 Okay, good afternoon. Sorry for the delay, we had some technical issues, but we're all here now. So thank you very much for coming this afternoon. My name is Sarah Ladislaw. I'm the director of the Energy and National Security Program here at CSIS. And I'm really pleased to be here today with two of the colleagues on the stage from the Rodeum group. But we also have several of their other colleagues in the room who've been helping out with the report as well. I'm very pleased to have everyone here today to talk about a new report that we've just finished sort of the first round of called Remaking American Power, which takes a look at the energy sector impacts of the Clean Power Plan. And so just by way of background, I'm going to talk a little bit about why we are doing what we're doing and what stage in the process we're at, why we think it's important, why we decided to partner with Rodeum and why they decided to partner with us as anybody's guess. And then where we will be going this fall. So for those of you who are CSIS Energy Program regulars, and I see a lot of you in the audience, a lot of what we've been doing over the last several years is looking at how oil and gas production in the U.S. and the production surge in the U.S. has been changing things fairly materially, both through the United States in terms of an energy market, energy policy, energy technology perspective, but also for us geopolitically as well. And the Rodeum Group and Trevor, a principal at the Rodeum Group, and John Larson, both in your World Resource Institute past, but also at the Department of Energy and now with the Rodeum Group, have long been looking at sort of decarbonization policies, especially in the electric power sector, and how to sort of model and understand those impacts. And so we thought that that set of skills when matched together actually allowed us to get at something that we think is actually a really important issue, which is in the face of what has been a very dynamic energy sector in the United States over the last five years in particular. When you add a policy into the electric power sector that is looking to reduce emissions, what kind of impacts does that have, not only on sort of larger economic impacts for the country, but also in terms of what are the impacts, both on the national level in terms of the fuel mix, energy, natural gas production, coal production, but then how those things play out on a regional level as well. And so where we are today is we've come up with preliminary findings, and we call them preliminary findings because they look at a subset of what we're going to look at, which is mostly some of the national level impacts, both in terms of what it does to the energy sector, but also what we tried to do was bound how we were looking at it by design features that states have as options for dealing with this new rule and sort of bound them in a way that we think is interesting for trying to derive some of those conclusions for what's happening in the kind of impacts that you would see in the energy sector. And so that's what we're going to present today is some of those sort of national level impacts. We will have a bit of a teaser at the end about what this could mean on the regional level and why we think that's important. I just want to say, you know, the Clean Power Plan and the rule itself is a highly politicized issue, right? It has a lot of uncertainties and we'll talk a little bit about the ones that we expressly don't address. And all of the sort of normative or design feature issues that we don't seek to address. We are going to be looking at different parts of the impacts of this rule or different potential rules as it might sort of come out in the end. Excuse me, different issues that people present or the way the EPA thinks about some of the challenges in the draft that they've put forward. But we're not going to deal with a lot of those, right? So we don't deal with reliability issues. We don't deal with, you know, estimating benefits and sort of the, we do estimate benefits, but we don't get into sort of the, you know, the art and the science behind that. And we really are trying to add value on the decisions that states and regions and in fact, sort of national level policymakers have to take into account when they're trying to think about the best possible economic outcomes of implementation of this kind of a policy. So I'm going to leave it there. I'm going to turn it over to Trevor who will do some more introductory comments. We'll go through the presentation and then hope to have a bit of a discussion. Sure. Thanks, Sarah. And thanks everybody for turning out today. The why partner with CSIS is an obvious answer that it's, I think there is no shop that has done more to provide objective fact base analysis and insight on energy market and policy dynamics in DC than CSIS and then Sarah and her team in particular. And so, you know, coming to this study, our intuition was that understanding the impact of the clean power plan, the potential impact in the electric power sector itself required understanding the broader energy market context in which it's going to be implemented, but also that the clean power plan will not just impact the electric power sector. It will impact other parts of the energy market and it was important to take that into account as Sarah said. And I think as you'll see in the results that we're presenting today, why that approach is important and the kind of benefit of this partnership, which is also just a pure joy. The real brains behind this operation on the RHG side are both my colleague, John Larson and then Shashank Mahan, Whitney Kachem, who are sitting in the front row here. I'm just their puppet mouthpiece and I will in very short order turn it over to John for for real insight and intuition. Could we go to the, we have a clicker here. The EPA proposal for those who have not read the 800 page federal register entry themselves. Though it's a real bodice ripper and I encourage you all to go check it out. Then we'll go over the kind of scope and methodology of this particular study, walk through five key findings from the analysis that we've done today and then tee up what we're going to be looking at in the next couple of months for a full report to be published in October. What we're hoping from this session here is to get your reaction in the Q&A to what we're presenting now and insights. As Sarah said, the kind of universe of possibilities to analyze with the Clean Power Plan is vast and so in our narrowing down process getting a sense of what's going to be most important and informative as stakeholders try to navigate this process in the months ahead. Thanks, Trevor. So quick overview of the EPA Clean Power Plan, 800 pages in two slides. First we're going to just start with process. Right now we're in the design phase of the Clean Power Plan as proposed in June. The common period ends in October, mid-October and as we move forward, EPA is expected to finalize the plan in June of 2015. After that we're going into the implementation phase. This is where states have to construct their own implementation plans and get them approved by EPA. That process could take as little, it's supposed to take as little as a year but could go as far as into 2018. Then finally 2020 is when the compliance period starts and from 2020 all the way through 2030 and beyond, the Clean Power Plan has emission rate goals that each state is going to have to meet. And when you consider those emission rate goals, it's basically a pound per megawatt hour emissions rate averaged over the entire fossil fleet in a state. That's the goal that needs to be met. States can submit their own individual state plan or cooperate with other states. We think that's actually very important. We'll talk a lot more about how we see that playing out in the energy markets. And it's important to remember that states can implement virtually any program or policy they want so long as they can demonstrate it's going to meet the goals and that those those standards are enforceable. So it's actually very unclear how this will really play out. We probably won't know for sure until more like 