1. The Intersection of Energy Reliability Objective and Other Environmental Policies and Programs, and the Role of Markets Barry Wallerstein, D.Env Executive Officer, South Coast AQMD CFEE Workshop August 30, 2007

2. Air Quality Challenges  Localized Exposure/Environment Justice – Air Toxics – Particulate Matter (PM2.5)  Regional Pollutants Particulate Matter (PM2.5) Ozone (Smog)  Climate Change – GHG

4. Federal Standard

9. CO2 Emission Comparison (2002, In Million Metric Tones ) 153 332 485

10. Comparison of Emissions from Power Generation Units

11. Actions Taken By SCAQMD During 2000-2001 Energy Crisis  Issued SCAQMD Executive Orders  Implemented Governor’s Executive Orders  Modified Emergency ICE Permit Conditions  Expedited New Power Plant Permitting  Developed State Mitigation Fund for New Peakers  Approved inter-district transfer of ERCs  Amended RECLAIM Program  Developed R1309.1

12. Electricity Generation Challenges  In-Basin Aging Power Plants  Scarcity of Emission Reduction Credits (ERC)  Transmission Line Limitations  Reliability  Facility Siting/ Env. Justice Concerns

13. Aging Power Plants in South Coast Area (as of 2010) Age of Power Plants Generation Capacity (MW) Total In- Basin Generation % of Total 30 years or older7,82612,22564% 35 years or older7,20112,22559% 40 years or older6,75612,22555% 45 years or older4,11212,22534% 50 years or older1,59712,22513%

14. PM ERC Market Price * Includes January through July 2007 data

15. Air Quality and Power Generation Intersections  Need Determination – New Capacity Needed for Growth and Replacement – Base load vs. peaking units  Technology Selection – DSM/Renewables vs. Fossil  Siting – System Stability vs. Localized/EJ Impacts

16. SCAQMD R1309.1 Priority Reserve  Tiered requirements based on location that reflect current air quality  Mitigation fees for ERCs to invest in pollution reduction projects – $92,000/lb PM; $34,400/lb SOx  ERCs to be issued for – First 2700 MW units unless approved by the Board – After CEC approval and long-term contracts except for serving native load

17. Proposed Projects ProjectCapacity (MW) AES Highgrove300 BP Carson/Edison – Carson Hydrogen Power Project 500 CPV Ocotillo850 El Segundo Repower630 Reliant Energy656 Riverside Energy Resource – City of Riverside 96 Sun Valley500 Vernon Power Plant – City of Vernon 943 Walnut Creek500 Total4,975

18. Other Issues  Long Lead Time for Project Development  Uncertainty – Regulatory – Business

19. Other SCAQMD Commitment  Energy Resource Planning ($1,000,000) – Initial RFP for $450,000  Feasibility/Pilot Study – Advanced PM2.5 Control Technologies ($4,000,000)

20. Policy Recommendation  Enhanced Energy Resource Planning – Integrate Energy and Air Quality Policies – Develop a Master Plan – Determine Conformity to Master Plan – Establish Mandatory Retirement Schedule for Aging Plants