BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF:
1
1
PROPOSED NEW CAIR S02, CAIR NOX
1
R06-026
ANNUAL AND CAIR NOX OZONE SEASON
)
(Rulemaking
-
Air)
TRADING PROGRAMS, 35
1LL.ADM.
1
CODE 225, CONTROL OF EMISSIONS FROM
)
LAREGE COMBUSTION SOURCES,
1
SUBPARTS A, C, D and E
1
NOTICE
TO:
Dorothy Gunn, Clerk
Illinois Pollution Control Board
James R. Thompson Center
100 West Randolph, Suite 1 1-500
Chicago, IL 60601 -321
8
SEE ATTACHED SERVICE LIST
PLEASE TAKE NOTICE that I have today filed with the Office of the Pollution
Control Board the AMENDED 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 28,2006
Environmental Law
&
Policy Center
35 E. Wacker Dr. Suite 1 300
Chicago, IL 60601 -21 10
(3 12) 673-6500
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF:
PROPOSED NEW CAIR S02, CAIR NOX
R06-026
ANNUAL AND CAIR NOX OZONE SEASON
)
(Rulemaking
-
Air)
TRADING PROGRAMS, 35
1LL.ADM.
1
CODE 225, CONTROL OF EMISSIONS FROM
)
LAREGE COMBUSTION SOURCES,
SUBPARTS A, C, D and E
AMENDED 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
&om
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 lllinois 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.
Wind Enerw
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
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 fi-om these areas is about 9000
MW."' 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-fi-ee
resourcethere are no emissions of sulfur oxides (SO,),
nitrogen oxides (NO,), carbon dioxide
(C02), mercury or particulate matter (PM) fi-om
wind power. This lack of air pollution impact is good for the health of Illinois7 citizens
and good for reducing Illinois7 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
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
'
National Renewable Energy Laboratory (NREL), "Wind Powering America," available at
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
property tax re~enue.~ 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
~llinois, there is also potential to use biomass (fiom 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, 10wa.~ 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, and net
C02 emissions in a conventional power
plant by the
of capacity which is displaced by biomass. Harvesting of
switchgrass and partial harvesting of corn stover also creates additional income streams
for farmers. Each megawatt of co-firing would create a demand for energy crops from
1,000 acres or corn stover fiom 2,000 acres of surrounding
farmland.4
Landffl Gas
Illinois is among the leading states in electricity generation from methane
extracted
fiom landfills. Currently, 23 landfill gas to energy projects have the capacity to
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/fvO4osti~35953.vdf.
Document describes a model for assessing economic impact of
wind power development. The model software is available
fiom NREL.
Chariton Valley Biomass Project, http://biomass.ecria.coml
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
generate 130 MW of ele~tricit~.~
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
68716-3 (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
C02, 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
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.' Solar PV
produces no air pollution and no greenhouse gases, apart from their manufacture. Thus,
replacing peak load generation
from coal with that fkom solar power will both improve
the system's reliability and significantly offset air pollution.
Enerw Efficiencv
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/opp rjseleclmopdata.xls
Ibid., available at
www.epa.govllrnoplprojlxls/candlfslmopdata.xls
7
Solarbuzz, "MarketbuzzTM 2006: Annual Worldwide PV Market Report," available at
www.
solarbuzz.com/marketbuzz2006-figures.htm
See
Environmental Law and P~licy Center (2001), "Repowering the Midwest," Figure 5. lob at p. 40,
available at
www.repoweringthemidwest.orglp1an.php.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
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.g Studies have demonstrated that enough
energy efficiency can be "procured" at under
2.5cIkwh (well under the cost of generating
and delivering coal-fired electricity) to level electricity
demand.'' 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,
C02, NO,, and
SO, emissions are decreased, and all land and water impacts associated with power
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 lllinois 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.
Illinois Department of Commerce and Economic Opportunity, "Energy Efficiency for Illinois,"
Powerpoint presentation, August 10,2006. at p. 15.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
Consistencv 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
ths plan is to
drastically reduce the reliance of lllinois 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 lllinois
utilities to meet 10% of Illinois electricity demand with renewable sources by 201
511.
The Governor's plan also sets energy efficiency as a goal, 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
REIEE set aside in the Clean Air Set-Aside (CASA) from 12% to
15.4% with a
1
%
increase on an annual basis to a maximum of 20%.
While IEPA's proposed rule and the provisions for an
REIEE 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
EEJRE projects eligible for CASA allowances should
'O
"Repowering the Midwest," at pp. 20-21.
"
The original RPS submitted in the Governor's Sustainable Energy Plan in February, 2005 called for 8%
renewables by 2012. The Governor's Energy Independence Plan announced in August, 2006 called for
I
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
reasonably be able to offset between five and eight percent" of future load. However, if
utilities are to meet the 10% target, the CASA set aside for renewables alone must be
increased to 13.6% (1 3.0% 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
generation alone would need to be allocated 9.886 allowances or 13.0% 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 13.6%.
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,
fiom 10% in 2006
and rising to 25% in
2015.'~ 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).
Since the 10% renewable energy target does not nearly represent the upper limit
of Illinois' renewable energy potential,
I believe this justifies a continued 1% annual
ramp-up in renewables' share of the available allowances beyond the initial allocation.
Similarly, as energy efficiency savings continue. to accumulate, documented energy
efficiency should also be assigned additional allowances.
