NWEC policy director Nancy Hirsh addresses B.C. – U.S. issues

NW Energy Coalition policy director and executive director-designee Nancy Hirsh was the invited speaker at the Pacific Energy Innovation Association breakfast meeting in Vancouver, B.C., on Oct. 1. The object was sharing perspectives on energy issues of cross-border importance. Thus, her address covered such topics as EPA’s proposed Clean Power Rule, the Columbia River Treaty, the Northwest Power and Conservation Council’s upcoming 7th regional plan, and the Pacific Coast Collaborative’s energy efficiency platform.

Click here Nancy’s PowerPoint presentation

Remarks of Nancy Hirsh, policy director/executive director-elect,
NW Energy Coalition
PEIA Breakfast
October 1, 2014

Good morning. My colleague Marc Krasnowsky and I are pleased to be here this morning. Thank you for coming. Penny Cochrane asked me to give an overview of the Coalition and then touch on some of the key issues facing the Northwestern US states that have impacts in BC.

Introduction to the Coalition

The Coalition was founded in 1981, and is a non-governmental, public-interest alliance that advocates for a clean and affordable energy future. We work in the U.S. states of Washington, Oregon, Idaho and Montana, and we collaborate with groups in B.C. Our primary goals are:

• To meet new energy demand with energy efficiency and clean renewable resources.
• Ensure a full and fair accounting for environmental impacts in energy decisions.
• Support efforts to protect and restore the fish and wildlife of the Columbia Basin.
• Securing consumer and low-income protection in energy policy decisions.

And

• Always have informed public involvement in energy policy decisions.

The Coalition’s strength and unique role lies in our energy expertise and diverse membership. We are an alliance of more than 100 environmental and low-income/consumer-protection groups, communities of faith, clean energy businesses, labor unions and utilities. The Coalition is the only organization in our region that brings disparate voices together to work through conflicts and move forward with shared solutions.

As you all well know, there is much work still to be done to meet climate goals. The Northwest U.S. must deliver enough energy efficiency and renewable power to meet new demand, protect endangered salmon, and replace the power from the coal plants that serve the region today. And we look forward to a strong Coalition to deliver these goals over the next 30 years.

I will touch on four main topics this morning: EPA’s proposed Clean Power Rule, the Columbia River Treaty, the Northwest Power and Conservation Council’s upcoming 7th regional plan, and the Pacific Coast Collaborative’s energy efficiency platform.

EPA Clean Power Rule
No topic is more discussed in the U.S. energy community today than the EPA Clean Power Rule.

It all started last year (June 2013), when President Obama issued a directive to EPA under his Climate Action Plan. The president is using the Clean Air Act as his vehicle to go after fossil-fueled generating plants. The U.S. Supreme Court paved the way for action on greenhouse gas emissions. The EPA proposed rule is the first national step to reduce emissions in the electric sector. I might argue it does not reduce emissions enough but it’s a start and it creates an opportunity to ratchet up our investments in renewables and to dig deeper for energy savings. And frankly, it’s about time.

We believe the Clean Power Rule — many refer to it as simply 111[d] — will be a game-changer in the electric sector. Use of energy efficiency and renewable resources to help meet a national goal of 30% reduction in carbon emissions could leverage significant new investments in clean energy. EPA will issue guidelines for states to use in developing plans for the affected sources, known as EGUs – electric generating units. It is important to note that this provision of the CAA directs states to develop a plan rather than EPA creating one national plan.

For the four Northwest states (as the slide shows), the proposed plan calls for carbon intensity reductions of 33% in Idaho, 21% in Montana, 48% in Oregon and 72% in Washington. It identifies four potential “building blocks” for doing so: More efficient operation of coal plants, increased use of existing and under-construction natural gas facilities, more renewables or low-emitting resources (including existing and planned nuclear), and more energy efficiency.

