How Carbon Policy Affects Renewable Energy Markets: Solutions to Maximize Benefits

Renewable energy generation provides important greenhouse gas emissions benefits. Carbon regulations and markets, like California’s cap-and-trade program, interact with renewable energy markets, like Renewable Portfolio Standards and voluntary renewable energy purchasing, in important ways. They can be complementary, and even incremental with respect to emissions reductions where certain policy mechanisms are in place. This webinar will explain:

how carbon regulations affect renewable energy markets
why it is important that voluntary renewable energy continue to reduce emissions once carbon regulations are in place
what policy mechanisms can ensure that it does in order to protect voluntary demand, investment, and benefits
The webinar will feature a case study of the voluntary renewable energy set-aside mechanism in California’s program.

Who should attend:

State air regulators
Corporate renewable energy purchasers
Voluntary market stakeholders
Renewable energy and carbon policy advocates

Speakers

Maya Kelty, Regulatory Affairs Manager, 3Degrees
Todd Jones; Director, Policy and Climate Change Programs; CRS

Transcript

1. How Carbon Policy Affects Renewable Energy Markets: Solutions to Maximize Benefits Todd Jones Director, Policy and Climate Change Programs Center for Resource Solutions ©2018 Center for Resource Solutions
2. 2 resource-solutions.org/publications ©2018 Center for Resource Solutions
3. 3 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
4. 4 ©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.
5. 5 ©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
6. 6 ©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.
7. 7 ©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)
8. 8 ©2018 Center for Resource Solutions Use of specified generators on the grid can only be determined contractually.
9. 9 ©2018 Center for Resource Solutions Renewable Energy Certificates
10. 10 ©2018 Center for Resource Solutions
11. 11 ©2018 Center for Resource Solutions
12. 12 ©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)
13. 13 ©2018 Center for Resource Solutions Main Elements of The GHG Protocol Scope 2 Accounting Guidance 1. Adopts an “attributional” (or emissions rate) accounting approach based on the direct emissions factor of the generation 2. Requires reporting of two Scope 2 figures (or “dual reporting”): a market-based figure and a location-based figure 3. Provides “quality criteria” for contractual instruments (e.g. certificates) that are used to demonstrate specified source consumption and use of a specified source emissions factor to calculate the market-based Scope 2 figure 4. Requires calculation and use of “residual mix” for unspecified purchases and null power under the market-based method (or disclosure of its absence).
14. 14 ©2018 Center for Resource Solutions Example Scope 2 Calculations
15. 15 ©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)
16. 16 ©2018 Center for Resource Solutions Example Avoided Emissions Calculations
17. 17 ©2018 Center for Resource Solutions
18. 18 ©2018 Center for Resource Solutions Supply Sales U.S. Voluntary Renewable Energy Market
19. 19 ©2018 Center for Resource Solutions Source: National Renewable Energy Laboratory
20. 20 ©2018 Center for Resource Solutions Source: Lawrence Berkeley National Laboratory
21. 21 ©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”
22. 22 ©2018 Center for Resource Solutions California Imports and RECs • California has cap-and-trade. Neighboring states do not. • California wants to cover emissions associated with imported power. • California can’t regulate out-of-state generators. • California regulates imported emissions at the point of the importer. • California assigns an emissions factor at the point of the importer. • California reports emissions associated with imported (delivered) power. • California doesn’t require RECs to assign a zero emissions factor to imported power from a renewable source. Result: Double counting CA – zero-emissions import OR – RPS delivering zero-emissions RE to customers
23. 23 ©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”
24. 24 ©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
25. 25 ©2018 Center for Resource Solutions
26. 26 ©2018 Center for Resource Solutions
27. 27 ©2018 Center for Resource Solutions Illustration of the Effect of the Voluntary RE Set-aside on Allowance Prices
28. 28 3Degrees ABOUT US
    Privately held certified B Corp founded in 2007
    Serving more than 400 clients:
    Providing renewable energy and climate strategies for global corporates
    Developing and implementing renewable energy and climate-based solutions for the utility of the future
    Creating value and managing risk for wholesale clients with environmental commodities Connecting people with cleaner energy on a massive scale
29. 29 Program Example: California’s Cap-and-trade program
30. 30 Background California’s Cap-and-trade Program
    Authorized under AB32 (2006)
    Adopted in 2011, compliance began in 2o13
    Program details:
    Allowances issued by CARB or purchased at auctions and tradable
    Multi-sector cap (85% of emissions)
    Cap set at 394.5 MMT in 2015, 334.2 MMT by 2020, 200 MMT by 2030
    8% of compliance can be met with offsets (4% beginning in 2021, with ½ DEBS)
    Program is linked with Quebec and Ontario, others in discussion
    Auction proceeds reinvested in emissions reductions
    Market is oversupplied: cap exceeds historical covered emissions
    Post-2020 scoping currently being undertaken (AB398)
31. 31 Voluntary Renewable Electricity Program (VREP) and Reserve Account California’s Cap-and-trade Program
    Eligibility:
    COD post-July 1, 2005
    RPS-eligible, or compliant with CEC guidelines for California Solar Initiative, or solar interconnected with distribution system of a CA EDU
    Allowances allocation: 0.5% of total annual allowance budget (first compliance period); 0.25% for second compliance period; none post-2020
    Retirement based on default emissions factor for unspecific power, 0.428 MTCO2e/MWh Year Allowance Allocations to VREP 2015 986,250 2016 956,000 2017 926,000 2018 895,750 2019 865,750 2020 835,500
32. 32 Voluntary Renewable Electricity Program (VREP) California’s Cap-and-trade Program
    Available for any purchaser or seller to request for eligible RE
    Supports new renewable energy (post-2005)
    Unused allowances roll-over (*no allocations beyond 2020*)
    Delivers key benefit for all CA voluntary renewable energy transactions – corporate or residential
    Required for Green-e certified sales
33. 33 VREP Projections California’s Cap-and-trade Program CA VRE Subscriptions. Subscriptions associated with MWh projections (CRS, 2017) CA VREP Allowances. Allowances equaling the difference between the sum of annual allowance allocation and a surplus of 1,218,493 MTCO2e in 2015 and projected Subscriptions (CRS, 2017)
34. 34 Resources California’s Cap-and-trade Program
35. 35 Recommendations California’s Cap-and-trade Program
    Ensure continued benefits to voluntary purchasing of CA generation:
    Monitor allowance depletion post-2020
    Allow further allowances can be issued if and when the set-aside is depleted
    Customer education
    Administrative suggestions:
    Facility eligibility
    More seamless linkage between REC retirement and allowance retirement
36. 36 ©2018 Center for Resource Solutions Rate-based GHG Regulations • Legal limits on the GHG emissions intensity of electricity generation, either at individual generation facilities or a group of generation facilities • Do not have the same effect on RE generation as mass-based GHG regulations • But can include an explicit adjustment to rates to reflect the effect of RE generation, e.g. CPP • Also require a mechanism to protect regulatory surplus and voluntary demand for RE if regulations include an explicit adjustment to rates to reflect the effect of RE generation
37. 37 To corporate entities purchasing renewable energy: GHG regulations can remove your impact. Support regulations WITH a mechanism to protect 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
39. Contact Todd Jones Maya Kelty Director, Policy and Climate Change Programs Senior Manager, Regulatory Affairs todd.jones@resource-solutions.org mkelty@3degreesinc.com 415-561-2118 415-370-6489 ©2018 Center for Resource Solutions