2019 but we can still get a better understanding today. And EPA set its goals using four building blocks. One is heat rate improvements of coal plants. Another is displacing or fuel switching from coal to natural gas. Third is fuel switching away from fossil fuels towards zero emitting generation and then finally demand side energy efficiency. So with that, back to you Trevor. So like we said at the start our goal was not primarily to provide new insights into what this would mean for the electric power sector per se but for energy markets more broadly and so to do that we use the national energy modeling system used by EIA for the annual energy outlook because it combines both detailed representation of the U.S. power sector and broader modeling of the energy market. So from oil and gas production to coal production to to downstream impacts in residential and commercial buildings. And the results from that analysis we present at a national at a regional and at a sectoral level some of which we'll present today and the rest of which will be presented in the full report in October. As was already mentioned several times the ultimate impact of this proposal will depend on the state implementation plans that are developed over the next several years. And so rather than being predictive about how states will develop those plans what we're trying to do with this analysis is assess the impact of an economically efficient economically optimal way of implementing those plans testing out two major design variables. The first is the extent to which states cooperate in both developing and implementing their plans. EPA has allowed for states to submit implementation plans jointly and comply as a block rather than as individual states. So you can imagine for example the New England states that are part of Reggie which is a cap and trade program that covers a number of Northeast states submitting a plan together that's a possibility. So we look we bookend outcomes we look at a scenario where you have a cooperation between all 50 states to set one goalpost and a scenario where each state although as I'll point out in a second in our modeling that's done by power market region which is slightly larger than a state has to comply individually to highlight how that impacts the energy market results in the costs as states consider whether or not to try to cooperate in meeting these targets or not and then the second major design variable is the extent to which states include energy efficiency crediting as a compliance mechanism. EPA has allowed for that in the building blocks that that John mentioned. EPA includes energy efficiency potential as one building block that doesn't necessarily mean that states need to credit energy efficiency as a compliance pathway but they're provided with that option. So again to bookend we look at one scenario where no energy efficiency crediting occurs and another where all states credit energy efficiency at the levels that EPA outline in their in their building blocks. For the national cooperation versus regional fragmentation bookends we are looking at power markets the 22 power markets in the US and in the national cooperation case send a single emission rate target for all states assuming that there will be interstate credit trading and in the regional case each region has it has the emission rate target specifically defined by EPA and then in scenarios where we explore crediting energy efficiency we use EPA's efficiency cost estimates and impact estimates directly. So just to walk through what we're going to show today and then what's going to be presented in October. So those we have three scenarios national cooperation with the national cooperation without EE and regional fragmentation with energy efficiency. There will be three additional scenarios policy design scenarios included in the report in in October. Also in October we're going to explore how different developments in the energy market could impact those results. So both if shale gas resources which as you'll see in a minute is an important variable prove to be higher than currently projected or lower than currently projected if export demand for natural gas in the form of LNG is higher than currently committed or lower than currently committed and in terms of results we're showing results from those scenarios in terms of energy prices energy expenditures we're looking at compliance costs and benefits and then looking upstream it changes in natural gas production prices and revenue and coal production prices and revenue and we'll walk through those today. There are a number of developments that could occur between now and when state implementation plans actually take effect that could make their impact different than what we're modeling here today. EPA could modify its proposal between now and when the final rule is issued next summer. You could have legal challenges that delay or change elements of the rule and there's also differences in how energy prices energy demand develop that could be beyond the scenarios that we include in our sensitivity and would obviously lead to different results. So again this is not to be predictive of how states will comply and what the impact will be but to show the range of possibilities. All right so to get us started on the key findings the first key finding from this analysis is that the shale boom of the past few years makes compliance with either the coin power plan or other emission reductions policies relatively affordable compared to before the shale boom occurred. So a little bit of background that growth in shale resources over the past decade and the reduction in natural gas prices in the U.S. as a result have lowered the cost of natural gas fire power generation relative to coal fire power generation which is the slide that you see on the left and that change in relative prices has led to a significant change in generation mix. So as natural gas fire generation has gotten cheaper more of it has dispatched as relative coal generation has gotten relatively more expensive less of it has dispatched to a point where in April 2012 natural gas produced as much electricity in the U.S. as coal for the first time ever. Since 2012 we've actually seen a rise in U.S. natural gas prices which further underscores the sensitivity of power sector outcomes to changes in fuel costs as natural gas prices have risen over the past year year and a half coal has regained market share in U.S. That switch from 2007 to 2012 in generation from natural gas from coal to natural gas helped contribute to a fairly substantial reduction in power sector CO2 emissions over that time period alongside the recession improvements in energy efficiency and an acceleration in the deployment of renewable energy. Importantly though as that switch has reversed and as coal has regained market share in the U.S. CO2 emissions in the U.S. have risen total CO2 increased in 2013 and under current policy the EIA projects that power sector emissions will stay either flat or increase modestly in the years ahead. So low cost gas helped deliver significant emission reductions but we've picked about as much of that low hanging fruit as we can it is unlikely that we're going to see additional power sector emission reductions just because of low cost gas. However that gas changes the cost and the dynamics of policy aimed at reducing emissions as we see in our results analyzing the queen power plan. And so the first result side on the left is a reference case generation mix going out from 2010 to 2030 and the the two lower areas red and orange are coal and gas and they largely follow the emissions chart that Trevor just showed and coal generation stays about flat into the future whereas gas rises to meet overall demand. When you add in a emissions performance standard such as what's contemplated in the clean power plan you change the incentives for generators in the marketplace and it can take further advantage of some of the and we see that it takes further advantage of some of the low cost shale gas resources available. So what happens is you have an emissions rate standard any generator with an emissions rate above that standard incurs a