This national framework that encourages state-specific plans can take advantage of and reinforce existing state efforts and encourage further progress. This outside-the-fence line approach is hotly debated as it drives greater emissions reductions than a focus only with the boundaries of an individual coal-fired plant. This, of course, enables more reliance on three of the four building blocks: increased use of existing natural gas plants, renewables and efficiency.

While we are 100% behind the proposed rule, we do have some concerns with the details. The emissions base-year choice of 2012, which happened to be a year of high hydropower and low fossil fuel use is not a good emissions base for our region as it does not reflect the significant variability in the hydrosystem and its impact on fossil use. We will recommend an average of 3-5 years rather than a single emissions year. In addition, the energy efficiency building block is complicated and we don’t think the draft rule accounts for the full value of energy savings. For example, the proposal sets the average measure life at10 years and assumes no persistence of savings. We are concerned that a compliance period beginning in 2017, from a 2012 baseline, could put a damper on activity between now and 2017. Also, the proposed rule uses current energy codes and efficiency standards in setting state targets but does not allow advances in codes, standards, or market transformational activity that might be driven by policy to count toward compliance even though not tied to EGU emissions reductions. We are working with other advocates to make sure these efficiency drivers are included.

We are VERY pleased that EPA has opened the door for regional collaboration between states that may provide the most cost-effective compliance strategies. The Coalition is supporting this type of flexibility and encouraging the region’s official power planning agency, the Northwest Power and Conservation Council, to analyze the opportunity. We will work through the extended comment period, now December 1, and thereafter to strengthen the final proposed rule.

Columbia River Treaty
The Treaty between the United States and Canada, signed in 1961, mandated the construction and operation of three water-storage dams (Duncan, Mica, Keenleyside) in British Columbia to provide flood control and optimize hydropower generation downstream; it also authorized construction of Libby Dam on the Kootenai River in Montana. All four dams were operational by fall 1964. In our view, the Treaty is 100% focused on flood control and maximizing hydropower output. It contains few provisions for ecosystem management, or salmon and cultural restoration.

The Treaty calls for benefits of the additional power generation from the construction of the Treaty dams to be split 50/50 — the Canadian entitlement is between 759 and 482 average megawatts depending on flow and precipitation. The Bonneville Power Administration is responsible for delivering the power to BC Hydro. However, BC Hydro did not need all the power initially, so it sold a large portion to U.S. utilities. In 1998, as the original power sale expired, B.C. laid claim to the power. Now all the Canadian portion of the power is returned via transmission at Blaine and Nelway in Idaho.

The context in which the Treaty operates today is significantly different than 50 years ago. Climate change is affecting the Columbia’s hydrology and ecological health. This has ramifications for flood control, salmon restoration and power generation. And we all anticipate we have only just begun to see the physical changes in the watershed.

Critical to clean energy development and salmon restoration will be potential changes to the Treaty principles, operations and governance. The first time the Treaty can be modified is in 2024, and 10 years notice must be given — so 2014 is THE year. Both B.C. and the Northwest U.S. regional agencies have made initial recommendations for consideration by their federal governments. For NGOs, the biggest change to the Treaty will need to be including ecosystem impacts into the core mission of system operation. As expected, the No. 1 regional recommendation from the U.S. government agencies is to reduce the benefits to Canada (not in so many words). And B.C. recommends more equity for B.C., making the case that the U.S. gets more benefits in terms of flood control, water supply, recreation, power, etc. The B.C. recommendations also talk about climate impacts and ecosystem protection. By the end of the year we expect both federal governments to indicate a desire to keep and modify the Treaty.

NWPCC – 7th Regional Power and Conservation Plan
Every five years, the Northwest Power and Conservation Council issues an updated 20-year regional plan to guide the Bonneville Power Administration’s and, by extension, all regional public utilities’ resource decisions. Established by Congress in 1980, the Council has two governor-appointed representatives each from Idaho, Montana, Oregon and Washington. The Council is expected to release its new plan, which will be its seventh, at the end of 2015.

