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Optimizing Carbon Market Mechanisms in the Western Interconnect

Event Description and Agenda:

The energy market in western North America is preparing for increased collaboration and cross-border power swapping. Utilities in states neighboring California (and beyond) have already joined or announced their intention to join the California energy imbalance market (EIM), a recent initiative to trade electricity in real-time intervals to help manage the challenges of renewable integration. Other power organizations in the Pacific Northwest are assessing their options to achieve similar benefits through more organized sharing arrangements. As these western power flows integrate more, it becomes increasingly important for utilities, merchant power and transmission operators to understand and plan for existing and future carbon reduction requirements in the U.S. — and California specifically — with regard to:

  • AB 32, California's signature climate-change law from 2006 that required the California Air and Resources Board (ARB) to formulate a plan that would bring greenhouse gas (GHG) emissions to 1990 levels by 2020.  This resulted in a range of GHG emission reduction programs, including a cap-and-trade program that was introduced in 2013.
  • SB 32, the would-be ‘son of AB 32' to further cut carbon dioxide emissions beyond the level required by AB 32 to 80 percent below 1990 levels, no later than 2050.  The bill, rejected in 2015, is expected to be re-considered in the 2016 legislative session.
  • SB-350, recently passed by California in September 2015, extends California's renewable portfolio standard (RPS) from 33 percent by 2020 to 50 percent by 2030
  • The U.S. EPA's Clean Power Plan (CPP) is moving forward on a national level to implement the EPA's emission objectives, which are to reduce carbon dioxide from power generation by 32 percent within 15 years relative to 2005 levels and would require individual states to submit plans for specific carbon reduction standards.
  • California's Cap-and-Trade Program which — despite its fairly recent formation — is already expanding to accommodate new national and international signatories, and could be a significant tool in helping other states and regions achieve the EPA's CPP targets

Thus, this conference is designed as a forum for stakeholders operating in the California market and larger western interconnect region to plan, strategize and collaborate for an optimal future carbon market future. It will examine how existing and future measures will impact western electric and gas utilities, power organization operations and markets developments going forward. Finally, it will emphasize how utilities, independent power producers, and other entities are adjusting their business models — and working together — to comply with future regulations that reduce the impact of power generation on climate change. 

Wednesday, January 20, 2016

7:30 - 8:00 a.m. :: Registration & Continental Breakfast

I. Setting the Stage: Carbon Policy Measures and Impacts on Resource Strategies: Now and Post-2020

8:00 - 9:30 a.m. :: California and North America Carbon Policy Nexus: Impacts on Western Power Markets Now & Post-2020

There are multiple local and national policies and programs driving carbon reduction requirements in North America — currently lacking coordination — that leave uncertainty regarding the future regulatory landscape for the power industry. Furthermore, many of the goals driving current greenhouse gas (GHG) reduction in California extend only to 2020, creating uncertainty in the planning process for the electricity industry well beyond that time horizon. This session will forecast how these policies may develop and converge, providing an analysis of what the power industry should prepare for with regard to future carbon reduction requirements at the local and national level. Main discussion points will include:

  • Overview and update on North American carbon policy initiatives regimes
  • Forecast of post-2020 regulatory landscape on western power markets
    • How will California and western markets in general continue to be influenced by national and international policy?
    • How will the EPA's Clean Power Plan/111(d) interact with California's RPS and cap-and-trade program?
    • How might California's post-2020 regulatory landscape impact other states in the western interconnect?
  • What are the opportunities for policy and program coordination to provide a consistent framework?
  • How can the power industry start strategically planning for future carbon reduction requirements amid uncertainty? 

Richard Saines, Co-Vice Chairman of International Emissions Trading Association (IETA) and Partner, Baker & McKenzie LLP

Craig Segall, Senior Staff Attorney, California Air and Resources Board (invited)

Adam Smith, Program Manager - Climate & Air Policy, Southern California Edison (SCE)

9:30 - 10:30 a.m. :: Aggressive Renewable Portfolio Standards (RPS): Linkage between State Mandates and Federal Regulations?

How important a role will aggressive renewable portfolio standard (RPS) requirements play in reducing emissions from existing sources, thus helping states comply with local and federal environmental programs?  In this session, regulators from two states will address some of the issues their states must contend with to achieve their recently implemented, very aggressive RPS state mandates — Hawaii with a mandate of 100% renewables by 2045, and California with a mandate of 50% by 2030 — and how these mandates relate to achieving CPP goals. 

