Demand for Natural Gas in Wisconsin: Changes due to Carbon Regulation

1
Demand for Natural Gas in Wisconsin Changes due
to Carbon Regulation

• Peter J. Taglia, P.G., Staff Scientist, Clean
  Wisconsin
• Andrew D. Kellen, P.E., Assistant VP, Power
  Supply Resources, WPPI

2
Outline

• Wisconsins Energy Mix and GHG Emissions
• Governor Doyles 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?

3
Wisconsins 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

Wisconsin Energy Use by Fuel Source WI Energy
Statistics, OEI, 2008
4
Wisconsins 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

Wisconsin Natural Gas Use by Sector Source WI
Energy Statistics, OEI, 2008
5
Electrical Generation in WI by Fuel

• 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
Electrical Generation in WI Source WI PSC, SEA,
2007
6
GHG Emissions in Wisconsin

• WIs 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
7

• What role will natural gas play in Wisconsin
  under carbon regulation?

8
Governor Doyles Task Force on Global Warming

• 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

9
Governor Doyles Task Force on Global Warming

• 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)

• to guide a detailed emission and economic
  modeling effort
• An interim report was released in February, 2008

10
Working Group Evaluations

• 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

11
Options to Reducing Greenhouse Gas Emissions
from Transportation

• Reduce Demand
• Pedestrian/Bike/Mass Transit/ Carpooling (VMT
  reduction)
• Increase Efficiency
• Higher MPG vehicles (e.g., California Cars)
• Lower Fuel Carbon Content
• Biofuels, Renewable Electricity (Low Carbon Fuel
  Standard)
• Natural gas does not offer significant GHG
  savings for transportation

12
Options to Reducing Greenhouse Gas Emissions from
Industry

• Reduce Demand
• Less sales, shut down plants (undesirable)
• Increase Efficiency
• Produce more product with less fuel
• Lower Fuel Carbon Content
• Switch 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

13
Options to Reducing Greenhouse Gas Emissions
from Electric Generation

• Reduce Demand
• Energy conservation (reduce waste)
• Increase Efficiency
• Get more benefit from less electricity
• Increase the fuel efficiency of power plants
• Lower Fuel Carbon Content
• Switch from coal to wind, solar, nuclear,
  hydroelectric, hydrogen.or natural gas

14
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
15
Electric Generation Work Group Results
16
Significant GHG reductions could come from
re-dispatching existing natural gas plants in
Wisconsin ahead of coal plants But exactly how
does replacing coal generation with natural gas
generation result in significant GHG savings
since both fuels are carbon-based fossil fuels?
17
Power Plant Greenhouse Gas Emissions

• Fuel carbon content
• Generation efficiency
• Carbon Dioxide Emissions

18

• 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

COAL
GAS
19
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.
20

• Further evaluation of the electrical generation
  spreadsheet modeling (and GHG reduction option
  estimates from all working groups) was needed to
  evaluate interactions between different policies.
  
• The additional modeling was done through the
  Technical Advisory Group of the Governors Task
  Force using a modeling consultant and a complex
  economic/emission model.
• This model was also designed to evaluate a
  regional cap and trade system

21
Governors 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/modelin
g.html
22
Natural Gas Modeling Results

• The Energy 2020 model for WI begins in 2004 with
  total natural gas consumption of 415 TBtu
  (Trillion BTUs, 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).

23

• 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

24
GHG Reduction Policy Modeling Results

• 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

25
Modeling of Cap and Trade Program

• 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

• 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

26
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

27

• The work of the Governors 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

28
Other Perspectives on Natural Gas Electrical
Generation Under Carbon Constraints
29

• 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/cli
  mate/Lieberman_Warner_final.pdf

30

• 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
31
Thank You!

• Peter J. Taglia, P.G.
• Staff Scientist
• Clean Wisconsin
• www.cleanwisconsin.org
• 608.251.7020x27
• ptaglia_at_cleanwisconsin.org

Andrew D. Kellen, P.E. Assistant VP, Power Supply
Resources WPPI www.wppisys.org 608.834.4545 akell
en_at_wppisys.org