Leaders from MN’s Division of Energy Resources, the MN Pollution Control Agency, and the energy sector discuss regional solutions to cut emissions from existing power plants.

1. Greenhouse Gas Performance
Standards & Energy Efficiency
Minnesota & the Midwest Look Ahead
Jessica Burdette | Department of Commerce
Frank Kohlasch | Pollution Control Agency
Jon Brekke | Great River Energy
Webinar: May 22, 2014

2. Pg. 2

3. Pg. 3

4. Pg. 4
How Utilities are Benefiting From
Minnesota’s New Energy Savings Platform
Webinar:
Tuesday, June 24th
11:00 - 12:00 pm CST
Joe Plummer
Public Utilities Rates Analyst, ESP Program Mgr.
MN Department of Commerce
Division of Energy Resources
Target Audiences
• Minnesota utility program
managers
• Minnesota utility operations
managers
• Minnesota policymakers
• Energy regulators in other
states
• Energy platform developers
Jeff Haase
Energy and Efficiency Conservation Program Mgr.
Great River Energy

5. Pg. 5
CEE Technology Forum
Tuesday, June 24th
MacPhail Center (Minneapolis)
Networking Reception 5:00 - 6:15 pm
Program 6:15 - 8:00 pm
Steve Nadel
ACEEE
First in a series
of anniversary forums
Where MN is Taking the Future of Energy Efficiency
Jay Stein
E Source
Mark Brown
My Meter
Rich Szydlowski
CEE

6. Greenhouse Gas Performance
Standards & Energy Efficiency
Minnesota & the Midwest Look Ahead
Jessica Burdette | Department of Commerce
Frank Kohlasch | Pollution Control Agency
Jon Brekke | Great River Energy
Webinar: May 22, 2014

7. Pg. 7
Today’s Presenters
Jessica Burdette
Conservation Improvement Program Supervisor
MN Department of Commerce
Division of Energy Resources
Frank Kohlasch
Air Assessment Section Manager
MN Pollution Control Agency
Environmental Analysis & Outcomes Division
Jon Brekke
Vice President of Membership & Energy Markets
Great River Energy

8. Greenhouse Gas Performance
Standards and Energy Efficiency:
Minnesota and the Midwest Look
Ahead
Federal Carbon Regulation for Existing Power
Plants
Frank Kohlasch
Minnesota Pollution Control Agency
May 22, 2014

9.  June 2013: President Obama’s Climate Action Plan
 Regulations for new plants – a.k.a. 111(b)
 Regulations for existing plants – a.k.a. 111(d)
Background

10.  Clean Air Act Section 111(b)
 New Source Performance Standard (NSPS)
 Plants built after proposal
New Power Plants: 111(b)
Photo credit: Portland General Electric Creative Commons License CC BY-ND 2.0

11.  2013: a new proposal
 Regulations for coal and natural gas
 Creates an emission rate
 Partial carbon capture and sequestration
New Power Plants: 111(b)
Photo credit: Montana Environmental Information Center

12.  A different section the Clean Air Act
 Applies to existing fossil fuel power plants
 Will establish Emission Guidelines
 States responsible for plans
Existing Power Plants: 111(d)
Photo credit: Minnesota Power (Laskin Energy Center)

13.  Degree of emission limitation
 Best System of Emission Reduction (BSER)
 Considers
 Costs
 Non-air quality health & environment
 Energy requirements
 Adequately demonstrated
Existing Power Plants: 111(d)

14.  State plan
 Similar process to State Implementation Plan
(SIP) review
 Demonstrates implementation & enforcement
 Considers
 Remaining useful life
 “Other factors”
Existing Power Plants: 111(d)

15.  Carbon dioxide
 It’s not like other pollutants
 A product of good combustion
 No end of pipe controls currently available
Existing Power Plants: 111(d)
Photo credit: Jynto, Robert A. Rohde, Jacek FH (Creative Commons License CC BY-SA 3.0)
Basic Methane Combustion

