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Demand for Natural Gas in Wisconsin: Changes due to Carbon Regulation
Peter J. Taglia, P.G., Staff Scientist, Clean WisconsinAndrew D. Kellen, P.E., Assistant VP, Power Supply Resources, WPPI
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Outline• Wisconsin’s Energy Mix and GHG Emissions• Governor Doyle’s Task Force on Global
Warming• Power Plant Greenhouse Gas (GHG)
Comparison• Task Force Emission Modeling in Wisconsin
− Reference Case− Policy Case− Cap and Trade
• A run on gas, or a run on renewables and nuclear?
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Wisconsin Energy Use by FuelSource: WI Energy Statistics, OEI, 2008
Wisconsin’s Energy Mix by Fuel
• #1 Coal is used primarily for electrical generation (90%)
• #2 Petroleum is used primarily for transportation (83%)
• #3 Natural gas consumption is divided between residential, industrial, commercial, and electrical generation uses
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Wisconsin Natural Gas Use by SectorSource: WI Energy Statistics, OEI, 2008
Wisconsin’s Natural Gas Consumption Trends
• Residential consumption is flat to declining
• Industrial consumption is declining
• Electrical utility and commercial natural gas use is increasing
• Total natural gas consumption in WI fluctuates based on weather, but overall consumption has been flat to slightly increasing since 1970
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Electrical Generation in WI by Fuel
Electrical Generation in WISource: WI PSC, SEA, 2007
• Coal provides approximately 70% of WI electrical sales (in-state generation and imports)
• Natural gas for electricity has increased since 2004 as new plants came online
Coal 60%
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• WI’s GHG emissions were 123 Million Metric Tons (MT) CO2e in 2003
− 14% higher than 1990
• Electrical generation is the largest source of GHGs in WI− 43 MT CO2e
− 30% higher than 1990
• By comparison, transportation is the largest source of GHGs in CA (59%)
Wisconsin Greenhouse Gas Emissions by Sector
Source: World Resources Institute, Charting the Midwest, 2007
GHG Emissions in Wisconsin
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What role will natural gas play in Wisconsin under carbon regulation?
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Executive Order 191 (April 2007): • Bring together a prominent and diverse
group of key Wisconsin business, industry, government, energy and environmental leaders to create a Task Force on Global Warming.
• After examining the effects of, and solutions to, global warming in Wisconsin, the Task Force will create a state plan of action to reduce our state's greenhouse gas emissions.
• Staffed by DNR and PSC
Governor Doyle’s Task Force on Global Warming
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29 Task Force Members
6 Working groups created: • Carbon Tax/Cap & Trade• Electric Generation• Conservation & Energy Efficiency• Forestry & Agriculture• Industry• Transportation
And a Technical Advisory Group (TAG)
Governor Doyle’s Task Force on Global Warming
to guide a detailed emission and economic modeling effort
An interim report was released in February, 2008
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• Each working group developed a list of options for reducing GHG emissions in their sector
• Estimates for the GHG reductions and the cost of each option were developed
• Work groups recommended options for consideration by the Task Force, but the ultimate decision on final recommendations are made at the Task Force
Working Group Evaluations
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1. Reduce Demand Pedestrian/Bike/Mass Transit/ Carpooling (VMT
reduction)
2. Increase EfficiencyHigher MPG vehicles (e.g., California Cars)
3. Lower Fuel Carbon ContentBiofuels, Renewable Electricity (Low Carbon Fuel
Standard)
Natural gas does not offer significant GHG savings for transportation
Options to Reducing Greenhouse Gas Emissions from Transportation
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1. Reduce Demand Less sales, shut down plants (undesirable)
