Friday, January 15, 2010

Jeremy Firestone and the IRP

Professor Jeremy Firestone also presented comments on the IRP to the Public Service Commission Tuesday night. His comments are brief and very much to the point:
It is imperative that the IRP recognize the fundamental way in which the law of the state of Delaware has changed in the past year. Delmarva’s IRP needs to be written in acknowledgement that the existing, planned load of its 2006 IRP is the load of the past; it is not the load of the future.
First, Delmarva must craft an IRP that is consistent with new section 1020(b) of Title 26, which requires that in preparing the IRP, Delmarva:
1. Shall first consider demand response and demand-side management strategies.
2. Shall preferentially obtain electricity through demand response, demand-side management, weatherization, and cost-effective renewable energy resources before
considering traditional fossil fuel-based electric supplies.
Second, Delmarva must write an IRP that accounts to the extent possible scientific studies that estimate environmental externalities. Importantly, the National Academy of Science recently released a review of health externalities of fossil fuel generation. It found that on average, US coal plants cause health externalities equivalent to 3.2 cents/kWh and the dirtiest coal plants, 12 cents/kWh. These costs have to be added to the cost that Delmarva can procure these energy sources. It does not stop there however; Delmarva must also account for the environmental externalities such as direct wildlife impacts of the air emissions associated with fossil fuels and the discharge of cooling water, not to mention climate change. As it also must account for these on a life-cycle basis, it must account for mountain-top mining of coal as well.
In light of these developments, the reference case should not be status quo ante—one that assumes a 20% RPS by 2019, which is where Delmarva already effectively will be given the land and offshore wind contracts it has signed. Rather, the reference case, should conservatively assume that Delmarva has contracts for 30% renewable by 2020. Delmarva could still analyze the existing, outdated case, but it should be viewed as a step back, not a reference.
In addition, the IRP should include scenarios with aggressive renewable targets such as 40% and 50%.
Delmarva should run variations on these, including a price based on additional purchases from BWW at the BWW-Delmarva price. All scenarios should use 2012 as the start date for national carbon price. They should base natural gas on NYMEX. They should also run with PTC and separately assuming the ITC is extended to 2016 for offshore wind.
A sensitivity analysis also could be run with a slightly lower “effective price” effect (that is, the differential between the wind price and local nodel price) which would show how selecting out-of-state land-based wind rather than offshore wind would affect ratepayer bills.
But Delmarva also must be cognizant that it is now much more difficult to site a land-based wind project in Maryland, Pennsylvania, Virginia and West Virginia given the endangered Indiana Bat and the recent case out of Maryland, Animal Welfare Institute v. Beech Ridge Energy.
Finally, the IRP must account for the new realities. Delmarva must provide a No MAPP scenario as the reference rather than assuming MAPP and only somewhat reluctantly undertaking an analysis of a delayed MAPP. Delmarva must also account for New Jersey
efforts to require a new cooling water tower for the Nuclear plant at Oyster Creek, including what it might mean for the Salem Nuclear Power Plant.
References
National Academy of Science, Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, Committee on Health, Environmental, and Other External Costs and Benefits of Energy Production and Consumption; National Research Council, ISBN: 0-309-14641-0, 466 pages, 6 x 9, (2009)
Animal Welfare Institute v. Beech Ridge Energy, LLC, RWT 09cv1519 (D. MD Dec. 8, 2009)

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