penalty and runs and has a reason to run less in the market because it has a higher cost. Meanwhile any generator below that emissions standard mostly low carbon generators like natural gas combined cycle and renewables have an incentive to run more and that is how you meet the emissions rate but it also changes the overall market dynamics in a way that shifts generation. You can see on the right hand side one of our scenarios the national case without EE that shows that generation from natural gas increases substantially while cold generation goes down. This shows you the most cost-effective outcome to meeting an emissions rate standard solely through generation mitigation options. That generation shift due to the switch ins and incentives it's largely met through increased generation at existing gas plants. So on the reference our reference case on the left hand side shows you additions of capacity into the future with mostly natural gas and renewables projected to meet demand into the future with no policy and again you know existing gas runs more to meet the emissions rate standard but new gas also comes in to help get you to the finish line and you can see a substantial increase in natural gas capacity additions into the future relative to 2010 in this chart and then meanwhile you see the same shifts and incentives force more coal to the sidelines and more coal coal capacity gets retired under the under the policy case. Again this is one of our cases we're going to show you how that outcome changes as we consider different design elements. So when you have that shift in incentives in generation and changes in capacity you see fairly big emission reductions and the green line here is our is our national case with just the generation side options considered and you can see emissions go down substantially out into the future even lower than the EPA's own projections of the clean power plan. Big reason for that is is something that I think gets lost when we think about emissions rate standards. They do not predetermine an emissions outcome. They are very they are dynamic and the outcome is sensitive to market dynamics and policy design. And so you know different market dynamics around shale gas for example or or any technology costs for renewables could change your emissions and your emissions outcome when you meet the same emissions rate standards. So that's important to know and that's a big reason why our green line is lower than the red line of this particular scenario. So moving on to cost on the on the left hand side you can see we see that this big emission reduction from the shifts in generation incentives actually achieves big big gains with relatively small impacts on electric rates about 4 percent. In this case we see rates go as high as almost 10 percent nationally in other cases which I'll cover later. That is within the same area and range of what EPA's rate impacts are projected to be. Just for reference when EPA did an analysis of Blacksmith Markey they they projected something closer to 14 percent or 13 or 14 percent rate impact. So you know we're just to give people kind of orientation to what what this means. Blacksmith Markey is a very different policy but the Clean Power Plan and Clean Power Plan achieves less reduction so you have other reasons for that difference. On the right hand side the costs of the policy are are not zero. They are about 12 billion dollars in our national generation side case but they are still relatively modest in in the big picture and when you we use EPA's methodology to consider not just to consider the benefits in the form of public health benefits and avoid climate damages and we see fairly large benefits in large part because we see a lot of emission reductions. So another key finding is that when you include energy efficiency it reduces both costs and benefits of the policy. So this is change in generation relative to reference and on the left hand side is our national without EE case where you're just meeting the standard through generation side options and on the right hand side you're seeing the same national cooperation that now we've added in energy efficiency crediting and you can see a couple of things. First off on the on the generation side only case on the left you see that same coal to gas which we talked about previously that is the most cost effective pathway to meeting the standard. A given current expectations on gas prices and technology costs for renewables when you add in EE you see because you're reducing now you're now reducing demand from energy efficiency. You have a lower amount of shift between coal and gas but you still have a shift between coal and gas in fact that's the still the primary way you get to the standard after energy efficiency is considered. Just the magnitude of that change is much smaller than when you're when you take EE out of the equation. That also means a difference in emission reductions. Again I mentioned before power emissions rate standards don't predetermine your emissions reduction outcome and this is another good example of that with on the on the left hand side without EE we have higher emission abatement than we have with EE. Part of that is the policy design and market dynamics I talked about. The other thing is when you open the door to crediting EE you do bring in the option of crediting energy savings that states we're going to pursue anyway. That means you you may not get as much emission reductions as you anticipated because you're crediting actions that were already effectively in the reference case. We do account for that in this analysis to some degree and you can see that's another reason why these numbers are different. And you know when you have different impacts on the generation abatement side you should expect different costs. So on the left hand side here again is electric rates. They move up modestly compared to the national without EE case this is because EE isn't free. You have to pay for it that comes at a cost that gets rolled into electric rates so rates go up. But when you achieve real energy savings from those investments your overall electric bills go down and you can see electric expenditures go down by a little over 2% relative to reference case in our with EE scenario and overall energy expenditures also go down relative to reference case. In the meantime your costs could potentially be higher. There's a lot of variation on the in in a debate about how the how the cost of EE should be accounted for. We present a low and a high end range here. It's quite a big range of how the things could play out. But on the high end you could actually see higher compliance costs to meet the emissions rate standard by including EE. But you do get this consumer benefit from lower energy bills. Key finding 3 cooperation lowers costs. This is a bit intuitive but it's important to put some numbers around it. So this is the same idea about the change in electric power generation relative to reference but this time we're looking at the difference between national cooperation and regional fragmentation. On the left hand side is the cooperation on the right hand side is the all these regions have to meet the standard on their own. And I think the most important takeaway here is you still beat the standard through cold to gas switching. That's your primary at least cost option given our current expectations around prices. You actually get a little bit more in the regional fragmentation case. You now have 22 different standards which means you have 22 different shifts in incentives region to region and that does change the national generation outcome to some degree. And when you have a bigger cold to gas shift you have greater emission reductions relative to a national program because of this fragmentation driven gas shift. And then when you think about costs you can see practically a factor of 2 impact in rates relative to a national cooperation case. This is again somewhat intuitive but also very important. The closer the more states can cooperate the lower rate impacts will be for consumers nationally. And that's an important thing to consider in this analysis. You do also see a domino effect into