Presentation on theme: "MD RGGI STUDY January 2007 1 Economic and Energy Impacts from Maryland’s Potential Participation in the Regional Greenhouse Gas Initiative A Study Performed."— Presentation transcript:
MD RGGI STUDY January 2007 1 Economic and Energy Impacts from Maryland’s Potential Participation in the Regional Greenhouse Gas Initiative A Study Performed by the Center for Integrative Environmental Research at the University of Maryland Commissioned by the Maryland Department of the Environment January 2007
MD RGGI STUDY January 2007 2 Study Purpose Maryland enacted the Healthy Air Act in April 2006, requiring the Governor to include the State in the Regional Greenhouse Gas Initiative. MDE is required to study reliability and cost issues that may result from joining RGGI. MDE contracted with the University of Maryland through the Center for Integrative Environmental Research (CIER) to research reliability and cost impacts. The study analyzes potential impacts on electricity demand, energy supply, generating plant retirement and generator profits, electricity prices, CO 2 allowance prices, CO 2 emissions, emissions leakage, generator competitiveness, generation adequacy, ratepayer impacts and overall economic impacts.
MD RGGI STUDY January 2007 3 Research Team University of Maryland Center for Integrative Environmental Research Matthias Ruth, Principal Investigator Steven Gabriel, Co-Principal Investigator Kimberly Ross, Project Manager Sanjana Ahmad Russell Conklin Jennifer Cotting Julia Miller Dan Nees The John Hopkins University Benjamin Hobbs Yishu Chen (currently at University of California, Merced) Soora Kim Resources for the Future Dallas Burtaw Karen Palmer Anthony Paul Towson University Regional Economics Study Institute Daraius Irani Jeffrey Michael
MD RGGI STUDY January 2007 4 Study Design and Research Methodology Three complementary models were employed: –Haiku: National simulation of the electric power grid & environmental policies (e.g., emissions control technologies) –Johns Hopkins University Oligopoly Under Transmission Constraints (JHU-OUTEC): Market equilibrium model for the PJM region, which includes Maryland and its neighbors; it allows analysis of the potential market power of large electric generating companies, and more detailed transmission capacity analyses –IMPLAN: Input-output model used to estimate the statewide economic and fiscal impacts of Maryland joining RGGI (this model is used frequently by the state)
MD RGGI STUDY January 2007 5 Study Design and Research Methodology Two primary modeling scenarios were employed by all three models: –“Maryland does not participate in RGGI” the baseline scenario (i.e., business-as-usual) the Classic RGGI region consists of the current RGGI states (ME, VT, CT, NH, NJ, NY, and DE) and anticipated RGGI states (MA and RI) Note: MA joined after study completion –“Maryland joins RGGI” includes same assumptions as baseline scenario expands the Classic RGGI region to include Maryland total amount of RGGI CO 2 emissions allowances increased by roughly 1/3 JHU-OUTEC and IMPLAN use Haiku results as inputs.
MD RGGI STUDY January 2007 6 Study Design and Research Methodology Comments were solicited from over 60 stakeholders representing more than 30 institutions –The stakeholders ranged from industry to state government agencies to environmental NGOs –Much of the input came in the early stages modeling assumptions data parameters recommendations for future alternative model runs –Stakeholders will be invited to review the report and comments on its analysis report will be available online at www.cier.umd.edu comments are due three weeks after report release addendum with comments will be provided online
MD RGGI STUDY January 2007 7 Findings: Supply, Demand and Reliability Maryland Joining RGGI Price of Electricity –Has virtually no effect on electricity price in Maryland. –Reduces electricity demand in Maryland through investments in energy efficiency, which contributes to the lack of a price effect. Reliability –Has no effect on reliability.
MD RGGI STUDY January 2007 8 Findings: Supply, Demand and Reliability Maryland Joining RGGI Utility Impacts –Has a negative impact on profits of coal-fired generators, but does not prompt retirement of coal capacity in Maryland. –Produces a very small amount of retirement of existing oil and gas steam capacity. –Has a positive impact on the profits of oil and gas generators, who earn revenues from the sale of CO 2 emission allowances created by the program.
MD RGGI STUDY January 2007 9 Electricity Demand in Maryland Maryland joining RGGI lowers net electricity demand in the state by 1.5% to 3.0% as a result of increased energy efficiency investment.
MD RGGI STUDY January 2007 10 Composition of Electricity Supply in Maryland in 2015 Changes Slightly Maryland joining RGGI reduces coal and natural gas generation in Maryland slightly by 2015 and raises net imports of power to the state, largely through a drop in exports of power to the east.
MD RGGI STUDY January 2007 11 The Effect of Maryland Joining RGGI on CO 2 Emissions from Electricity Generation in Maryland Maryland joining RGGI reduces CO 2 emissions from electricity generators in Maryland by roughly 13% by 2020. in Maryland
MD RGGI STUDY January 2007 12 Effects of Maryland Joining RGGI on Cumulative CO 2 Emissions for Expanded RGGI Region Maryland joining RGGI results in total expected emission reductions (including offsets) for the expanded RGGI region of roughly 26 million tons between 2010 and 2025.
MD RGGI STUDY January 2007 13 Effects of Maryland Joining RGGI on Cumulative CO 2 Emissions Outside Expanded RGGI Region Maryland joining RGGI results in total expected emission reductions for the nation of roughly 5 million tons between 2010-2025. Note: Ring Around RGGI, Eastern Interconnect and Nation exclude Expanded RGGI region. “Leakage”– shifts in C0 2 emissions to other areas due to increased use of electricity from outside the state or other factors – is low, particularly in the ring of states surrounding RGGI. However, it is a complex issue and would require further analysis to interpret impact on other regions of the nation.
MD RGGI STUDY January 2007 14 RGGI CO 2 Allowance Prices Maryland joining RGGI reduces the price of CO 2 emissions allowances in the RGGI cap and trade program.
MD RGGI STUDY January 2007 15 Findings: Economic Impacts Maryland Joining RGGI Costs to Consumers –The $50 million in annual savings to residential customers in 2010 translates into annual savings of $22 for the average Maryland household. Job Creation –Over 1,800 net new jobs are created in 2010 by Maryland joining RGGI which is 0.06% of total forecasted employment in Maryland in 2010. –In subsequent years, this rises to 0.1% of total forecasted employment in Maryland.
MD RGGI STUDY January 2007 16 Findings: Economic Impacts Maryland Joining RGGI State Economy –Gross State Product (GSP) is expected to increased by nearly $150 million in 2010 due to Maryland joining RGGI. –The total economic impact is 0.06% of Maryland’s forecasted GSP for 2010, and remains less than 0.1% of total forecasted GSP in subsequent years. –There is little fiscal impact on the state.
MD RGGI STUDY January 2007 17 Findings: Generator Competitiveness and Adequacy Maryland Joins RGGI Generator Competitiveness –There is no evidence that the effects of Maryland joining RGGI will amplify any potential market power in the generation market. Reliability/Generator Adequacy –It is unlikely that generation capacity prices would rise significantly in the PJM region because energy efficiency programs would likely compensate for plant retirements. Transmission –Assumptions concerning the configuration of the transmission grid after 2015 can make as much difference in power prices and other market outcomes as "Maryland joins RGGI."