Update on Regional Greenhouse Gas Initiative (RGGI)

1
Update on Regional Greenhouse Gas Initiative
(RGGI)

• Jim Platts
• System Planning, ISO-NE
• May 4, 2005

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What is RGGI?

• Open stakeholder process developing a Model CO2
  Cap and Trade Rule for nine Northeastern states
• Target for developing Model Rule is 2005
• Representatives from a broad cross section of
  government, industries, utilities, NGOs, etc.
• ISO-NE, NYISO and PJM are participants
• Initiated by Governor Pataki

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The Nine RGGI States
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Significance of RGGI to ISO-NE

• Nine States will implement regs for state CO2 Cap
  based on Model Rule over next several years
• ME, NH, VT, MA, RI, CT, NY, NJ and DE
• Other States/Provinces are observers
• PA, MD, DC, ECP
• Eventually could be basis for a national CO2 Cap
• Will affect the relative competitiveness of all
  types of generation in the Northeast

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RGGI Organization
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
6
RGGI Structure Tiers of Participants

• Staff Working Group State regulatory staffs
  (environmental and rates) The Decision Makers
• Stakeholder Group
• State DEPs, generators, utilities, environmental
  groups, PIRGs, interest groups, NGOs, industries,
  etc
• Resource Group 3 ISOs, NGOs, emission brokers
• Subgroups for specific issues
• Public observers Many diverse groups
• Facilitator Raab Associates
• Website www.rggi.org

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The RGGI Process Simplified
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Process (simplified)

• Present and discuss CO2 Cap and Trade issues
• Develop modeling assumptions
• Present and discuss results of model runs
• Decide on X CO2 reductions by 2024 from 1990
  baseline and related issues
• Develop Model Rule
• States implement regs based on Model Rule

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CO2 Policy Issues

• Cap Size
• Electricity Markets
• CO2 allowance allocations
• Use of offsets
• Additionality
• Leakage seams issue
• Early Banking
• Non RGGI Imports

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RGGI Modeling

• Used ICFs IPM model to simulate electricity
  sector operation and emissions for selected years
  between 2006 to 2024.
• Model is well known and widely used for policy
  and regulatory analysis and integrated resource
  planning
• Represents US by NERC regions and sub-areas
• Use REMI Model to examine economic consequences
  of various policy options

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RGGI Modeling
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Technical vs. Policy Assumptions
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Technical Assumptions

• ISOs provided base plans and energy growth
  extrapolated beyond 10 yrs
• IPM modeled RTEP sub-areas
• ISO-NE used RTEP03 capacity assumptions with
  RTEP04 static transmission interface limits to
  reflect planned upgrades

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RGGI Generation Assumptions

• New renewables
• RPS requirements
• New gas-fired combined cycle
• New coal allowed only in High Emissions
  Reference Case
• Only existing nuclear planned upgrades allowed
• Assumes further SO2, NOx and Hg reductions

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RGGI Gas and Oil Assumptions
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Pollution Assumptions
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Renewable Resource Assumptions
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI RPS Demand (Adjusted)
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Renewables Cost and Potential
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Modeling

• Source www.rggi.org. This information is public
  and provided to the PAC by ISO-NE

Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Reference Case
New England 2006 CO2 Emissions RGGI 42 million
tons RTEP04 57 million tons
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Capacity Additions Ref Case
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI CO2 Cap Cases
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Reference Case
(2003 )
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Reference Case - Imports
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Reference Case
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Alternative Reference Cases
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI New Generation Mix
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI CO2 Emissions
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Energy Prices Ref Cases
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Ref Cases US/Canada CO2 Caps
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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CO2 Allocation Options

• 3 Basic Approaches
• Historical
• Auction
• Updating
• Resources for the Future (RFF) Study of these and
  hybrid approaches

Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RFF Allocation Study
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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Use of 3 Approaches
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RFF Allocation Conclusions
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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Economic Impacts of RGGI Cap REMI

• Macro-economic forecasting tool to 2050
  assemble reference case alternative forecasts
  as related to the Initiative
• Scenario-specific inputs derived predominantly
  from ICFs IPM model runs ( other desired
  aspects developed apart from IPM)
• Identify the economic impacts on businesses
  households in each of 12 states (total impacts,
  numerous metrics, ripple-effects across model
  region) as a result of the initiative

Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Next Steps

• Staff WG will meet in late April and again in
  June with regulatory agency heads from nine
  States to review RGGI results
• Stakeholders meeting May 19
• Additional modeling results
• Bricks for Model Rule and MOU

Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Model Rule
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI MOU
Source www.rggi.org. This information is public
and provided to the PAC by ISO-NE
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RGGI Implications for ISO Participants

• Fossil plants may incur additional costs for CO2
  emissions by 2008-2009
• Value of renewable and other non-emitting
  resources may increase
• Final details wont be known until 6 New England
  states implement regs