How Carbon Policy Affects Renewable Energy Markets: Solutions to Maximize Benefits (Eastern Region)

Renewable energy generation provides important greenhouse gas emissions benefits. Carbon regulations and markets, like the Regional Greenhouse Gas Initiative (RGGI), 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 the RGGI program.

Transcript

1. 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
   

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   ©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
   

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

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   ©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
   

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   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
   

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   ©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.
   

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   ©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.
   

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   ©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)
   

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

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

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

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    ©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”
    

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    ©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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    ©2018 Center for Resource Solutions
    

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    ©2018 Center for Resource Solutions
    

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

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    ©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
    

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

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    ©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
    

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    ©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)
    

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    ©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
    

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    ©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.
    

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    ©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.
    

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    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
    

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25. Contact
    Todd Jones Noah Bucon
    Director, Policy and Climate Change Programs Senior Analyst, Policy and Certification Program
    todd.jones@resource-solutions.org noah.bucon@resource-solutions.org
    415-561-2118 415-561-2110
    ©2018 Center for Resource Solutions
    

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