your expenditure story when rates go up like that. And then meanwhile you're talking about potentially a difference of about $10 billion in cost between national cooperation and regional fragmentation. So that will turn it back to Trevor. Great thanks. So those shifts in generation that John outlined have significant impacts on other parts of the energy sector. Important to stress that this is our estimate of what the most cost effective generation side solution would be at currently projected natural gas prices and renewable energy costs. Those gas prices could be different which would change those outcomes and that's something we're exploring in the sensitivities for the October report. Gas prices could be different, renewables costs could be different. Also it's entirely possible that states would develop state implementation plans that weren't the most cost effective possible option. And it's possible that renewable or other technology specific supports will be included in state implementation plans that leads to different generation outcomes. But if states implement what's currently seen as the most cost effective approach the upstream impacts are considerable that shift from coal to natural gas generation has a potential to increase total US gas consumption by up to 40% relative to what would have occurred without the clean power plan between 2020 and 2030. Because of the shale boom the vast majority of that increase in US gas demand is met through an increase in US natural gas production mostly from shale with a small change in our natural gas trade position a slight reduction in natural gas pipeline imports from Canada and a slight increase in natural gas pipeline a slight decrease in natural gas pipeline exports to Mexico sorry increase in natural gas imports from from Canada but 90% or so of that increase in consumption is met through domestic production. Similarly a shift from coal to gas means a lot less coal consumption and we see up to a 47% reduction in US coal demand as a result of that shift in power generation under the clean power plan. Most of that reduction in coal consumption is due to reduction in coal production. The ability coal miners in our modeling have some ability to mitigate that impact through higher exports assuming current export coal export capacity. Important to note in this analysis we don't project changes in coal export capacity like the currently proposed coal terminals on the west coast which would have an impact on the outlook for US coal producers resulting from this policy. Given current EIA projections for the shale gas resource base and cost in the US that 14% increase in consumption 11% increase in production occurs with only a modest increase in domestic natural gas prices so 9% on average between 2020 and 2030 at Henry Hub relative to what will prices would be otherwise. So EIA projects an increase in natural gas prices in the years ahead and in the presence of the clean power plan those natural gas prices are about 9% higher at Henry Hub than they would be otherwise. Delifted natural gas prices rise by about two and a half percent in that scenario relative to what would have occurred otherwise and similarly a decline in delivered coal prices in the US due to less demand. So you add an increase in natural gas production to a increase in natural gas prices and you get a significant change in natural gas revenue both to producers at the wellhead and total sales revenue that includes pipeline distribution. So up to a 20% increase in the amount of money US natural gas producers make each year relative to what they would make absent that change in power sector demand for natural gas and a you know up to $28 billion a year decline in coal sales revenue in the US as there's less demand for coal from the Padua River Basin in Wyoming, Illinois Basin in the Midwest and from Central Appalachia. The magnitude of those upstream impacts in dollar terms that shift from natural gas production revenue to coal production revenue from an economic standpoint is actually much more significant than what's occurring downstream and the changes in energy costs as you can see with the slide on the right. So in the national without EE scenario total nationwide energy expenditures increased by a little more than $3 billion a year on average but you have an order of magnitude larger than that change and production revenue from coal to gas. So that's one of the more significant economic stories we think of potentially the clean power plan and something that to date has not gotten much attention everybody's focused on what's going to happen to electricity prices in the electricity sector directly and that change upstream has important impacts on the regional economics of the clean power plan and this is in previewing some findings that we're going to go into a much more depth in the full report in October and as different parts of the country evaluate what this means for them what kind of state plans they develop who's going to win who's going to lose what's the impact it's important for states to think about the upstream effects as well as the downstream effects. So we do this analysis by census region I know nobody thinks of themselves as living in a census region I have to repeatedly check to see which census region I live in but it is a kind of a level of aggregation that is kind of sufficient to derive useful insights about the impacts and and what we present both today and in our October report so take a look at the map figure out which state you live in and just remember your color if you're green or yellow or orange because I'll I'll flow those colors through to the to the rest of the slides. The as John said EPA took a building box approach to developing the clean power plan what they did is they looked at abatement opportunities state by state using those building blocks so how much emission reductions could occur in a particular state due to efficiency due to increased deployment of natural gas combined cycles due to renewables due to co-efficiency improvements and then they added that all up to create the emission rate target for that state because emission reduction opportunities vary by state the compliance obligation under the clean power plan varies by state as well so the west south central census region for example which is Texas, Oklahoma, Arkansas, Louisiana has a per capita abatement expectation that is more than twice as large as many parts of the Midwest and in New England that's already attracted some attention as people try to figure out what's the regional impact of this plan how balanced is it by region but an important complement to that story is looking at the regional variation how the upstream impacts will be felt not just the downstream compliance costs so on this slide we compare the change in production revenue from coal which is above the below line versus natural gas which is above the line between 2020 and 2030 again relative to what's projected to occur without the clean power plan in place and we do that both with efficiency crediting and without efficiency crediting and you see quite a bit of variation across regions so that west south central region that has the largest compliance obligation also sees the largest benefits in terms of increased natural gas production up to a 17-18 billion dollar a year increase in average natural gas production revenue relative to what would have occurred otherwise offset slightly by a billion dollar a year decrease in coal production revenue right meanwhile the the mountain region sees a seven and a half billion dollar a year decrease in coal production revenue largely concentrated in my home state of Wyoming which mines 40 50 of the country's coal partially offset by an increase in natural gas production revenue but not fully offset the those dynamics are largely the same with efficiency crediting and without efficiency crediting but the magnitude changes right because crediting efficiency requires less fuel switching in the power sector to meet the target the upstream impacts are less pronounced and as with the national case when you when you compare the magnitude of those upstream impacts to the magnitude of the