Study Case Report PC 10 High Carbon Price PC 11 Low Carbon Price W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Overview Study Case Descriptions Impacts to Generation Commitment and Dispatch Impacts to Path Flows Key Observations 2 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Carbon Price Studies Purpose To study the effect of applying varying levels of a Carbon Price adder while keeping all other assumptions at their original values. These study cases were derived from the April 9, 2015 version (v1.5) of the 2024 Common Case. Comparisons are made to that version. 3 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

PC10 Carbon Tax (CO 2 ) Studies Rather than applying a high carbon tax (PC10) and a low carbon tax (PC11), a series of prices were applied. California Global Warming Solutions Act (AB32) was retained System-wide carbon tax applied 4 W ESTERN E LECTRICITY C OORDINATING C OUNCIL Case Carbon Tax ($/metric ton) Description WECC (non- California) California PC Common case with AB32 in California PC Assume that California would not lower their tax PC Apply AB32 tax WECC-wide PC WECC-wide $40 tax PC WECC-wide $50 tax PC WECC-wide $60 tax

Generation Impacts 5 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Annual Generation - Carbon Price 6 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Data Metrics – Coal vs. Gas Data ElementCoalGas (CC)Gas (CT) Fuel Price ($/MMBtu)0.97 – – 5.65 Heat Rate* (MMBtu/MWh)9.14 – – – CO2 Emission Rate (lbs/MMBtu)200.0 – CO2 Emission Rate (lbs/MWh) – Average Cost ($/MWh) – 8341 – W ESTERN E LECTRICITY C OORDINATING C OUNCIL *Ranges show the largest concentration of values. Under the assumed fuel prices and heat rates for the 2024 Common Case, coal-fired generation typically has a lower production cost than gas-fired generation. However, when a carbon tax is applied, the difference in the emission rates causes the coal-fired generation to be more heavily impacted.

Example of CO 2 tax – Coal vs. Gas Data ElementCoalGas (CC)Gas (CT) Fuel Price ($/MMBtu) Heat Rate (MMBtu/MWh) CO2 Emission Rate (lbs/MMBtu) CO2 Emission Rate (lbs/MWh) Average Cost ($/MWh) Example 100 MWh – tons CO $50/ton – cost /MWh Adjusted cost ($/MWh) W ESTERN E LECTRICITY C OORDINATING C OUNCIL In this hypothetical example the $50/ton carbon tax increased the cost of the coal-fired unit approximately twice as much as the gas-fired units.

Comparison PC1 vs PC10-50 ($50 CO 2 tax) 9 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Annual Generation Costs 10 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Annual CO 2 emissions 11 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Trend in Average Capacity Factors 12 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Annual Energy Share by Fuel 13 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Change in Energy by State – PC1 vs. PC10d 14 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Path Flows 15 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Path (COI plus PDCI) 16 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Path W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Path W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Path 8 19 W ESTERN E LECTRICITY C OORDINATING C OUNCIL The transmission associated with Path 8 was built to deliver the output of the Colstrip Power plant to the participants in Oregon and Washington. The $50 carbon tax mostly displaces that coal plant and even reverses the predominant flow. This could impact the operational limits of the path.

Path W ESTERN E LECTRICITY C OORDINATING C OUNCIL The transmission associated with Path 27 was built to deliver the output of the Intermountain Power plant to the participants in California. The $50 carbon tax significantly reduces the output from that coal plant.

Observations 21 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Observation #1 As the carbon price was increased: – More and more coal-fired generation was displaced by gas-fired generation (CO 2 emissions from burning coal are almost twice as much as from burning natural gas). 22 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Observation #2 Compared to the PC1 common case, the results from the $50 carbon tax case showed a reduction in CO 2 emissions of 54 Million Metric Tons (14.9%) with an increased cost of 14.8 Billion dollars (65%). 23 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Observation #3 The path flow results for the $50 carbon tax case indicate that the carbon tax caused the imports into California to decrease. The imports were replaced with additional output from gas-fired generation inside California. 24 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Observation #4 The reduction in CO 2 emissions in response to a carbon tax had a cost of about 240 M$ per Million Metric Ton of reduction. The last increment suggests that a “saturated displacement ” may occur at some point. 25 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Questions? And Contact Information: 26 W ESTERN E LECTRICITY C OORDINATING C OUNCIL Stan Holland (801)