16.  What will an Emission Guideline look like?
 An emission limit
 Best System of Emission Reductions
 Considering other factors
 Adequately demonstrated
Existing Power Plants: 111(d)
Photo credit: Tom Corser (Creative Commons
License CC BY-SA 2.0 UK)
Photo credit: Intel Free Press (Creative
Commons License)

17.  Traditional approach
 Facility boundary approach
 Emission limits on a facility
 Pollution controls
 Work practices
 Operational limits
 Fuel blending
 For carbon: combustion efficiency and on-site
energy efficiency
111(d) Emission Guidelines

18.  Flexible approaches for carbon
 Electricity system approach
 Actions outside the boundaries of an individual
facility
 Renewable energy
 Combined heat and power
 Electric efficiency programs and other demand side
management
 Regional or multi-state approaches
111(d) Emission Guidelines

19.  Flexible approaches for carbon
 Nexus to the electricity system
 Stringency of the standard
 Compliance with the standard
 Data collection and verification
111(d) Emission Guidelines

20.  Flexible approaches for carbon
 Who does EPA hold accountable?
 How do states demonstrate compliance?
 How to ensure consistency across states?
111(d) Emission Guidelines

21.  How far can EPA go for flexible approaches?
 EPA’s discretion to allow flexible approaches
 EPA’s authority for state plans
 Cross State Air Pollution Rule decision
111(d) Emission Guidelines
Photo credit: Kjetil Ree (Creative Commons License CC BY-SA 3.0)

22.  June 2014: Proposed Rule
 June 2015: Final Rule
 June 2016: State Plans due to EPA
 June 2017: EPA approvals State Plans
 A State Plan will likely require a new rule
Existing Power Plants: 111(d)
Timeline

23.  Next Generation Energy Act
 Renewable Energy Standard
 Electric Efficiency Standard
 Emission reduction statutes
Carbon Dioxide Emissions in
Minnesota

24. Carbon Dioxide Emissions in
Minnesota

25.  Carbon regulation is coming
 EPA receptive to flexible approaches
 Minnesota is well situated
 The devil will be in the details
Summary
Photo Credit: NASA

26. FRANK KOHLASCH – MINNESOTA POLLUTION CONTROL AGENCY
frank.kohlasch@state.mn.us or 651-757-2500
Photo Credit: NASA
THANK
YOU

27. Update on Energy Efficiency
in Minnesota
May 22, 2014
Presented By:
Jessica Burdette

28. Department of Commerce – Division
of Energy Resources
• State Energy Office
• Conservation Improvement Program
• Weatherization
• State Energy Programs
• Energy Planning and Advocacy
• Energy Rates and Regulation
• Energy Environmental Review & Analysis
• Office of Energy Assistance
• Telecommunications

29. • Long standing commitment to energy efficiency
in Minnesota
• National recognition for energy efficiency work
in Minnesota
• Regulations and programs continue to evolve
• Partnerships with industry stakeholders
• Achievement of real results

30. • Conservation Improvement Program (CIP)
• Sustainable Buildings (SB) 2030
• B3 Benchmarking – Public Facilities
• State Energy Programs – Department of Energy
• Weatherization – Low Income/Residential
• Financing Programs:
• Guaranteed Energy Savings Programs
• Public Buildings Enhanced Energy Efficiency Program
• Revolving Loan Fund/Loan Loss Reserves

31. • Conservation Improvement Program
• Minnesota Statute 216B.241 and 216B.2401
• Minnesota Rules Chapter 7690
• 1.5% Energy Savings Goal: With few
exceptions, all are required to meet state mandated
conservation and efficiency expenditures and energy
savings goals.
• Utilities Subject to CIP
• 130 Municipal Utilities
• 44 Distribution Coops
• 11 IOUs (natural gas and electric)