downstream impacts it highlights why it's important to think about this in the broader energy market context right so again west south central which is a net increase of up to 17 billion dollars a year and fossil fuel production revenue sees a increase of 1.1 billion dollars a year in energy expenditures so if you're in the west south central census region that's the more important economic story for you that's going to have a bigger impact on the composition of the economy in your region than the changes in energy costs resulting from the cpp likewise if you're in wyoming the rate impacts in wyoming you mostly use bonneville hydro power the rate impacts are probably going to be pretty modest your equities in this debate are all about coal production that's not about the price of electricity in the state and that's why it's important we think to take to take these dynamics into account as well as and i think sarah is going to speak to this in a second the the importance of thinking about how we link this conversation about power sector policy to energy policy elsewhere about pipeline infrastructure and other supply decisions so basically that was an overview of where we are to date right and as trevor just alluded to we think that starting the conversation now because people have options about how they engage this conversation about what your options are what the design implications or the implications of different design decisions are is an important discussion to have in light of or in the context of these broader energy market impacts not just the downstream but certainly taking the upstream into consideration so what we're going to do for the fall is extend the analysis to include additional scenarios so as you can see we'll do a regional fragmentation without energy efficiency regional cooperation additional regional cooperation options and then looking at playing around this issue of energy efficiency and the cost effectiveness of those policies it's a as i've learned i didn't know nearly as much about this when we started that is quite a conversation so we're gonna unpack it and hopefully an understandable way as possible and then really you know some of the stuff that we we have been spending a lot of time thinking about here at csis is there's a lot of things you can think about vis-a-vis the opportunities associated with the shale gas boom as long as you'd spreadicated on affordable reliable supplies that can get produced and move where they're needed there's a lot in that sentence and so what we're going to do is look at some of the scenarios based on the variation in gas prices right and the differential between gas and coal prices that might elicit and then also some other big policy issues that we've been looking at which is the potential range of options in terms of gas lng exports or gas exports and more generally and what that might mean those types of market sensitivities might mean for some of the broader energy market conclusions that we've been able to show today and i think it's really important because as trevor said it will help illuminate sort of on a regional basis where there may be other energy policy issues either dealing with production or dealing with infrastructure or or dealing with you know power sector choices and decisions that will allow us to help people understand what their options are for sort of engaging in this discussion and perhaps a more robust way than the discussion has been to date and so we'll be hopefully that last sort of finding will help illustrate why the regional perspective on this is really quite important not only for sort of informing the national discussion but also in helping states and regions who are thinking about this in a real-time basis about what their options are and how they might want to think about those in terms of where they might want to pursue cooperation or what kind of policies they would want to put in place so if i've not forgotten anything i think that that's that's our sort of preliminary findings again we've been talking about this with folks over the course of the last several days and actually i've already received some insights that are helping us to think about how we can incorporate either design features or certain sensitivities that'll help us be be even more instructive to informing the debate that we're looking to be helpful to and so we thank you guys for listening and we would love to sort of have some feedback on some of your questions and a bit of a discussion so there are microphones in the back the only thing i would say is please just wait for a microphone because we are webcasting the event and then state your name and affiliation and you can either make a comment or but we always like it when it sort of ends in a question that helps us know where to go from there so Kevin thank you Kevin massive stance on thanks for a great presentation this is one of the most sophisticated analyses i've seen of this issue and of course the energy efficiency issue is really where this this seems to break down especially in your analysis i'll get into the legal defensibility of energy efficiency as a building block because this is a technical i guess quantitative analysis but i'm trying to understand the issue of emissions abatement and the value of energy efficiency of the energy efficiency pathway relative to the the non-energy efficiency pathway that you guys laid out i'm not interpreting what you just presented as saying that if energy efficiency is included the emissions abatement outcome will be lower than if it is not included and i guess a follow-up question is that is if energy efficiency is included in the in the state implementation plans is there what happens post 2030 because you get a i guess you go after the energy efficiency opportunities that exist to a certain point but there's diminishing marginal returns on on energy efficiency so would the usb on a what kind of post 20 emissions pathway with the usb on if energy efficiency was included in state state implementation plans relative to the alternative which is without energy efficiency yeah so there's there's a lot in that set of questions the first thing is i'll kind of restate one point which was you know an emissions rate standard doesn't predetermine an emissions outcome you know it's going to go down as you ratchet down the standard but you don't know where you're going to end up because of things like prices for different fuels and technologies level of electricity demand and what types of policies you're using to get to that emissions rate goal so there's a variety of things there ee is is material to what the actual emissions outcome is part of that is you know i think when people look at ee as a building block in setting up the standard you know it's considered kind of a one for one switch out between that and renewables you know the next megawatt gets a proportional reduction in emissions but what we see in the analysis is that the market impacts of that play up very differently you know it's all about what ee displaces in the market and we see it largely displacing not baseload but natural gas so that's a lower emitting resource and that has differences on the emissions rate on the total emissions outcome on your question about 2030 and beyond first of all we assume the standard stays flat after that because that's what the clean power plan currently contemplates as far as ee is concerned we have cost escalators in in our cost of ee that go up as so assuming you're kind of working your way up the supply curve of ee but and that's consistent with epa's assumptions but we we don't think that ee you run out of energy efficiency the retail electric demand forecast through 2030 you know electric u.s electric demand stays almost flat for for that decade so it starts to rise after that a little bit but it's not it doesn't rise nearly at the same rate as we see in the reference case forecast because it took me a long time to get my head around this too like hours of conversation with john like to explain that so let me see if i can dumb it down a little bit um so two things going on we think first is that creating a baseline against which you credit efficiency