Ratemaking & New Technology A Regulatory Innovative Approach to Carbon Capture Projects Kara B. Fornstrom, Chairman, Wyoming Public Service Commission 2019 WIA Spring Conference March 29, 2019
Today’s Presentation Why the Future of Coal Matters to ● Wyoming Pressures on Coal-Fired Electricity ● Wyoming’s Response = LEAD ● What’s Impeding Utilities from ● Investing in CCUS Technology? Rate Making 101 ● 2019 Wyoming Legislative Policy ● ● Is Regulatory Innovation the Missing Piece? ● Conclusion/Questions
Why the Future of Coal Matters to Wyoming Wyoming Coal Mines ● Wyoming Coal-Fired Generation Plants ● Wyoming’s Portion of the US Coal Economy ●
Wyoming’s Coal Mines
Top 10 Producing Coal Mines by Tonnage in the US (2015) University of Wyoming Center for Energy Economics and Public Policy, 2017.
Top 10 Producing Coal Mines by Tonnage in the US (2017) EIA
2017 U.S. Coal Production by State
Wyoming’s Coal -Fired Plants
Coal Revenue for Wyoming
Coal-Fired Power Plants Fueled by the Powder River Basin Source: https://wildearthguardians.org/climate-energy/maps/powder-river-basin-coal-plants/
Wyoming Coal-related Employment (2012) University of Wyoming Center for Energy Economics and Public Policy, 2015.
Coal Economy Addition to Gross State Product (2012) University of Wyoming Center for Energy Economics and Public Policy, 2015.
Pressures on Coal-Fired Electricity Natural Gas – Domestic Production ● National Energy Policy ● Legal Rulings ● State Energy Policy ● Impact on Wyoming ●
U.S. Natural Gas Production: 1990 - 2018
National Energy Policy: Public Utilities Regulatory Act (PURPA) Enacted in 1978 as part of the National Energy Act in ● response to a national energy crisis Encouraged the development of renewable energy and ● cogeneration technologies as competitive alternatives to oil and other scarce sources of fuel PURPA requires electric utilities to purchase power ● produced by qualifying facilities (QFs) that used renewable energy and cogeneration technologies - Must Take Obligation Ratepayer Indifference Standard ●
National Energy Policy: ITCs and PTCs Solar Investment Tax Credit (ITC) ● Established by the Energy Policy Act of 2005 ○ Federal policy mechanism to incentivize the deployment of both rooftop and utility-scale solar. ○ Allows both residential and commercial developers to recover 30% of the cost of a solar investment ○ Tax credit begins stepping down at the end of 2019 ○ Renewable Electricity Production Tax Credit (PTC) ● Established in 1992 by the Energy Policy Act of 1992 ○ Originally available to all forms of renewable energy ○ Currently only available to wind for facilities commencing construction after December 31, 2016 ○ Tax credit is $0.015/kWh, adjusted for inflation in current calendar year in which the sale occurs ○ Tax credit was $0.0024/kWh in 2018 ○ Tax credit is phased down for wind facilities commencing construction in 2017 and thereafter ○ Repowering ○ ○ Wind facilities must complete construction by December 31, 2020 to receive 100% PTCs
National Energy Policy: Results PURPA along with ITCs and PTCs have had a tremendous impact on renewable development ● According to the EIA, wind generation grew 80% between 2008 and 2018 to 275 MWh, accounting ○ for 6.5% of total electricity generation Solar, meanwhile, exploded from just 2 million MWh to 96 MWh, comprising 2.3% of total ○ generation last year Soruce: https://ncsolarnow.com/how-purpa-helped-boost-utility-scale-solar-in-north-carolina/ Photo: Wikimedia Commons and Pixabay
Legal Rulings: Massachusetts v. EPA, 549 U.S. 497 (2007) The U.S. Supreme Court ruled that GHGs are “air pollutants” under the Clean Air Act ● The EPA subsequently had authority to regulate emissions of the same from both stationary and mobile ● sources. In 2009, the EPA found that “greenhouse gases in the atmosphere may reasonably be anticipated both to ● endanger public health and to endanger public welfare.” EPA has been exercising its authority for the past decade and continues to regulate GHG emissions from ● coal-fired, natural gas, and other fossil fuel powered facilities Massachusetts v. EPA remains the law of the land ● Citation: “Carbon Capture and Sequestration in the Cowboy State: A Primer for the Wyoming Lawyer, Kipp Coddington, March 14, 2019.
