BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF:
)
)
PROPOSED NEW CAIR SO2, CAIR NOX
)
R06-026
ANNUAL AND CAIR NOX OZONE SEASON
)
(Rulemaking – Air)
TRADING PROGRAMS, 35 ILL.ADM.
)
CODE 225, CONTROL OF EMISSIONS FROM )
LAREGE COMBUSTION SOURCES,
)
SUBPARTS A, C, D and E
)
NOTICE
TO:
Dorothy Gunn, Clerk
Illinois Pollution Control Board
James R. Thompson Center
100 West Randolph, Suite 11-500
Chicago, IL 60601-3218
SEE ATTACHED SERVICE LIST
PLEASE TAKE NOTICE that I have today filed with the Office of the Pollution
Control Board the TESTIMONY OF CHARLES KUBERT,
of the Environmental Law
and Policy Center, a copy of which is herewith served upon you.
By:
Faith Bugel
Counsel for the Environmental Law & Policy Center
DATED: November 10, 2006
Environmental Law & Policy Center
35 E. Wacker Dr. Suite 1300
Chicago, IL 60601-2110
(312) 673-6500
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF:
)
)
PROPOSED NEW CAIR SO2, CAIR NOX
)
R06-026
ANNUAL AND CAIR NOX OZONE SEASON
)
(Rulemaking – Air)
TRADING PROGRAMS, 35 ILL.ADM.
)
CODE 225, CONTROL OF EMISSIONS FROM )
LAREGE COMBUSTION SOURCES,
)
SUBPARTS A, C, D and E
)
TESTIMONY OF CHARLES KUBERT
My name is Charles Kubert and I am submitting this testimony on behalf of the
Environmental Law and Policy Center where I have worked as a Senior Business
Specialist since 2002. My responsibilities at ELPC focus on renewable energy and
energy efficiency policy development and analysis. I have an M.B.A. in finance from
The University of Chicago Graduate School of Business. Prior to my work in energy
policy, I worked for close to twenty years in financial analysis and management
consulting for leading corporations. The purpose of my testimony is twofold: first, to
explain the important role that renewable energy and energy efficiency can play in
reducing emissions from power plants and in increasing Illinois’ energy independence,
and also to justify why renewable energy and energy efficiency deserve a larger share of
the Illinois set-aside allowances under the state’s proposed Clean Air Interstate Rule
program.
Illinois has four primary sources of renewable power potential: wind, biomass,
landfill gas and solar photovoltaics.
In addition, Illinois has tremendous remaining
energy efficiency potential.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
Wind Energy
Currently, Illinois has 107 MW of installed wind capacity with an additional
2,000 MW at varying states of development, including two large projects under
construction. The National Renewable Energy Laboratory has estimated that, “the total
amount of class 4 and 3+ lands combined is about 1800 square kilometers (1.2% of
Illinois' land area), and the wind potential from these areas is about 9000 MW.”
1
As
wind turbine technology improves, the economic viability of developing this resource has
improved. Already, the levelized cost (capital plus operating) of wind energy is
competitive on a per kWh basis with new coal generation and significantly less expensive
than new combined cycle natural gas-fired generation. Although Illinois does not have
the raw wind resource potential of some of the Great Plains states, its extensive network
of transmission lines and large power markets make the development of this resource
cost-effective.
Wind energy development has a number of benefits for Illinois. First, wind
energy is an emission-free resource—there are no emissions of sulfur oxides (SO
x
),
nitrogen oxides (NO
x
), carbon dioxide (CO
2
), mercury or particulate matter (PM) from
wind power. This lack of air pollution impact is good for the health of Illinois’ citizens
and good for reducing Illinois’ contribution to global warming pollution. Second, wind
energy has no fuel costs. As a result, it is a long-term hedge against rising and volatile
coal and natural gas prices. Third, wind energy creates positive economic benefits for the
state, particularly rural areas—construction and permanent maintenance jobs, lease
1
National Renewable Energy Laboratory (NREL), “Wind Powering America,” available at
www.eere.energy.gov/windandhydro/windpoweringamerica/where_is_wind_illinois.asp
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
income for landowners who have wind turbines placed on their property, local tax
revenue and all of the increased economic activity associated with these wind farms. A
single 100 MW wind farm will result in 70 construction jobs, ten permanent jobs,
$300,000 in annual lease payments to landowners and as much as $2 million per year in
property tax revenue.
2
The economic benefits of wind generation have been well-
documented. These economic benefits can be reaped while maintaining the agricultural
nature of wind project sites, as farmers can continue to farm the land around the turbines
and land can revert to full agricultural use after turbine decommissioning. Finally, wind
energy displaces the drain on Illinois’ economy resulting from the purchase of out-of-
state fossil fuels.
Biomass Energy
While wind energy is generally the lowest cost source of renewable energy
generation in Illinois, there is also potential to use biomass (from corn stover and
perennial grasses) in co-firing applications with coal or in small combined heat and
power systems. The use of perennial switchgrass in a conventional coal-fired power
plant has been successfully tested in Ottumwa, Iowa.
