cap ( ) t accunt fr banked allwances accrued prir t RGGI adjusted cap is 64.6 millin shrt tns Cst cntainment reserve (CCR) f 10 millin allwances triggered if prices rise abve certain levels RGGI CO 2 Emissin RGGI Emissins Cap Over Time Shrt Tns f CO 2 120,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000, ,826,637 88,627,274 83,201, Shrt Tns f CO2 180,000, ,000, ,000, ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000, Base Cap 4
5 Distributin f Allwances In riginal RGGI MOU, states aspired t auctin at least 25% f their allwances. Tday, mre than 90% f RGGI allwances are distributed thrugh auctin. States ffer their allwances fr sale in ne reginal auctin held n quarterly basis; single clearing price Prspective bidders file qualificatin applicatin and ntices f intent t bid in accrdance with auctin ntices Auctins are pen t all qualified applicants (including nn-cmpliance entities) CO 2 allwances are fungible acrss the multi-state regin: CO 2 allwances issued by any participating state can be used fr cmpliance in any f the participating states 32 successful auctins since September 2008; ver 830 millin CO 2 allwances sld Market mnitr has identified n evidence f anti-cmpetitive cnduct CO 2 allwance auctin clearing prices have ranged frm $1.86 t $7.50. Allwances may als be purchased n the secndary market 5
6 Reinvestment f Prceeds Mre than $2.4 billin in net prceeds since 2008 Each individual state determines hw t distribute prceeds frm their prtin f allwance sales Reinvestment f prceeds helps t mitigate the impact t cnsumers f RGGI cmpliance requirements in energy market prices Analysis Grup (2015): $1.3 billin in net ecnmic benefit, $460 millin in energy bill savings frm RGGI s secnd three years Analysis Grup (2012): $1.6 billin in net ecnmic benefit, $1.3 billin in energy bill savings frm RGGI s first three years Energy efficiency investments a significant driver f net ecnmic benefits Reduced individual cnsumptin lwers bills Reduced lad puts dwnward pressure n verall prices 6
7 Flexibility Mechanisms RGGI prgram incrprates varius cst cntainment/flexibility mechanisms t limit vlatility and cmpliance cst increases Multi-year cmpliance perid: Three year perid t acquire allwances, t reduce uncertainty and expsure t price vlatility Banking: Cmpliance entities may use allwances purchased tday t cver emissins in the future Limits uncertainty related t future cmpliance csts Brrwing nt allwed in RGGI Offsets: RGGI allws fr limited use f ffsets (emissins reductins frm utside the electricity sectr) Limited access t these (ffset) allwances increases supply and mitigates price Cmpliance entities may utilize ffsets fr up t 3.3% f their emissins In practice, unused: ffset prices > than RGGI allwance prices Cst Cntainment Reserve (CCR) Fixed supply f allwances available if auctin price exceed certain price level ($4 in 2014, $6 in 2015, $8 in 2016, $10 in 2017 and rising by 2.5% every year after thereafter The CCR is replenished at the start f every calendar year (mre is nt added if nt triggered). The CCR was 5 millin tns in 2014, and is 10 millin every year thereafter 7
8 RGGI Experience: Emissins Reductins 8
9 RGGI Experience: Ttal Generatin Mix Ttal generatin mix in RGGI states
10 RGGI Experience: Ttal Generatin Change 10
11 RGGI 2012 Prgram Review Regular prgram review has been key t RGGI s success Imprvements implemented in previus (2012) prgram review included 45% reductin in the RGGI cap, interim cap adjustments, the creatin f the Cst Cntainment Reserve (CCR), and added requirement that cmpliance entities hld allwances fr 50% f annual emissin 11
12 RGGI Auctin Clearing Prices Summary 12
13 RGGI 2016 Prgram Review 2016 Prgram Review RGGI, Inc., n behalf f the RGGI states, is facilitating public meetings t gather stakehlder input fr the states 2016 Prgram Review First reginal stakehlder meeting was held in Nvember 2015 Fur stakehlder meetings held, with mre tentatively planned States anticipate that any prpsed prgram changes may be implemented starting in the furth cntrl perid ( ) ISO-NE Envirnmental Advisry Grup has been tracking 2016 Prgram Review and GHG Update slides are available at 13
14 RGGI 2016 Prgram Review RGGI states have identified several key items fr discussin with stakehlders These include but are nt limited t: CO 2 emissins reductins Flexibility mechanisms Offsets Cst Cntainment Reserve Cmpliance Perids RGGI regulated surces Prmting renewable energy and energy efficiency Imprvements t RGGI CO 2 allwance auctins and RGGI COATS (RGGI emissin and allwance tracking system) 14
15 EPA Clean Pwer Plan () First-ever natinal standards that address carbn pllutin frm existing pwer plants Under the states can chse t use: Perfrmance (natinal) rate, state blended rate r state mass gal Single-state, multi-state, r trading-ready plans States have ptin t include mass gal fr ptential new surces (in additin t existing surces) 15
16 IPM Mdeling & 2016 Prgram Review RGGI States using IPM mdeling t infrm the future design f RGGI Tw Reference Cases were prepared Clean Pwer Plan () New and Existing ( N+E) Mass-based gals in nn RGGI states fr existing surces and new surces cmplement Existing ( E) Mass-based gals in nn-rggi states fr existing surces and infrmatin t date n prpsed EPA leakage set-aside Scenari mdeling: Iterative prcess t analyze ptential impacts f changing RGGI design elements and t infrm decisin making Des nt reflect a preference fr any specific plicy Prvides general infrmatin n trends, nt precise predictins Mdeling infrmed by stakehlder cmments t date 16
17 Mdeled RGGI CO 2 Caps Millin Tns CO RGGI Cap ( Ref) 2.5% Cap Decline % Cap Decline 5% Cap Decline
18 RGGI Cumulative Capacity Additins The chart shws the distributin f capacity additins and retirements by capacity type. 35,000 30,000 Additin ,000 Renewable: Bimass MW 20,000 15,000 10,000 5,000 0 (5,000) Renewable: Slar Renewable: Wind Renewable: Hydr Gas: CT Gas: CC Natural Gas Other Steam (10,000) Cal (15,000) N+E Retirement E E 2.5% 2024 N+E 2.5% 2024 N+E 2.5% N+E 5% 5% CCR N+E E E 2.5% 2024 N+E 2.5% 2024 N+E 2.5% N+E 5% 5% CCR Nuclear 18
19 RGGI Generatin Mix The chart shws generatin by type and net imprts fr the RGGI states. GWh 450, , , , , , Net Imprts Bimass and Other Hydr Slar 150,000 Wind 100,000 Gas CT 50,000 Gas CC 0 Other Steam N+E E E 2.5% 2024 N+E 2.5% 2024 N+E 2.5% N+E 5% 5% CCR N+E E E 2.5% 2024 N+E 2.5% 2024 N+E 2.5% N+E 5% 5% CCR 19
20 Prjected RGGI Allwance Prices 2012$/Tn N+E E N+E 2.5% N+E 2.5% 2024 E 2.5% 2024 N+E 5% 5% CCR
21 Prjected RGGI Firm Pwer Prices $/MWh N+E E E 2.5% 2024 N+E 2.5% 2024 N+E 2.5% N+E 5% 5% CCR
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