Matthew McDonnell, Commission Counsel, Hawaii Public Utilities Commission (HPUC)

Brian Turner, Deputy Executive Director - Policy and External Relations, California Public Utilities Commission (CPUC)

William Westerfield, Senior Attorney, Sacramento Municipal Utility District (SMUD)

10:30 - 10:45 a.m. :: Morning Break

10:45 - 11:30 a.m. :: Future of Natural Gas in Western Power Markets

As the paradigm of increasing carbon regulation emerges, what is the role of natural gas as a fuel source into the future?  This session will explore the role of natural gas into the 2030 timeframe and beyond.  It will provide an analysis of how natural gas will be constrained for utility use into the future, and how to prepare for that constraint in the business model. The session will also discuss opportunities to use natural gas in the transportation sector to help the reach California's GHG reductionn goals, and opportunities to "de-carbonize" natural gas to further reduce its carbon content. 

Xantha Bruso, Manager of Long-Term Energy Policy & Procurement, Pacific Gas & Electric (PG&E) (invited)

Tanya Peacock, Environmental Public Policy & Planning Manager, Southern California Gas Company (SoCalGas)

II. Cap-and-Trade: Economic Update, Market Optimization, and Future Linkage Opportunities

11:30 a.m. - 12:15 p.m. :: Carbon Reduction Policies: Complementary or Counterproductive Implications to Cap-and-Trade?

In California, a host of other policies are in effect to reduce carbon outside of cap-and-trade. This suite of policies directly influences cap-and-trade and carbon pricing. This session will discuss what pressure there will be for cap-and-trade to help meet emission reduction goals, and how these other policies and programs will impact the future dynamics and pricing of cap-and-trade and other entities operating in the California energy market. It will consider these other policies:

  • Vehicle fuel efficiency
  • Renewable portfolio standard
  • Advanced clean cars and low carbon fuel standard
  • Uncapped emission source reductions, offsets
  • Energy efficiency
  • Combined heat and power (CHP)
  • All other programmatic measures

Amber Mahone, Director - Climate Policy Analysis, Energy + Environmental Economics (E3)

12:15 - 1:15 p.m. :: Group Luncheon

1:15 - 2:15 p.m. :: Legal Issues and Regulatory Framework for Climate Policy

This session will provide an overview of the regulatory framework and legal issues surrounding climate policy in California, highlighting:

  • Resolved, pending, and anticipated legal issues
  • Legal challenges for the cap-and-trade and low carbon fuel standard programs
  • Typical procedural process with the California Air Resources Board (CARB)
  • Implications when CARB issues a proposed rulemaking
  • Opportunities for comments and public hearings

Kevin Poloncarz, Partner - Environmental & Energy Practice, Paul Hastings LLP

2:15 - 3:45 p.m. :: Compliance Mechanisms for Carbon Trading & Offsets: Now and Post-2020

This session will focus on strategies to optimize compliance with regard to cap-and-trade and other future carbon policies, addressing both the development of quality GHG emission credit projects and the role of offsets, now and post-2020. There will be a discussion on the offset transaction process: evaluating how to develop a quality project, purchase credits, and effectively manage a portfolio of projects and relationships in the California-Quebec market. It will also outline key components of the compliance process such as CITTS and Workbook 1, Verifier, and how to tie out import quantities with ISO market reports. There will also be a discussion on common risks for market participants such as buyer liability and project quality. This session will also consider how future policy may further impact compliance obligations, with particular emphasis on the prospect of international offsets in the California market.


Richard Saines, Co-Vice Chairman of International Emissions Trading Association (IETA) and Partner, Baker & McKenzie LLP


Adam Smith, Program Manager - Climate & Air Policy, Southern California Edison (SCE)

Brad Neff, Long-Term Energy Policy, Pacific Gas & Electric (PG&E)

Bruce McAllister, Supervisor - EIM, PacifiCorp

William Westerfield, Senior Attorney, Sacramento Municipal Utility District (SMUD)

3:45 - 4:00 p.m. :: Afternoon Break

III.Implications of Carbon Policy and Market Integration in the Western Interconnect

4:00 - 5:15p.m. :: EPA's Clean Power Plan/111(d): Implications for the Western Interconnect

This session will explore potential outcomes of the U.S. EPA's 111(d) in states in the western interconnect, focusing on states outside of California. Based on analyses of cost of compliance and state resource mix, it will model how various states might choose from a menu of compliance options to achieve carbon reductions required as part of the rule. It will then project how compliance choices could determine regional electricity prices and various carbon pricing schemes across the western interconnect, as well as ultimately impact electricity trade patterns in the west. It will discuss how the western interconnect might develop a 111(d) compliance structure enabling western states to achieve emission goals economically, efficiently, and in alignment with their neighbors. In the analysis, it will highlight:

  • Projected coal retirements by state
  • Western renewable energy zone
  • Primary challenges
    • Transmission infrastructure
    • Grid integration
    • Coordinating compliance