3
Biomass can either be directly
mixed with coal in these plants or gasified, with the resulting “syngas” being fed into the
plant’s boilers. Co-firing reduces SO
x
and net CO
2
emissions in a conventional power
plant by the percentage of capacity which is displaced by biomass. Harvesting of
switchgrass and partial harvesting of corn stover also creates additional income streams
2
Goldberg, M. (2004), “Job and Economic Development Impact (JEDI) Model: A User-Friendly Tool to
Calculate Economic Impacts from Wind Projects,” NREL, available at
www.nrel.gov/docs/fy04osti/35953.pdf. Document describes a model for assessing economic impact of
wind power development. The model software is available from NREL.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
for farmers. Each megawatt of co-firing would create a demand for energy crops from
1,000 acres or corn stover from 2,000 acres of surrounding farmland.
4
Landfill Gas
Illinois is among the leading states in electricity generation from methane
extracted from landfills. Currently, 23 landfill gas to energy projects have the capacity to
generate 130 MW of electricity.
5
There are an additional 20 landfills which according to
the U.S. EPA are candidates for electricity generation from methane.
6
Landfill gas meets
the Illinois statutory definition of renewable energy in Illinois. 20 ILCS 687/6-3 (f).
While each landfill gas project is relatively small; such projects utilize a resource
(methane) which otherwise would be simply flared or released to the atmosphere. Since
methane is a far more potent greenhouse gas than CO
2
, the capture and use of this for
power generation is highly beneficial.
Solar Energy
The global market for solar photovoltaic systems is growing by over 25 percent
each year. As the cost of these systems comes down, businesses, individuals and
governments recognize the important role that solar energy can play in displacing central
station fossil-fueled generation.
7
While Illinois is not thought of as a “sunny state”, its
solar energy potential is significant, particularly during the summer months when
3
Chariton Valley Biomass Project, http://biomass.ecria.com/
4
Telephone conversation between Charles Kubert and Bill Belden, Biomass Project Manager, Chariton
Valley Biomass Project, November 8, 2006.
5
U.S. Environmental Protection Agency, Landfill Methane Outreach Program, available at
www.epa.gov/lmop/proj/xls/opprjseleclmopdata.xls
6
Ibid., available at www.epa.gov/lmop/proj/xls/candlfslmopdata.xls
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
electricity demand and generation are at their peaks. In the majority of Illinois, solar
photovoltaic output coincides with utility peak loads over 70% of the time.
8
Solar PV
produces no air pollution and no greenhouse gases, apart from their manufacture. Thus,
replacing peak load generation from coal with that from solar power will both improve
the system’s reliability and significantly offset air pollution.
Energy Efficiency
Energy efficiency, as a strategy for reducing long term energy demand and
consequent emissions from power plants, has long been ignored in Illinois. Yet, energy
efficiency has been shown to be the lowest-cost and most immediate way to level
electricity demand without compromising household comfort or business performance.
Energy efficiency measures are long lasting and save energy across all time periods for
which the end-use equipment is in operation.
9
Studies have demonstrated that enough
energy efficiency can be “procured” at under 2.5c/kwh (well under the cost of generating
and delivering coal-fired electricity) to level electricity demand.
10
Energy efficiency
opportunities cut across all sectors of the economy and include lighting, space cooling,
refrigeration, motors and other commercial and industrial equipment.
Encouraging energy efficiency and the programs that support it is advantageous to
both the environment and the economy. With reduced energy demand, CO
2
, NO
x
, and
SO
x
emissions are decreased, and all land and water impacts associated with power
7
Solarbuzz, “Marketbuzz™ 2006: Annual Worldwide PV Market Report,” available at
www.solarbuzz.com/marketbuzz2006-figures.htm
8
See
Environmental Law and Policy Center (2001), “Repowering the Midwest,” Figure 5.10b at p. 40,
available at www.repoweringthemidwest.org/plan.php.
9
Illinois Department of Commerce and Economic Opportunity, “Energy Efficiency for Illinois,”
PowerPoint presentation, August 10, 2006. at p. 15.
10
“Repowering the Midwest,” at pp. 20-21.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
generation are also reduced. Lower demand for energy has a positive effect on the energy
infrastructure, as reduced electricity loads put fewer stresses on the distribution system
and reduce the need for peak load generation. Growing energy efficiency investments
create thousands of jobs in manufacturing, trade, and services related to the production,
installation and maintenance of energy efficient measures
Increased energy efficiency lowers household utility bills and provides
consumers with more disposable income to spend on other goods and services, thereby
growing the Illinois economy. Businesses likewise are able to redirect dollars into
increased investment, wages, and job growth. Finally, it is important to point out that
energy efficiency, just like conventional generation, is measurable both in terms of
avoided generation and the associated avoided emissions.