is hard right you have to project like what would efficiency improvements have been otherwise and then you claim credit for your departure from that and we think that there will likely be a modest amount of hot air in that analysis that states will credit efficiency that would have occurred so that's reason one and that's that's captured to some degree in our analysis right this now if states if they guarantee that all of the efficiency is additional and they can successfully implement that then you're not going to see as large of a difference as we show there but we assume that some that's going to occur the second is that when epa set the the rate goals and identified how many credits you get for efficiency versus how many credits essentially you get for natural gas and others the assumption was that every megawatt hour of demand reduced is going to proportionately back out natural gas coal everything else in the market it turns out that efficiency improvements don't proportionately impact the power sector they occur at different times of the day which have disproportionate impacts on generation and so what we're finding in this analysis is that that there is a the the emission that gets the generation that gets displaced by efficiency is less coal heavy than the generation that gets displaced by by supply-side solutions does that make sense the other kind of related point i would i think the question is good on we're looking at a 2020-2020 time horizon we have to think about how this sets us up for the next phase i think the efficiency point is right the other point that jumps out at me is because of the shale when we have this really large quantum of abatement that we can grab through dispatch change right going to hold a natural gas that is a one largely right over the long term we are going to if we want to reduce emissions anything like you know 80 percent by 2050 you have to move you either have to equip that natural gas with ccs or you have to move to nuclear renewables right so another question is if under this policy we comply just through coal gas switch which is in our modeling the most economically efficient option in the next two decades what does that do to the cost of emission reductions over the longer term i think that's an important question too other questions yes sir um could you just talk a little bit more about why you chose ee is the sort of variable to isolate first like why is that something you identify as such a black and white differentiator there's a few reasons i mean one one is uh ee is kind of novel in this proposal as far as a pollution reduction uh goal in the sense that most epa regulations consider just supply side options and and this one's a little different so we thought that was an important distinction another is if you look at climate policy in the states right now most state explicit climate policies don't credit ee you've got reggie which is a cap and trade program you've got california cap and trade program and so they have energy efficiency programs it's not that ee isn't valuable to their to their overall policy goals but it is not directly linked with the carbon policy so you know when thinking about how states might implement the clean power plan we thought that was an interesting dichotomy uh where you know most state efforts today have been a generation side effort uh in in dealing with carbon specifically and also just if you're thinking about the broader energy market impacts the two variables we isolate the extent to which efficiency is credited in the level of interstate cooperation we think are the two most significant in terms of shaping with the ultimate energy market we've got uh okay uh in the back right there please bruce hi uh bruce phillips and uh thank you for the presentation and and the study is just tremendously interesting i'm sure it'll be useful to all sorts of folks uh one question on the on the gas supply assumptions your results uh i think show a lot uh greater increase in the demand for natural gas in the united states than some of the results from from epa in the regulatory impact analysis but the price increase at henry hub that uh you're forecasting if i understand this right is more or less sort of in the same ballpark as as what epa is suggesting and so i guess there's some underlying differences in the gas supply assumptions in what epa was using in its ipm modeling and what you're using in in nems and i'm wondering did you uh did you rely strictly on the nems model for the for the underlying gas supply assumptions or did you develop some of your own assumptions that that you then folded into the nems modeling system we just use the nems assumptions and then what we'll do is we'll book in a high resource case and low resource case to test the sensitivity to that i don't know ipm very well i mean my understanding is that just has a simplified gas supply curve that feeds into the power park whereas in nems it's a kind of field-by-field cost-based production function you know the it's been a very difficult past decade and projecting shale production and prices in the u.s uh you know each year i think we've been surprised uh by uh on the upside in terms of production and on the downside in terms of price but that could of course change at any point right we could start to be disappointed in terms of how much shale gas there is available and at what cost and so that's why we'll test out that and to see how sensitive those results are okay we had a question here and then off the line here so thank you um thank you very much for the nice great presentation my name is Konishi Mer from Tepco, Washington. My question is when you assess the level of pure switching from coal to gas what kind of mechanism do you assume to be implemented and do you assume any kind of carbon pricing uh even implicit or expressed kind of shadow pricing yeah i mean we're we're essentially because the implementation picture is so uncertain you know you've got 50 states all making different policy decisions we we decided to not go down that road at all and just simply say let's meet the emissions right goal in the most cost effective way possible which is a tradable performance standard so any generator above the the emissions rate goal has to buy credits from generators below the emissions rate goal so that's the policy that we that we captured and then obviously with our sensitivities we with our different scenarios we have different frameworks for that that that does produce a credit price that effectively monetizes that shift in incentives for generators in the market i wouldn't call it the same thing as a carbon price but uh and it has different impacts for both the incentives and for rate impacts and all sorts of things it's not the same thing as a carbon tax or a cap and trade program but but that effectively is how how it works. Adriana Hennie University of Zürich Switzerland um also i want to really thank you for that um really a great presentation of the proposal. My question is carbon dioxide emissions are only one part if we talk about greenhouse gas emissions and now they're important and in fact much more powerful greenhouse gases methane and with with natural gas we have in the in the cycle from the production of natural gas until it gets burned in the power plants we have a lot of leaking and emission of methane into the atmosphere and i mean roughly what we know now if we have leakage of methane of more than 3.2 percent of the natural gas the natural gas doesn't have any um advantage towards coal in uh when it comes to greenhouse gas emissions or climate warming footprint and since the the gas the goal to gas switch would obviously i mean the additional gas natural gas would obviously come from shale gas as conventional production is platotors or declining since a long while in the U.S. most of the studies that are out including those of various U.S. government agencies clearly show that leakage of methane now is probably between three and six percent of the gas produced so that would mean with the status that we have now there is no climate footprint advantage of natural gas over coal to expect so a serious issue that would have to be