How Carbon Policy Affects Renewable Energy Markets: Solutions to Maximize Benefits Noah Bucon Senior Analyst, Policy and Certification Programs Center for Resource Solutions ©2018 Center for Resource Solutions Todd Jones Director, Policy and Climate Change Programs Center for Resource Solutions

2 ©2018 Center for Resource Solutions Nongovernmental Organization (NGO) creating policy and market solutions to advance sustainable energy since 1997. • Expert assistance • Renewable energy and climate policy • Renewable Energy Markets annual conference • Green-e® certification for suppliers and users of renewable energy and carbon offsets in the voluntary market About Center for Resource Solutions

3 resource-solutions.org/publications ©2018 Center for Resource Solutions

4 ©2018 Center for Resource Solutions What do we mean by “GHG Regulations?” Legal limits on the mass amount of GHG emissions from electricity generation, either at individual generation facilities or a group of generation facilities • Mass-based • Source-based (production-based, generation-based) • Plant level or sector level

5 1. Greenhouse gas regulation in the power sector changes the benefits and impact of voluntary renewable energy purchasing. 2. These benefits and impacts are important drivers of voluntary demand. 3. Voluntary demand for renewable energy is an important driver of renewable energy development and emissions reductions. 4. There are proven solutions for maintaining those benefits. Guidelines ©2018 Center for Resource Solutions

6 ©2018 Center for Resource Solutions GHG Attribute of Electricity Generation Description Type of Accounting Value for RE Generation Direct emissions The direct emissions, emissions profile, or emissions factor associated with the generation. Attributional, measuring the emissions that can be attributed to the production of electricity. Zero for wind, solar, and hydropower. Positive for biomass and some geothermal. Avoided grid emissions The net change in emissions on the grid due to the generation. Consequential, measuring the emissions impact or consequences of producing electricity. Nearly always positive. The difference between the direct emissions of the generation likely displaced by RE generation and the direct emissions of the RE generation.

7 ©2018 Center for Resource Solutions GHG Attribute of RE Generation Value before GHG Regulation Direct emissions Zero for wind, solar, and hydropower. Positive for biomass and some geothermal. Avoided grid emissions Nearly always positive—net reduction to emissions at emitting sources due to RE generation. Value after GHG Regulation Zero for wind, solar, and hydropower. Emissions from biomass and some geothermal may be regulated. Zero. No net change to emissions at regulated sources due to RE generation.

8 ©2018 Center for Resource Solutions GHG Attribute of RE Generation Production Delivery or Consumption Direct emissions Avoided grid emissions • Direct (Scope 1) emissions of the generation owner • Used for emissions reporting to regulators • Used for compliance with source-based GHG regulations • Tracking mechanism required for verification • The indirect (Scope 2) emissions of the consumer • Used for emissions disclosure to customers • Tracking mechanism required for verification • GHG reduction benefits of RE • Used for Impact statements about consumption or delivered power • Used for voluntary RE set- aside calculations • Grid emissions effect of generation • Used for impact statements by generators • Used for carbon offsets (in regions without GHG regulations for power)

9 ©2018 Center for Resource Solutions Supply Sales U.S. Voluntary Renewable Energy Market

10 ©2018 Center for Resource Solutions Source: National Renewable Energy Laboratory

11 ©2018 Center for Resource Solutions Source: Lawrence Berkeley National Laboratory

12 ©2018 Center for Resource Solutions REC Attribute and Consumption Claim Effect of Production-based GHG Regulation Direct emissions and scope 2 claim Avoided grid emissions and demand-side impact claim • If imports are not included, then no effect • If imports are included, then may be double counting • Avoided emissions equal zero—RE has no impact on emissions in regulated state or region • RE is not “surplus to regulation”

13 ©2018 Center for Resource Solutions What happens to this when voluntary RE has no demand-side impact and is not driving reductions beyond what’s required by law? Source: Lawrence Berkeley National Laboratory

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16 ©2018 Center for Resource Solutions Illustration of the Effect of the Voluntary RE Set-aside on Allowance Prices

17 ©2018 Center for Resource Solutions Regional Greenhouse Gas Initiative • 1st mandatory US cap-and-trade program • 2005: Memorandum of Understanding à RGGI Model Rule • CT, DE, ME, MD, MA, NH, NY, RI, VT, (NJ) • Fossil fuel-fired generators over 25 MW • 2009 cap: 188 million short tons à 2020 cap: 56 million short tons • Compliance through allowance retirement or carbon offsets • COATS: CO2 Allowance Tracking System (COATS) • Administered by RGGI, Inc. but enforced by member states

18 ©2018 Center for Resource Solutions Emissions in RGGI States Relative to the RGGI Cap (2009-2016)

19 ©2018 Center for Resource Solutions RGGI Set-Aside Mechanism • Optional provision in Model Rule adopted by 8 of 9 states • Suggested formula: CO2 tons = MP x EF • “CO2 tons” is the number of allowances to be placed in the reserve account • “MP” is the projected MWh of voluntary renewable energy purchases in the state of sale • “EF” is the CO2 emissions factor for the control area where the electricity represented by the sale was generated • Process initiated by REPs but executed by regulatory agencies • Allowance allocation from total budget varies by state

20 ©2018 Center for Resource Solutions Further Considerations • Set-asides associated with state of consumption NOT state of generation • GHG Implications for interstate trading: • Delaware generation sold into Maryland? • Maryland generation sold into Delaware? • New York generation sold in Pennsylvania? • Pennsylvania generation sold in New York? • Future set-aside use expected to increase • Growing voluntary RE markets • Increasing corporate procurement • Greater awareness of set-asides Green-e Certified Sales (2015)

21 ©2018 Center for Resource Solutions Green-e Supply (2015) Green-e Sales 2015 Green-e certification requires that set-asides are used for each MWh of voluntary/corporate renewable energy

22 ©2018 Center for Resource Solutions Guidance for States with Existing GHG Regulation • Adopt an allowance set-aside or otherwise lower the GHG emissions limit on behalf of the voluntary renewable energy market, if one is not already included in the regulation. • Ensure that the voluntary renewable energy mechanism is effective in reducing emissions on behalf of the voluntary market. • Strengthen and extend existing voluntary renewable energy set- aside mechanisms.

23 ©2018 Center for Resource Solutions Guidance for States Considering GHG Regulation (Particularly NJ & VA) • Be consistent with other existing state GHG programs, if possible. • Include an allowance set-aside or otherwise lower the GHG emissions limit on behalf of the voluntary renewable energy market. • If emissions associated with imported power are included in the regulation, require RECs for reporting zero-emissions renewable imports to prevent double counting direct emissions.

24 To corporate entities purchasing renewable energy: GHG regulations can reduce your impact. Support regulations WITH a mechanism to protect the added value of voluntary renewable energy generation. To state air regulators: Voluntary and corporate renewable energy procurement is a significant driver of emissions reductions in the power sector and can lower the cost of regulation. Protect this driver with GHG regulations that include a mechanism for voluntary renewable energy. ©2018 Center for Resource Solutions Key Takeaways

Contact Todd Jones Noah Bucon Director, Policy and Climate Change Programs Senior Analyst, Policy and Certification Program [email protected] [email protected] 415-561-2118 415-561-2110 ©2018 Center for Resource Solutions

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