Julia Frayer, Partner, London Economics International (LEI)

January 21, 2016

7:30 - 8:00 a.m. :: Continental Breakfast

8:00 - 8:45 a.m. :: Low-Carbon Grid Study:  Impact of Renewable Integration on Carbon Balance

This session will focus on the research of the California 2030 Low-Carbon Grid Program (LCGS), an in-depth analysis with a 2030 greenhouse gas (GHG) emissions target of 50% below 2012 levels, which would set California well on the way toward meeting its 2050 emissions reduction goal.  It will provide a summary of findings which demonstrated that this level of emissions reductions can be achieved without significant rate impacts while maintaining the reliability of the electric grid.  It will also discuss specific near term strategies to cost effectively achieve an aggressive greenhouse gas reduction target and the consequences of simply trying to bolt on an increased Renewable Portfolio Standard target to the existing system. 

James Caldwell, Grid Consultant, Center for Energy Efficiency & Renewable Technology (CEERT)

8:45 - 10:15 a.m. :: Multi-State Collaboration for Carbon Trading: Challenges and Opportunities

This session will explore how states might collaborate to develop regional carbon markets as a strategy for compliance with the U.S. EPA's Clean Power Plan. Currently, there are two cap-and-trade programs with linked jurisdictions in North America — the Regional Greenhouse Gas Initiative (RGGI), a cooperative effort among nine states in the Northeast to reduce greenhouse gas emissions — and the California-Quebec market, which the province of Ontario is planning to join in 2016. Recently, New York State, a member of RGGI, announced its intention to work closely with California and several Canadian provinces to build a broad North American carbon market. This session will consider the opportunities and challenges related to regional collaboration and development of a broad North American carbon market, considering:

  • What are the economic implications of Ontario's intention to join the California-Quebec market?
  • How do RGGI and the California-Quebec market differ, and what would need to be changed programmatically for the two programs to align their markets?
  • How can states with existing carbon control programs make sure they are ‘carbon trading ready', or ready to trade in a larger geographic context?
  • What future potential does the Western Renewable Energy Generation Information System (WREGIS) play in multi-state collaboration with regard to tracking renewable energy generation compliance across borders?
  • What other future linkages are likely to develop in North America that will impact the western interconnect?
  • What are the pros and cons of extending California's carbon market throughout the larger western interconnect?
  • How can states in the western interconnect:
    • Determine if it's in their best interest to join a regional carbon market?
    • Collaborate to develop an optimal carbon trading market that is efficient and cost-effective? 


Kevin Poloncarz, Partner - Environmental & Energy Practice, Paul Hastings LLP


Xantha Bruso, Manager of Long-Term Energy Policy & Procurement, Pacific Gas & Electric (PG&E) (invited)

Paul Hibbard, Vice President, Analysis Group

Adam Smith, Program Manager - Climate & Air Policy, Southern California Edison (SCE)

10:15 - 10:30 a.m. :: Morning Break

10:30 - 11:45 a.m. :: PacifiCorp and California (CAISO) Integration: Benefits and Potential Regulatory Impacts

In November 2014, PacifiCorp became the first non-California-based utility to enter the California ISO (CAISO) energy imbalance market (EIM), an important initial step toward more coordinated operations among balancing authorities in the West. Five other utilities in western states outside of California have either announced their intention to join the EIM in 2016, or are evaluating it as a possibility.  Furthermore, PacifiCorp is now working towards further integration into the CAISO system by becoming a full participation transmission owner (PTO). This session will feature analysis from a recently conducted report on the potential benefits of further PacifiCorp and CAISO integration, including how such engagement could help reduce GHG emissions. It will then discuss how California and national carbon policy could impact EIM participants, considering collaborative opportunities for carbon reduction and also challenges with regard to increased regulatory requirements. It will consider:

  • Update on CAISO SH effort for 2016 — Regional Integration California Greenhouse Gas Compliance
  • GHG emissions reduction anticipated from PacifiCorp's (and others') increased market integration
  • Challenges for EIM market participants to comply with California and Clean Power Plan (CPP) requirements
  • Projected estimation of nominal costs created by the cap-and-trade for offering balancing resources into California
  • Role of bilateral contracts for imported power — will they be subject to the same cap-and-trade requirements?

Jack Moore, Director - Transmission Analysis, Energy + Environmental Economics (E3)

Bruce McAllister, Supervisor - EIM, PacifiCorp

Craig Segall, Senior Staff Attorney, California Air and Resources Board (CARB) (invited)

Brian Turner, Deputy Executive Director - Policy and External Relations, California Public Utilities Commission (CPUC)

11:45 a.m. :: Conference Adjourns

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