1. Greenhouse Gas Emissions Reductions from Wind Energy : Location, Location, Location? Duncan Callaway SNRE & Department of Mechanical Engineering dcall@umich.edu Meredith Fowlie Ford School of Public Policy & Department of Economics mfowlie@umich.edu With support from the University of California Energy Institute and the University of Michigan Energy Science, Technology, and Policy Award Program

2. “The issue of how much generation of emissions is displaced by production of electricity generation through wind energy is complex, but it needs to be understood properly.... Emissions displacement analysis is essential for policy and regulatory decisions.” National Academy of Sciences (2007)

3. How are these emissions displacement estimates used in the policy process? Policy implementation EX: Used to distribute incentives to operators based on avoided emissions (e.g. the NOx Budget Program) Policy design/ evaluation EX: Estimating (ex ante and ex post) emissions reductions achieved through policy interventions that promote renewables development.

4. Estimating emissions displacement A seemingly simple calculation is complicated by three stylized facts: 1.Resource performance profiles vary across sites. 2.Emissions displacement profiles vary across regions. 3.Correlation between resource availability and emissions displacement rates.

5. Annual average wind speed at 50 meters - Red = 11 m/s - Orange = 6.5 m/s - Blue = 3 m/s Wind Resources in New York Data from AWS Truewind 5

6. Stylized example : Wind resource profiles Average production (% of peak capacity)* Profile 1: average capacity factor : 30% Profile 2 : average capacity factor : 30%

7. Stylized example : Estimating emissions displacement Next- estimate how system emissions would respond to the addition of a new wind resource. Anticipate how the electricity market will respond to an increase in intermittent, low marginal cost power production at a given site. This requires some understanding of how electricity markets work….

8. Stylized example : Emissions displacement profiles Region A Natural gas always on margin Marginal emissions rate (lbs CO2/MWh) US average emissions rate of 2249 lbs CO2/MWh for coal generation. US average emissions rate of 1135 lbs CO2/MWh for natural gas generation. 1135 2249 off-peak peak off-peak Region B Coal off peak Natural gas on peak off-peak peak off-peak Marginal emissions rate (lbs CO2/MWh) 8

9. Stylized example : Estimated emissions displacement Profile 1Profile 2 Region A 204 tons/day * (1135 lbs/MWh) 203 tons/day * (1135 lbs/MWh) Region B 301 tons/day * (1674 lbs/MWh) 346 tons/day * (1939 lbs/MWh) * These estimates assume a 50 MW development lbs CO2/MWh) off-peak peak off-peak lbs CO2/MWh) off-peak peak off-peak 9

10. Emissions reductions from wind energy: Location, location, location? Do emissions displacement benefits vary significantly across wind sites in the U.S.? What explains variation across locations a.variation in wind profiles? b. variation in emissions displacement profiles? c. correlation between (a) and (b) ? What are possible policy implications of the variation we document?

11. Research objectives Possibly improve upon methods currently used to estimate marginal emissions displacement rates. Estimate, with unprecedented precision, the marginal emissions displacement potential at wind sites across the Eastern U.S. Investigate the relative importance of inter-temporal correlations in resource availability and marginal emissions displacement profiles.

12. What we are estimating…. Average emissions displacement on the “operating” margin. Estimates condition on existing infrastructure, institutions, and incentives. What we are not estimating…. Life cycle impacts of wind generation. Emissions displacement on the “build” margin.

13. Past and present approaches to estimating emissions displacement Regional system average emissions rates often used to estimate marginal operating emissions displacement rates (US DOE, AWEA). Late 1990s/early 2000s, most serious studies used grid dispatch simulation models (ISO NE, US EPA, OTC, NESCAUM). Significant efforts underway to develop /improve methods to estimating emissions displacement benefits. (CEC, 2004; ISONE, 2006; Gil and Joos, 2007; Keith et al., 2004; NAS, 2007; NREL, 2007; Schiller et al., 2007; US DOE, 2006; US EPA, 2004; WRI, 2007; etc.).

14. We are taking a regression-based approach m indexes market region, h indexes hour of day, t indexes time, Z is a proxy for changes in wind, X includes variables that affect dispatch /system operations. Data: – Hourly, unit level emissions and generation from units in three regional markets (NY, NE, PJM). – Forecast load and RT load from ISOs and FERC 714 – Imports / exports from ISOs – Other covariates (temp, fuel prices, etc) 14 Our approach

15. 15 Marginal emissions displacement profile: New York electricity market (Z = non-hydro generation) NYISO system average OTC estimate

16. Location Average CO 2 emissions rate (lbs/MWh) EU ETS CO 2 value 1 ($/MWh) RGGI CO 2 value 2 ($/MWh) Current policy incentive 3 ($/MWh) Z= combustion generation Profile a1162$11.94$1.78 $35 Profile b1178$12.11$1.81 16 Putting early results in context 1 The EU ETS price: approx. $22.61 / metric ton CO 2 in October 2008 2 The RGGI price: $3.07 / ton CO 2 in September 2008 3 All new wind eligible for Federal Production Tax Credit ($20/MWh). The weighted average price that NYSERDA paid for RPS Attributes for the most recent solicitation is $15 per Megawatt hour. 4 Source: FERC Oversight Electric Power Market Summaries

17. Estimated marginal emissions displacement profiles by region NY MISO EAST PJM NE Y- axes measure lbs CO 2 /MWh

18. Next steps….. Continue to refine our model using data from New York and other Eastern states. Take the model to the data- estimate MOERs using 3TIER data. Generate site-specific estimates of emissions displaced by new wind development. Address policy questions surrounding efficacy of production-based incentives.