addressed is to reduce to massively reduce the leakage of natural gas in the production cycle until it gets to the power plant is there anything provisioned in the in the EPA proposal to address this issue so that the switch from coal to gas would actually result in a in an advantage on the global warming front we could spend the rest of the session on that question obviously and i am benefit of being able to punt on it because EPA proposal does not require states to take into account like well i guess it's a ghc standard but it's just from the power sector directly um what we have in the analysis is a projection of the increase resulting increase in natural gas production and so i encourage you to apply your own leakage estimate to that and to come up with your conclusion of whether you think that's you know and that benefit or or not my general intuition is that at the EPA inventory leakage estimate rates that the that would not materially change the picture relative to what we showed you today in terms of climate benefits if you think that average leakage rates are higher or considerably higher than the EPA inventory estimates then that of course would change would change the picture i would just add that not only does EPA not require states to consider uh state the life cycle emissions profile of natural gas or any of the abatement options i don't believe the clean air act requires EPA to consider the life cycle abatement uh emissions of of the power sector uh standards they they're only looking at regulating co2 from fossil fuel power plants and that's the sole focus of the regulation right i mean that's another point you know which is you know that doesn't mean this one standard is the only thing EPA is doing on climate change you know there's there's currently multiple white papers out there and and and they're starting the process of regulating methane from a variety of sources i haven't followed that all that closely but obviously you know that that's another i mean you said we should be looking at that well EPA is yeah one of the things that we're buying ourselves more time to sort of deal with is that there's a whole host of issues i mean we've sort of dug into the energy efficiency ones because it's a building block right but there's a whole host of policies and issues out there that would materially impact the effectiveness of a lot of these policies right so for example lots of states have renewable energy policies and they may have a desire to implement stronger renewable energy policies that would materially change the outcome here based on their desire to have more renewable energy right so uh and similarly there's a whole you know robust discussion on trying to get your hands around the methane issue that is not included in this conversation but is nonetheless one that you could see if it was successful is going to be having an impact sort of on the actual climate benefits or sort of you know abatement benefits of this policy over that time period one of the things we're trying to to figure out is to in addition to sort of the infrastructure issues and all that kind of stuff is how to sort of include that so that people understand you know where where to where in parts of the country those other policy issues are being emphasized and we're at a national level they're being emphasized and how to think about those things so it's a it's a it's a foundational question it's an excellent question when you're getting at what the policy is actually trying to deal with it's just not something that is taken into consideration within sort of the design element so we had one right here with the blue chai and then we've got another one in the back of the glasses hi Jordan Collins with mince 11 have a couple quick assumption questions you looked at energy efficiency as a as an alternative a bit to more power generation did you take into account potential reductions in power generation from distributed generation or shifts in utility policy at like like the coupling that was one question additionally on on the renewable side what are you thinking about the technology learning curves on utility scale storage because that could definitely change the dynamic on the levelized cost for renewables and then kind of a simple question is when you say national cooperation what are the assumptions you're making on who is going to cooperate as the new reggie or is reggie going to change what are you thinking about who's going to partner up or who's not and then finally if your final proposals are going to be out in fall the folks who are submitting comments might not have the benefit of your results in time to submit comments to the EPA so I was wondering it's going to be before october 16th or not probably won't stop I could start with some of these assumption questions first off we consider the yes with DG and utility policies we didn't change anything that's in the NEMS you know annual energy outlook based assumptions DG generation does not count towards compliance here because of just the way the model structured so it's only utility scale renewables that get credit on storage again same thing we used annual energy outlook base case assumptions so we didn't change any assumptions around energy storage on national cooperation this is kind of the the gold standard for cooperation in a single national standard so every everybody's playing with everybody in this particular in that in those scenarios so that that's important to keep in mind in the final report we actually do intend to explore qualitatively you know how would cooperation how could cooperation really play out you know what types of states what kind of circumstances facilitate cooperation with which states without making you know crystal ball assumptions about you know projections of who's going to do what but just still exploring that discussion and then in the fall with regard to timing yeah it are we see the biggest value to this report I think Sarah would agree in in informing implementation not clean power design not the clean power plan design we'd love I mean hope one reason to get this out now is to get some of these bigger ideas out there into the discussion and in time for comments maybe EPA will extend extend the comment period and we'll be able to benefit from that but we really think that you know a lot of what we're learning is much more an implementation discussion than it is a design discussion yeah no I'm on the line we're working as fast as we can yeah I know it's a great point it's I mean yeah more information earlier is always better so but it's October 15th but you know what what's interesting is we've actually been thinking we've been thinking about it certainly from that perspective as well right I mean I think that the timeline is a pretty fast one under anyone's approximation and so that makes it a little bit difficult but along what John was saying you know even though we are sort of taking this two-part process right now you can actually see you know there will be a lot more process after you know the fall as well which gets to when you think about implementation when you think about sort of resolution of what you're ultimately going to end up doing there's a huge amount of preparation that goes into even getting anywhere close to doing it you know in an economically efficient way that's that's a long that's a long-term game at this point right I think it's out that you were saying you know we won't know what this looks like until 2018-2019 we see this at the beginning of that conversation and so yeah there'll be a lot of comments and I and I hope this is one of the things that people start to take into consideration but you know very humbly and maybe you guys are more prepared for it than I but I think we're still learning about the best way to express some of these you know broader energy sector impacts as well and so we don't want to jump the gun on that too because we need to identify all the relevant questions on a regional basis. Okay right there. Max Parnass, Toyota Motor in North America. I had a question kind of about how you incorporate energy efficiency and renewables into the model in the in the TSD for the document for