Conclusion
-
-
- -
- - -
10% renewable electricity by 201 5. The analysis is based on a 10% target for forecast demand fkom
bundled (generation and distribution) customers.
l2
The proposed
RPS
language requires at least 75% of the renewable energy to come fiom 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 28, 2006
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
CAI. 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.
l3
Id.
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
ELPC EXHIBIT 1
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
EXHIBIT I
Emission Allowances per MW of Renewables
Wind
Biomass
HoursNear
8760
8760
Assumed Capacity Factor
0.3
0.9
MWhNear per MW of Capacity
2,628
7,884
Allowance Formula
(21b/MWh)/2000 (.51b/MWh/2000)
0
0.00025
Illinois RPS: 10% by 2015
Wind
Biomass
Total RPS MWh Requirement
11,630,000
1 1,630,000
Assumed Share of RPS Rqmt
85%
15%
MWh Required
9,885,500
1,744,500
MW Required
3,762
22 1
Total Allowances
9,886
436
Available
CAlR Allowances
76,230
76,230
% of Available Allowances
13.0%
0.6%
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
ELPC EXHIBIT 2
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
Governor's Energy Efficiency Portfolio:
(All Demand Data expressed in million MWh)
-
2005
-
2006
-
2007
-
2008
-
2009
-
2010
-
201 1
-
2012
Baseline ema and'
95.4
97.3
99.3
101.2
103.3
105.3
107.4
109.6
Baseline Change In Demand (2005-12)'
nla
1.9
1.9
2.0
2.0
2.1
2.1
2.1
EEPS Targeted Reduction in Demand ~rowth~
10%
1 2%
14%
16%
1 8%
20%
EEPS Annual Reduction in erna and^
0.2
0.2
0.3
0.3
0.4
0.4
Cumulative Reduction in Demand
0.2
0.4
0.7
1 .O
1.4
1.9
Cum. Allowances (1.51b per MWh)/2000)
146.0
324.6
537.2
785.1
1069.4
1391.8
Share of Total IL Allowances
1.8%
' 2005 electric sales statistics for bundled (generation + distribution) customers of lllinois investor-owned utilities.
Source: Illinois Commerce Commission, Comparison of Electric Sales Statistics for
2005 and 2004.
Baseline Change in Demand assumes 2% annual growth rate
The EEPS requires a
10% reduction in demand growth beginning in 2007, rising to a 25% reduction by 201 5
4
Targeted percentage reduction in demand growth multiplied by baseline growth in demand
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
IN
THE MATTER OF:
)
1
PROPOSED NEW CAIR S02, CAIR NOX
1
R06-026
ANNUAL AND CAIR NOX OZONE SEASON
)
(Rulemaking
-
Air)
TRADING PROGRAMS, 35
1LL.ADM.
1
CODE 225, CONTROL OF EMISSIONS FROM
)
LAREGE COMBUSTION SOURCES,
1
SUBPARTS A, C, D and E
)
CERTIFICATE OF SERVICE
I, Faith Bugel, hereby certify that on November 28, 2006 I filed the attached
AMENDED TESTIMONY OF CHARLES KUBERT.
An electronic version was filed
with the lllinois 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 28,2006
Environmental Law and Policy Center
35 East Wacker Drive, Suite 1300
Chicago, IL 60601
(3 12) 673-6500
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006
'John J Kim.,
IEPA
Assistant Council Rachel L. Doctors
102
1 North Grand Avenue East
P.O. Box 19276
Springfield, IL 62794-9276
William Murray,
City of Springfield
Office of Public Utilities
800 East Monroe, 4th Floor, Municipal Bldg. East
Springfield, IL 62757-0001
Matthew
Dunn
Office of the Attorney General
Environ~nental Bureau
188 West Randolph,
20th Floor
Chicago, IL 60601
.
.
Virginia Yang
Illinois Department of Natural Resources
One Natural Resources Way
Springfield,
IL
62702-127 1
Daniel McDevitt
Midwest Generation
440 S.
LaSalle Street
Suite 3500
Chicago, IL 60605
S.
Farris
Office of Public Utilities, City of Sprin'gfield
20 1 East Lake Shore Drive
Springfield, IL 62757
R06-026 SERVICE LIST
Steven J. Murawski Sasha M. Reyes
Baker
&
McKenzie
One Prudential Plaza, Suite 3500
130 East Randolph Drive
Chicago
IL
60601
Kathleen C. Bassi, Steven
BonebrakeSheldon Zabel
Schiff Hardin, LLP
6600 Sears Tower
233 South Wacker Drive
.
Chicago, IL 60606-6473
Keith Harley
Chicago Legal Clinic, Inc.
205 West Monroe Street,
4thFloor
Chicago, I1 60606
James T.
Harrington, Jeremy R. HojnickiDavid Rieser
McGuire Woods LLP
77 W. Wacker
Suite4100
Chicago, IL 60601
Bruce Nilles
Sierra Club
122 W. Washington Avenue
Suite 830
Madison, WI 53703
Dorothy
Gun-
Illinois Pollution Control Board
James
R Thompson Center
100 West
Randolph, Suite 1 1-500
Chicago,
IL 60601-321 8
ELECTRONIC FILING, RECEIVED, CLERK'S OFFICE, NOVEMBER 28, 2006