Evaluating the Economic Benefits of a State Energy Efficiency and Renewable Energy Technology (EERET) Set-Aside for the NOx Budget Trading Program

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Evaluating the Economic Benefits of a State
Energy Efficiency and Renewable Energy Technology
(EERET) Set-Aside for the NOx Budget Trading
Program

• John A. Skip Laitner
• EPA Office of Atmospheric Programs
• March 23, 1999

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The Good News About Pollution Control and Climate
Change Policies

• It is not about ratcheting down our economy
• Rather, it is about
• investing in new technologies
• using Americas technological leadership and
• developing new ways to make things, and new ways
  to get where we want to go, where we want to
  work, and where we want to play.

Carol Browner, September 1997
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A recent EPA/LBNL analysis appears to confirm
Administrator Browners conclusion Technology
and Greenhouse Gas Emissions An Integrated
Scenario Analysis Usingthe LBNL-NEMS Model
in PDF file format at http//enduse.lbl.gov/Projec
ts/GHGcosts.html
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Summary of the EPA/LBNL Integrated Technology
Scenario Analysis

• A High Efficiency/Low Carbon (HELC) scenario,
  drawing from bottom-up studies such as the DOE
  Five-Lab Analysis, formed the basis of an
  economic assessment using a modified version of
  EIAs National Energy Modeling System (NEMS).
  The work was done by the EPA Office of
  Atmospheric Programs (OAP) and the Lawrence
  Berkeley National Laboratory (LBNL).
• With a carbon permit price of 23/tonne,
  energy-related carbon emissions are estimated at
  274 MtC in 2010, or about 55 percent of the Kyoto
  target (with emissions down by 3 percent from
  1990 levels).
• Under these assumptions, GDP is largely unchanged
  (29 billion out of a 10.4 trillion economy)
  and despite initially higher energy prices, total
  energy expenditures are down (-89 billion).

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With personal computers we haveWYSIWYG,
orWhat you see is what you getBut with
economic models, it may beWYMIWYG, orWhat you
measure is what you get!
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Representative Examples of New Technology
Opportunities

• A small example Consumer Electronics
• An emerging example New heat exchanger units
  from Modine Technology, Inc.
• Another emerging opportunity New technology
  with polyethylene concentrates from Eastman
  Chemical Company
• A very large opportunity Combined Heat and
  Power (CHP) systems

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Consumer Electronics

• More than 1.3 billion units in the United States,
  including televisions, video cassette recorders,
  audio devices, telephones, microwaves, etc.
• Each of these units typically have a stand-by
  power consumption of 2-12 watts, or 18-105 kWh
  per year, producing about 12 MtC of carbon per
  year
• Under the new ENERGY STAR label, stand-by power
  consumption will be reduced to 3-4 watts, saving
  consumers 4 billion per year and reducing carbon
  emissions by about 5-6 MtC

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Modine Technology, Inc.

• An established manufacturing of heat exchanger
  technology
• A new product design that, for example, will
  increase the energy efficiency of room
  air-conditioners from an EER of 10 to 13 --- at
  no extra cost to the consumer
• Yet, current investments and production lines
  make it difficult to open up the market for this
  new technology --- a condition that will likely
  change in a post-Kyoto world

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Eastman Chemical Company

• In September announced a new technology with
  polyethylene concentrates that can reduce
  processing time
• Applied to both extrusion coating and film
  applications to minimize both downtime and waste
• Among other benefits is reduced electricity
  consumption
• Unlike other methods, equipment modifications are
  not required since Eastman's technology is
  contained within the concentrates

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Combined Heat and Power Systems

• Combined Heat and Power (CHP) systems offer an
  important opportunity to demonstrate a smart
  path toward mitigating global climate change
• The accelerated adoption of the existing
  generation of CHP systems has the potential to
  reduce carbon emissions by perhaps 25 MtC in the
  year 2010 (in addition to what other models now
  indicate)
• Just as important, CHP can also reduce NOx
  emissions by up to 260,000 tons by 2010

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Potential Benefits of a 5 EERET Set-Aside in the
NOx Budget Trading Program

• An estimated reduction in electric demand of over
  90 Billion kWh for 2003 in the SIP Call region
• Approximately 5.0 billion in energy bill savings
  to consumers in 2003
• About 150 million in compliance cost savings for
  that year
• About 20,000 to 40,000 new jobs throughout the
  region

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And to help states evaluate the economic impacts
of its set-aside programs. . . . The Energy,
Economic, and Environmental Analysis System
(E3AS)!
Pronounced EASE, the software is a product of
the Goodman Group with Version 2.0 under
development for the states through an EPA-funded
grant to NASEO.
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Key Design Elements of theEconomic Impact
Analysis Software

• The algorithms and assumptions of the model are
  fully documented.
• Users are able to override any default data or
  results if they have reason to do so.
• Analysts can choose to use a minimum level of
  data, or they can adapt the model to use a richer
  level of detail.
• The model contains bill of goods data for more
  than 100 technologies that can be evaluated
  either individually or bundled into a
  program-level analysis.

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For a typical state, you probably didnt know
that . . . .
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But with the new E3AS model. . . .
That just may not matter!
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Analytical Logic of the Economic Impact Model
The User Enters
The Model Selects
State of Analysis
Key Multiplier and Economic Profile Data
Displaced Energy
Characteristics of Energy Supply
Appropriate Bill of Goods Data
Efficiency Measures
Deflator and Productivity Factors
Key Financial Data
Pattern of Savings
Appropriate Changes in Spending Patterns Across
All Economic Sectors
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Analytical Logic of the Economic Impact Model
Category of Impact
Net Annual Benefit
Energy Savings
5,000 GWh
Energy Bill Savings
80 Million
1,500 Tons
NOx Reductions
600 Tons
SO2 Reductions
Carbon Reductions
0.7 MMT
Employment Gains
1,700 Net Jobs
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The difficulty lies not with the new ideas, but
in escaping the old ones
John Maynard Keynes
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For more information on the material referenced
in this presentation, contact
Skip Laitner EPA Office of Atmospheric
Programs 501 3rd Street NW, MS 6201-J Washington,
DC 20001 o [phone] f (202)
565-2147 email Laitner.Skip_at_epa.gov