the rule there's a whole list of how many megawatt hours of renewables are produced in each state and so on and energy efficiency savings in each state. Do you put those into NEMS and then constrain it when it runs so that it matches the IPM results or do you just let it run and determine what that is? So I guess are you trying to match up your renewables and energy efficiency to IPM results or are you just letting NEMS run and seeing what comes out? Yeah go for it. So I think this is this is really an important point. The building blocks are how EPA identified the target for each state. It is in no way an indication of how each state should comply. The IPM results do not model a basement in each state based on the building blocks. The IPM results model abatement based on whatever the cost effective most cost effective way of meeting that emission rate target is and that's the same here. So we take that abatement target that was identified by EPA by using the building blocks and then we implement that in the model and generate the most cost effective solution to reducing emissions CO2 rates to the target set by EPA. Does that make sense? Yes, but I mean I think it's important to note that if you look at the IPM results the mix of abatement that takes place in each state is not going to be the same as the building blocks for that state. Correct. That's right. That's right. That's right. Now EE is a little different and that's important. So we we are not trying to match the demand forecast in IPM in that case. We are saying using the same presumption that EPA did in their RIA analysis where we say okay one and a half percent per year retail sales savings happen in each region all the way out through 2030 that gets you an energy savings amount that we then require the model to start with. So we say okay take that off of the top for retail sales demand of electricity and then let the model go from there. So there's actually rebound in there you know energy costs less and so there's a bit more demand for electricity that that bounces back from that level and then there's the the rest of the tradable performance standard on top of that trying to meet the overall goal. So there EE is a little more complicated but it's still not matching IPM by any means. Yes sir. James saying in this pretty picture where do technological uncertainties such as whether CC US will work show up? I mean just very quick CCS is in the is a technology option in the model and in fact we see a very small amount of CCS start to come in near the end of the forecast under our national without EE scenario and that that's mostly natural gas to CCS. It plays such a small role in this timeframe that it's probably not a technology cost sensitivity that's we think would be all that valuable. A different technology cost is something that folks have asked about is the cost and performance assumptions around renewables and whether or not that's something we should explore and that's something we're contemplating you know but I'd also say that CCS retrofits of coal plants is a compliance option in the model and we don't see it happen. Any other questions? Well one more. We have two more now. Women just on the end there. Susan Blevins ExxonMobil going back to the discussion on the carbon price can you speak to how the prices that the model did calculate compares to EPA's cost per building block? No. We can't. It's not a comparable it's not a abatement per ton value. It's a credit price to meet the meet the policy constraint which is a different number and it's more about how much additional value is the next megawatt hour of low carbon generation to meet the emission standard which is a very different calculation. So I mean yeah the short answer is we don't really have a comparable output. I mean I guess you could do compliance cost over emissions per ton compliance cost. I don't know if that's what EPA used in their RIA but I think I think it's a question of comfortability and so one of the other things that they just it's not an answer to your question but one of the things that we've been considering is the way in which we can actually derive some of those comparisons based on what we've done and what EPA has done. I mean it is sort of different and so we we didn't do it for these purposes it's possible to do and your question helps us to know that it's useful to do. Yeah thanks Joe. I have a question about the suite of energy efficiency measures that are considered in the energy efficiency scenario and specifically is CHP part of that scenario or is it considered otherwise or is it as as you were responding to the distributed generation question CHP is not addressed. Yeah I mean the CHP isn't doesn't qualify because it's on the distributed generation side and actually just as far as how we did efficiency generally we actually were agnostic as to what measures happen. We just say this amount of energy gets saved so we we didn't make any presumptions and use the cost. I mean it's basically the EPA's estimate of the cost of efficiency versus EPA's with EPA's estimate of how much energy savings occur so it's it's the whatever the technology costs that are built into those assumptions. Yeah. Additional Kristy. Oh I'm sorry. Kristy Tezak from Clearview. When you guys are going to look at the power market details are you going to do it on RTOs or how are you going to take a look at that because from a power perspective as you know census regions are pretty irrelevant although they are darn helpful when you're marketing on the hill. But you know beyond you know so there's a you know we've talked about the example of you know Reggie in the northeast states well northeast states trading which each other is all well and good but if you're looking to monetize your tradeable performance standard then wouldn't you love to get in bed with your cousins from another part of you know another part of the interconnect. So when you're looking at power markets are you going to keep it at the RTO level for simplicity's sake given the fact you have 10 minutes to finish this or are you going to look at maybe perhaps even interconnect wide. As far as results which I think where we were talking about providing detail with the 22 power market regions we showed you earlier on are probably the most granular we'll get as far as kind of what we might show and that largely follows RTO boundaries not not not perfect. But you know you can get some of that and then and you can certainly get interconnect wide numbers that way that that's relatively easy. As far as any policy inputs as far as who how trading might happen more more aggregate than those 22 regions that's something we're contemplating but is not the easiest thing to complete both both within the NEM structure we're working with and and just you know you get into this fraught area of who should work with who right and in your analysis and that that's not I mean we can certainly contemplate some reasonable assumption there but it's still it's a trickier space. I think it's an area where I think we feel like the this framework has limited utility and providing good insights about kind of RTO specific inter-trading decisions that said I think the kind of national framework and upstream elements of this analysis can provide useful input to that so it would be a great conversation to have for folks who are really looking at those you know in the weeds design questions about the costs and benefits of different interstate trading mechanisms what type of insights from this analysis would be useful to inform of that much more granular assessment. All right well if there are no other questions I just want to say you know I know Trevor had sort of mentioned at the beginning but we get to be the pretty faces today certainly a big thank to Whitney and Shashank and on the CSIS side Michelle Melton as well for all the work they've put in thus far and will over the next few months and I hope our short snappy 40 slide presentation will entice you enough to read the much longer version that will come out this fall with all of the sort of regional and sensitivity analysis so thank you very much for coming and thank you guys for working with us.