2. Increase EfficiencyProduce more product with less fuel
3. Lower Fuel Carbon ContentSwitch from coal to natural gas and
biomass
GHG emissions from WI Industry have been falling since 2000, even as output increased, due to efficiency gains and fuel switching
Options to Reducing Greenhouse Gas Emissions from Industry
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1. Reduce Demand Energy conservation (reduce waste)
2. Increase Efficiency• Get more benefit from less
electricity• Increase the fuel efficiency of power
plants
3. Lower Fuel Carbon ContentSwitch from coal to wind, solar,
nuclear, hydroelectric, hydrogen….or natural gas
Options to Reducing Greenhouse Gas Emissions from Electric Generation
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Analysis of Electrical Generation Options
Spreadsheet analysis used by electrical generation working group, including inputs for capital costs, fuels, demand and
price escalation Primary spreadsheet author: Tom Smies, WPSC
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Electric Generation Work Group Results
Supply SideGHG Reduction Options
Million MWh
CO2 Removed Million Metric Tons
Carbon Reduction Cost
($/Metric Ton CO2) displaces existing
generation
Carbon Reduction Cost ($/Metric
Ton CO2) avoids new generation
Operational Changes to Existing System
Redispatch Existing System (coal to gas) 9.5 6.8 50 N/A
New Construction Options
Distribution Upgrades 0.4 0.3 756 740
Transmission Upgrades 0.1 0.1 798 781
Hydro 500 Mw - CC Valued 3.7 3.1 123 112
Hydro - 500 Mw Nuclear Valued 3.7 3.1 134 122
Nuclear - 500 Mw 3.7 3.1 51 40
Combined Cycle - 500 Mw Base 3.7 2.7 65 51
Combined Cycle - 500 Mw Cyclic 1.8 1.3 88 59
West Wind - 500 Mw 1.8 1.5 70 63
WI Wind - 500 Mw 1.3 1.1 32 26
Biomass Retrofit - 200 Mw @ 10% Cofire 0.1 0.2 66 66
New Unit Biomass - 80 Mw 0.6 0.5 68 56
CHP - 500 Mw (50 MW projects) 3.7 2.1 67 49
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Significant GHG reductions could Significant GHG reductions could come from re-dispatching existing come from re-dispatching existing natural gas plants in Wisconsin ahead natural gas plants in Wisconsin ahead of coal plantsof coal plants
But exactly how does replacing coal But exactly how does replacing coal generation with natural gas generation with natural gas generation result in significant GHG generation result in significant GHG savings since both fuels are carbon-savings since both fuels are carbon-based fossil fuels?based fossil fuels?
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Power Plant Greenhouse Gas Power Plant Greenhouse Gas EmissionsEmissions
Fuel carbon content
+
Generation efficiency
=
Carbon Dioxide Emissions
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Carbon Content of Fossil Fuels (Lbs/MMBtu):
•Coal 205 to 212 •Diesel 161 •Nat. Gas 117•Hydrogen 0
•Efficiency of Combustion•Pulverized Coal 30-35%•SCPC 37-39%•IGCC 38-41%•IGCC w/ CCS 30-35%
•NGCC 50-55%•NGCC Cogen 60-70%
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Sources: NETL, Cost and Performance Baseline for Fossil Energy Plants (Rev. 1), August 2007 (SCPC, IGCC, NGCC and IGCC w/CCS), WI PSC 2008 WPL DEIS (SubPC and CFB, normalized to NETL emission data based on heat rate and N20 emissions). Note: Emission rates are for rated output under ISO conditions, actual emissions can be higher.
Greenhouse Gas ComparisonFossil Power Plants
0
500
1000
1500
2000
2500
P
ou
nd
s o
f C
O2e
per
MW
h
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• Further evaluation of the electrical generation Further evaluation of the electrical generation spreadsheet modeling (and GHG reduction spreadsheet modeling (and GHG reduction option estimates from all working groups) was option estimates from all working groups) was needed to evaluate interactions between needed to evaluate interactions between different policies. different policies.
• The additional modeling was done through the The additional modeling was done through the Technical Advisory Group of the Governor’s Technical Advisory Group of the Governor’s Task Force using a modeling consultant and a Task Force using a modeling consultant and a complex economic/emission model.complex economic/emission model.