32. • Regulatory Compliance
• IOU CIP Triennials and Status Reports
• Muni and Coop CIP Annual Reports and Plans
• Evaluation, Measurement & Verification
• Technical Reference Manual
• Reporting Requirements
• M&V Protocols and Custom Project Reviews
• Conservation Applied Research & Development
• Innovative program and technology research
• Advance utility CIP programs to meet energy savings goals
• Technical Assistance and Outreach
• Policy Development
• Stakeholder Engagement
• Data Analysis and Report Development

33. • ReportingESP™
• Reporting tool for CIP
• Required for all MN utilities
• Data are public with controlled access
• ESP®
• Program operations and tracking with
automated reporting
• Measure design
• Available for free to all MN utilities (optional)
• Data are private

34. • Minnesota Technical Reference
Manual (TRM)
• Standard algorithms, inputs, and costs
• Regular workgroup meetings/updates
• TRM is being built as Smart
Measure™ library on ESP®
• Real-time calculators and tracking
available for free to all MN utilities
• Better data, more efficient program
implementation

35. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
$0
$10
$20
$30
$40
$50
2006 2007 2008 2009 2010 2011
IncrementalSavings(Bcf)
Expenditures($1M)
Expenditures Savings
0.9% 1.0%
Natural Gas Utility Performance
0
200
400
600
800
1,000
$0
$50
$100
$150
$200
2006 2007 2008 2009 2010 2011
IncrementalSavings
(GWh)
1.4% 1.5%
Electric Utility Performance

36. 0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2006 2007 2008 2009 2010 2011
IncrementalCO2Savings(tons/yr)
Electric Gas

37. • Energy Savings from Codes and Standards
• Industrial Energy Efficiency
• Low Income Programs Challenges
• Energy Efficiency Project Financing
• Combined Heat and Power
• Electric Utility Infrastructure Upgrades
• Evaluation, Measurement and Verification
• Ongoing Tracking of Energy Savings
• Sustainability of Annual Energy Savings

38. Recently Established Energy
Efficiency Principles–“3N” Groups:
• National Association of State Energy Offices
(NASEO)
• National Association of Clean Air Agencies
(NACAA)
• National Association of Regulatory Utility
Commissioners (NARUC)
How EE can be used to comply
with 111(d) – for EPA’s
consideration

39. 1. Guidance on inclusion of EE
2. State energy program recognition
3. Non-utility delivered efficiency
4. Recommended EM&V Protocols
5. Translating electricity savings into avoided
emissions
6. Avoiding double counting
7. Transmission and distribution efficiency
8. Multi-State or regional efficiency programs
9. Energy efficiency registry
10. Accountability for energy efficiency in state
111(d) plans

40. Thank You

41. ISO market-based compliance
option for 111d regulations
Jon Brekke
Vice President, Membership & Energy Markets

42. GRE and our membership
 28 member cooperatives – 1.7
million consumers
 4th largest G&T in the nation
• $3.7 billion total assets
• $2.8 billion total debt
• $980.4 million revenue
 880 employees (MN and ND)
 3,619 MW generation
• 701 MW renewables
 4,660 miles transmission 5.4%
1.0% -2.6% -0.8% -0.2%
0.1% 3.0%
7.5%
-20.0%
0.0%
20.0%
2007 2008 2009 2010 2011 2012 2013 2014
YTD
Member sales

43. Our triple bottom line...
• Affordable rates
• Reliable electric service
• Environmental stewardship
Balance
Reliability
Environment
Rates

44. Regulation of CO2 emissions
from existing sources
 EPA (and states) in process of developing CO2
performance standards for existing power plants
 Most complicated issue in four decades of Clean Air
Act
 Potential to be very costly to electricity consumers
 GRE has engaged in advocating its positions as EPA
crafts guidelines for state implementation plans

45. GRE engagement approach
 Board of directors resolution
 Treats threat of GHG regulation as a business issue
 Gradual reduction in potentially-stranded
investment issues
 New resource approaches
 Pragmatic, GRE-centered approach to engaging in
the GHG regulation debate
• Engagement in development of GHG regulations to
minimize the financial impact on GRE members