State Energy Policy Renewable Portfolio Standards: Requires electricity suppliers to source a certain quantity of renewable ● energy ● In percentage, megawatt-hour or megawatt ● First RPS Design – California – 1995 (adopted in 2002) Other Versions: “Clean”; “Carbon Neutral” ● http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx
State Energy Policy
2015 Coal Shipments from Wyoming to Other States (Tons)
2016 Coal Shipments from Wyoming to Other States (Tons)
2015 – 2016 Comparison New York or Florida stopped receiving Wyoming Coal ● Reduction in shipments to the three of Wyoming’s historically largest coal ● receiving states: Texas: 55.1 Tons in 2015 to 44.5 Tons in 2016, a decrease of 10.6 Tons ○ Missouri: 40.4 Tons in 2015 to 34.4 Tons in 2016, a decrease of 6 Tons ○ Illinois: 45.6 Tons in 2015 to 29.6 Tons in 2016, a decrease of 16 Tons ○
Impact on Wyoming: Coal Production: 1970- 2016 Source: https://auber.org/wp-content/uploads/2018/05/Godby-_20171022.pdf
Impact on Wyoming: Coal Production: 2007 t0 2017 EIA
Impact on Wyoming: Annual Average of Wyoming Coal-Related Jobs EIA
Impact on Wyoming: Coal Revenues
Wyoming’s Response = LEAD Legal Framework: State and Federal ● Technology: CCUS & Integrated Test Center ● CO2 Pipeline Corridors ● Regulatory? ●
Legal Framework: Wyoming Statutes Specifies who owns the pore space (Wyo. Stat. § 34-1-152 (2017)) • Establishes permitting procedures and requirements for CCS sites, including permits for • time-limited research (Wyo. Stat. § 35-11-313 (2017)) Provides a mechanism for post-closure MRV via a trust fund approach (Wyo. Stat. § 35-11- • 318 (2017)) Provides a mechanism for utilization of storage interests (Wyo. Stat. § 35-11-315 (2017)) • Specifies that the injector, not the owner of pore space, is generally liable (Wyo. Stat. § 34- • 1-153 (2017)) Clarifies that vis- à -vis storage rights, production rights are dominant but cannot interfere • with storage (Wyo. State. § 30-5-501 (2017)) Provides a certification procedure for CO2 incidentally stored during EOR (Wyo. Stat. § 30- • 5-502 (2017)) Citation: “Carbon Capture and Sequestration in the Cowboy State: A Primer for the Wyoming Lawyer, Kipp Coddington, March 14, 2019.
Legal Framework: Federal FUTURE Act and 45Q Tax Credit ● Introduced in July, 2017; signed by President Trump in February, 2018 ○ Major components ○ Increased amount of tax credit ○ Extend timeframe, no volumetric limit ○ Made tax credit assignable ○ Use it Act ● Sponsored by U.S. Sen. John Barasso (R-WY) ○ Introduced in March 2018 ○ Furthers the FUTURE Act by supporting carbon utilization and direct air capture research ○ Support federal, state, and non-governmental collaboration in the construction and development of CCUS facilities ○ and CO2 pipelines
Technology: Electricity Generation and CCUS https://www.worldcoal.org/coal/uses-coal/coal-electricity https://phys.org/news/2014-04-theory-reality-carbon-capture- storage.html
Technology: Uses for Captured CO2
Technology: Integrated Test Center Carbon XPrize ● Breathe (Bangalore, India) ○ C4X (Suzhou, China) ○ Carbon Capture Machine (Aberdeen, Scotland) ○ CarbonCure (Dartmouth, Canada) ○ Carbon Upcycling UCLA (Los Angeles, CA, USA) ○ Japan Coal Energy Center (JCOAL) and Kawasaki Heavy Industries, Ltd. ● Kawasaki is slated to test their solid sorbent capture technology ○ Memorandum of Understanding (MOU) between JCOAL and ○ Wyoming, signed August 2, 2016 MOU covers technical cooperation, R&D, communication, information ○ exchange, and facilitating coal exports and sales JCOAL works to promote overall coal activities, from coal mining to ○ the field of coal utilization University of Kentucky Center for Applied Energy Research (CAER) ● Announced March 7, 2019 ○ Signed a lease to use a portion of the ITC’s large test bay as part of their ○ Phase II application of the Fossil Fuel Large-Scale Pilots funding opportunity Currently finalizing Phase II application ○ Hopes to obtain $50 million in DOE grant funding ○ If grant is obtained for Phase III, CAER will also host at ITC ○
Technology: Ongoing Projects
Technology: National Momentum
CO2 Pipeline Corridors: Wyoming’s Infrastructure Citation: “Carbon Capture and Sequestration in the Cowboy State: A Primer for the Wyoming Lawyer, Kipp Coddington, March 14, 2019.
Is Regulatory Innovation the Missing Piece? CO2 Technology Regulatory? State Law Federal Law
What’s Impeding Utilities From Investing in CCUS Technology? Utility Risk Profile - Risk Tolerance ● Incentives ● Traditional Rate Making Model ●
Utility Risk Profile: Risk Profile By Industry
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