• This model was also designed to evaluate a This model was also designed to evaluate a regional cap and trade system regional cap and trade system
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Governor’s Task Force Modeling Effort
• ICF Resources retained as modeling consultant
• Energy 2020 model selected for use− Integrated multi-sector economy,
energy and emissions model− Simulates decisions by energy
suppliers and consumers− Provides output data by state,
sector, end use, etc., including:• Fuel use• Emissions• Energy imports and exports• Electric generation, capacity and
prices• Employment and gross state
product (using state REMI model)
http://dnr.wi.gov/environmentprotect/gtfgw/modeling.html
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• The Energy 2020 model for WI begins in 2004 with total natural gas consumption of 415 TBtu (Trillion BTU’s, 1 TBtu = approx. 1 Billion Cubic Feet)
• In the Business As Usual (BAU) case, total natural gas consumption remains flat through 2015 then rises to 434 TBtu in 2020 and 476 TBtu in 2024 as additional natural gas electrical plants are built (a 14% increase in natural gas consumption).
Natural Gas Modeling Results
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BAU Model Results
The model builds wind to meet the existing renewable portfolio standard (10% by 2015)
The only new fossil generation plants added by the model are approx. 1,600 MW of natural gas combined cycle
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Policy Case 1 (all recommended policies, including energy efficiency, new building codes and an enhanced RPS, but no cap and trade):
• Gross natural gas consumption declines 10% in Wisconsin from 2004 to 2024
• No new fossil plant construction • Natural gas generation output reduced over 50% • Smaller decreases in coal generation output • The policy case resulted in overall GHG emissions that
were essentially stable at 2005 levels, but did not meet the goals of most GHG reduction proposals
Additional GHG reductions still needed
GHG Reduction Policy Modeling Results
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Modeling of Cap and Trade Program
• Cap applied to electric generating and large industrial facilities, as well as carbon-based fuels
• Greenhouse gas emissions capped at 2009 levels in 2011; declining to 1990 levels in 2020
• GHG emissions begin to have a cost
• Modeling was done for a regional cap and trade program affecting adjacent Midwest Governors’ Accord states (Wisconsin, Iowa, Illinois, Michigan and Minnesota) www.midwesternaccord.org
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Cap and Trade Modeling Results• Modeling results demonstrated the difficulty
in designing and implementing a cap and trade system affecting a limited portion of the country
• Some general insights can be gleaned from the results:− The majority of the emission reductions
achieved by the cap and trade program are in the electric power sector
− Natural gas generation increases slightly under cap and trade, while coal generation decreases significantly
− Total natural gas use decreases under cap and trade
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• The work of the Governor’s Task Force on Global Warming provided directional information on the ways different GHG reduction policies affected natural gas consumption in Wisconsin
• The modeling results, however, did not provide conclusive insights to the future consumption of natural gas in Wisconsin under stringent carbon regulations
• Two areas discussed by the Task Force, and included in recommendations, but not modeled:− Fuel switching in residential and commercial
sector from natural gas to pellet stoves/boilers
− The biogas potential of the state
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Other Perspectives on Natural Gas Electrical Generation Under Carbon Constraints
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“… energy-efficiency and renewable energy technologies face deployment limitations and could not compensate for the lack of CCS and nuclear technologies in the near term...electric companies would be forced to switch to using large amounts of natural gas to meet the Lieberman-Warner compliance deadlines… according to separate studies by CRA International and the Nicholas Institute, wellhead prices for natural gas would increase approximately 20 percent by 2020 above currently projected levels.”
http://www.eei.org/industry_issues/environment/climate/Lieberman_Warner_final.pdf
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20% Wind Energy by 2030• Joint effort by DOE, AWEA and
others to determine feasibility, costs and benefits of significantly increasing contribution of wind to US electric supply
• Final report issued in May, 2008• Modeled two cases:
− Base Case with no new wind − 20% Wind Scenario with wind
supplying 20% of US electricity in 2030
• Under 20% Wind Scenario, wind generation in 2030 would:− Displace 18% of electricity
generated by coal− Displace 50% of electricity
generated by natural gas− Reduce total US natural
gas demand by 11%
http://www.20percentwind.org
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Thank You!
Peter J. Taglia, P.G. Staff Scientist Clean Wisconsinwww.cleanwisconsin.org608.251.7020x27ptaglia@cleanwisconsin
.org
Andrew D. Kellen, P.E.Assistant VP, Power Supply
Resources [email protected]