46. External stakeholders:
“What’s your plan for carbon?”
 Command and control plant-by-plant approach may
be very costly
 Plant shutdowns / under-investment
 Reliability concerns
 Uncertainty not alleviated by traditional regulation
 Leverage energy market to optimize for reliability,
cost, and CO2 emissions

47. The concept
 Establish a target for CO2 emissions for the region
as a whole
 Negotiation between ISO states (15) and EPA
 Target declines gradually over time
 No caps on plants or utilities
 Use existing wholesale market infrastructure to
optimize:
 Reliability
 Cost
 CO2 emissions

48. The concept
 ISO models the market’s resources, load, and carbon
targets
 Identifies required carbon price necessary to achieve target
 Could be a path of values over time
 Carbon price charged to generators per ton of CO2
emissions
 Carbon revenues collected by ISO and refunded to
load by MWH’s

49. The effect
 Carbon price affects dispatch results, tilting the
region’s carbon intensity downward
 Carbon price allows utilities to make strategic
decisions based on market dynamics
 Results tracked to determine if adjustments should
be made to carbon price path

50. Advantages of approach
 Uses existing ISO market structure
 Optimization ensures continued focus on reliability and
cost
 Avoids direct control of plant emissions, minimizing
inefficiencies and costs of regulation
 Applies an efficient carbon price, without flowing a tax to
government – refund to load
 Plants can compete for space in an economic framework
 Can benefit from events in other states
 Regional influence on EPA

51. Comparison of approaches –
effect on existing plants
Conventional CO2 regulations Market-based optimization
Efficiency standard or CO2 intensity
standard (CO2 / MWH)
Plant owner’s decision
CO2 limit – tons / year Plant owner’s decision, subject
to market success
Best system of emissions reduction Plant owner’s decision
Renewable energy standards, plant
shutdown agreements, energy-
efficiency requirements, or other
measures
Plant owner’s decision

52. | brattle.com52
$-
$10
$20
$30
$40
$50
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
$/shortton
Price 1
Price 2
Price 3
Illustrative value paths examples
1. Start low and rise steadily (blue
line)
▀ Least impact on existing fossil
generation early
2. Start high and rise slowly (red line)
▀ Most impact on existing fossil
generation
3. Wait and then accelerate price
increase (green line)
▀ Least displacement of coal
▀ Creates steep increases later
▀ Potentially problematic for
investments
Carbon price paths to reach ~30% emissions reduction by 2035

53. | brattle.com53
Resulting carbon emissions differ by path…
While all price paths achieve the same annual reduction in 2035,
the cumulative effects are different
150
200
250
300
350
400
450
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
MillionShortTons
Annual Carbon Emissions
No policy
Price 1
Price 2
Price 3
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
Millionshorttons
Cumulative Carbon Emissions
No policy
Price 1
Price 2
Price 3

54. | brattle.com54
…as do energy market prices
 Waiting longer
requires larger
jump in energy
prices later
 After accounting
for refunding
carbon revenues
to load, energy
price increases
less than 1 ₵/kWh
through 2030, to
2-3 ₵/kWh
thereafter
$20
$30
$40
$50
$60
$70
$80
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
$/MWh
Energy Prices
Energy market price
Net price to load

55. Capacity factors for fossil units depend on
carbon value path…
30%
40%
50%
60%
70%
80%
90%
100%
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
NoPolicy
Price 1
Price 2
Price 3
Coal
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
NoPolicy
Price 1
Price 2
Price 3
Natural gas combined cycle

56. Thank you.

57. Jessica Burdette | MN Department of Commerce
jessica.burdette@state.mn.us
Frank Kohlasch | MN Pollution Control Agency
frank.kohlasch@state.mn.us
Jon Brekke | Great River Energy
jbrekke@grenergy.com

58. Question & Answer
Webinar Link:
http://www.mncee.org/Innovation-Exchange/Resource-Center/

59. Pg. 59