Consistency with the Governor’s Plan
Governor Rod Blagojevich has recognized the many benefits of renewable energy
and energy efficiency for Illinois. On August 22, 2006, the Governor unveiled a
proposed Energy Independence Plan (“Governor’s Plan”). The goal of this plan is to
drastically reduce the reliance of Illinois on fossil fuels for both power generation and
transportation. As a part of this plan, the Governor encourages the adoption of renewable
energy and energy efficiency portfolio standards. The plan sets the target for Illinois
utilities to meet 10% of Illinois electricity demand with renewable sources by 2015
11
(approximately 8% by 2012). The Governor’s plan also sets energy efficiency as a goal,
11
The original RPS submitted in the Governor’s Sustainable Energy Plan in February, 2005 called for 8%
renewables by 2012. This figure was the basis of the Illinois Commerce Commission staff report and the
data used in my analysis. The Governor’s Energy Independence Plan announced in August, 2006 called for
10% renewable electricity by 2015.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
stating that “[c]onserving energy by improving the energy efficiency of Illinois’ homes,
businesses and public buildings is the most cost-effective way to reduce energy use and
lower utility bills.” The Governor’s Energy Efficiency Portfolio Standard would require
utilities to “deliver” energy savings equal to 25% of projected annual demand growth by
2015. Meeting these renewable energy and energy efficiency targets and realizing their
associated benefits warrant increasing the RE/EE set aside in the Clean Air Set-Aside
(CASA) from 12% to least 17% with a 1% increase on an annual basis to a maximum of
20%.
While IEPA’s proposed rule and the provisions for an RE/EE set aside are
heading in the right direction, the rule still falls short of the specific goals set forth by the
Governor's Plan. According to the IEPA’s proposed rule, renewable energy and energy
efficiency clean air set asides would be allocated 9,150 allowances, out of a total of
76,230, or 12% of the total number of allowances. Based on my analysis, this figure
must be increased to be consistent with the Governor’s Plan and to support higher levels
of renewable energy and energy efficiency in Illinois. According to IEPA’s Hearing
Exhibit 5, “IEPA believes that EE/RE projects eligible for CASA allowances should
reasonably be able to offset between five and eight percent” of future load, consistent
with the 2012 Renewable Portfolio Standard (RPS) target. If utilities are to meet the 8%
target, the CASA set aside for renewables alone must be increased to 15.2% (14.6% for
wind and 0.6% for biomass/landfill gas). (Ex. 1.)
Wind energy can reasonably be expected to constitute at least 85% of the total
renewable energy generation under an RPS.
12
However, under this assumption, wind
12
The proposed RPS language requires at least 75% of the renewable energy to come from wind energy;
however, because of favorable wind economics, I believe that the wind share will be 85% or more.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
generation alone would need to be allocated 11,118 allowances or 14.6% of total
allowances by 2012. This figure is already in excess of the 9,150 available CASA
allowances for all renewables and energy efficiency under the proposed CAIR plan. The
remaining renewable energy sources should then be allocated 0.6%, for a total renewable
energy set-aside of at least 15.2%.
However, energy efficiency is also mandated by the Governor’s Plan, and so must
be included in the CASAs. The goal of the energy efficiency portfolio is for EE projects
to account for a growing percentage of projected annual load growth, from 10% in 2006
and rising to 25% in 2015.
13
For bundled customers of Illinois’ investor-owned utilities,
this cumulative savings would equal 1.9 million MWh. These cumulative energy savings
represent the equivalent of 1,392 allowances or 1.8% of the total pool of available
allowances (see Ex. 2).
Conclusion
Renewable energy and energy efficiency are both important and achievable
components of Illinois’ electric energy future. The Governor’s Energy Independence
Plan recognizes this importance in setting explicit targets for both over the next six years.
It is important that Illinois’ proposed CAIR rule be consistent with and supportive of this
policy initiative. As it stands, the proposed rule is not. Raising the allotted CASA
allowances for renewable energy and energy efficiency will greatly assist Illinois in
achieving compliance with its own clean energy goals.
13
Id
.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF:
)
)
PROPOSED NEW CAIR SO2, CAIR NOX
)
R06-026
ANNUAL AND CAIR NOX OZONE SEASON
)
(Rulemaking – Air)
TRADING PROGRAMS, 35 ILL.ADM.
)
CODE 225, CONTROL OF EMISSIONS FROM )
LAREGE COMBUSTION SOURCES,
)
SUBPARTS A, C, D and E
)
CERTIFICATE OF SERVICE
I, Faith Bugel, hereby certify that on November 10, 2006 I filed the attached
TESTIMONY OF CHARLES KUBERT.
An electronic version was filed with the Illinois
Pollution Control Board and copies were served via United States Mail to those
individuals included on the attached service list.
Faith E. Bugel
Counsel for the Environmental Law and Policy Center
DATED: November 10, 2006
Environmental Law and Policy Center
35 East Wacker Drive, Suite 1300
Chicago, IL 60601
(312) 673-6500
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 10, 2006