In the 6th Plan, released in January 2010, the Council staff produced some of the most comprehensive and sophisticated modeling and analysis in the U.S. The 6th Plan called for almost 6,000 aMW of energy efficiency over the 20-year timeframe – that’s 85% of projected load growth with the remainder to be met with new renewables and a small amount of natural gas.

Many utilities in the region, however, are saying the 7th Plan needs a “whole new look” that reflects low loads, low market prices and continued uncertainty on carbon pricing. Their goal is to get the Council to back off the aggressive energy efficiency acquisition pace. The 6th Plan modeled a range of futures, some of which had a price on carbon or a constraint on coal plant operations while other futures did not. A key debate in development of the 7th Plan will be whether to incorporate assumed EPA clean power rule emission reductions in the baseline or to leave it as a “scenario or possible future.”

Another significant issue involves solar costs and benefits. The 6th Plan had very high solar cost forecasts and the market has changed dramatically since. The new Plan must set accurate new cost points and put appropriate values on the grid and capacity benefits of solar.

And, for energy efficiency, low market prices have lowered the avoided cost for energy efficiency. Federal efficiency standards may achieve over 800 aMW of savings. Between low avoided costs and codes and standards taking away some low cost measures, conservation potential assessments are showing fewer cost-effective savings for utilities. The gap is widening between technical potential and achievable potential. The Council will be challenged to make sure that it is fully valuing the benefits of energy savings, including the benefits of hedging the risk of future market volatility. These issues will play out over the next year and a half.

Pacific Coast Collaborative – Energy Efficiency Platform
British Columbia and California lead the way on energy efficiency. Washington and Oregon are trying to catch-up so the Pacific Coast can more effectively lead the next generation of energy efficiency policies and initiatives. This morning I want to update you on where Washington and Oregon are in some of their energy efficiency efforts.

Codes – Washington’s goal is to cut energy use 70% below the 2006 code by 2030. Code improvements so far have brought the state 25% below the 2006 code, so there’s still a lot to do. Our colleagues at the New Buildings Institute are working with the state code council to draft a road map to get new buildings to the 70% goal. Others are pushing harder for a net-zero code or — at a minimum — net-zero-ready codes. The City of Seattle has stakeholders meeting to develop a net-zero-ready code.

Oregon’s residential code needs an upgrade to the 2012 IECC and code folks are working on a workable “stretch code” structure that builders would actually follow.

Benchmarking/disclosure – The mandatory retrofit requirement adopted here in Vancouver is quite out-front for the region. Washington requires commercial and state buildings larger than 10,000 square feet to benchmark energy use and disclose performance scores at point-of-sale or lease. Implementation has been quite low except for a few cities and state buildings. The City of Seattle ran with this policy and adopted a more stringent requirement with accountability. The City has very high compliance rate for the commercial buildings over 20,000 square feet. The next two steps: Get other communities and the state to step up and participate; and require public disclosure of the performance scores by building. This will support the energy efficiency industry in the marketplace.

Oregon is now developing a residential energy performance disclosure system. The state department of energy has issued guidelines that allow a few different audit tools but require the contractor to use a common format for consumers. There are some concerns with the process for translating to the common format, but this approach is being closely watched in Washington where there is no residential energy disclosure.

Of course, the brass ring is some type of mandatory schedule for retrofits or point-of-sale retrofit requirement based on a benchmark floor. Point-of-sale for both commercial and residential buildings is the optimal time to require a retrofit – money is changing hands, usually some type of upgrade or improvement is being done. The politics in Oregon and Washington are not aligned for such a retrofit mandate, so we’re currently looking to more comprehensive benchmarking and disclosure as the first step.

Pay for Performance: The pay for performance concept has been around for decades with energy services businesses. The new twist modeled in Seattle with a recently adopted rate tariff for the Bullitt Center is for the utility to purchase kilowatt-hour savings as if they were purchasing kWh from the market. It’s a 20-year contract and only for actual kWh saved against a baseline. This approach is being piloted in both states. But the goal is to help finance more complete retrofit work and help ensure persistence of savings over time. It is a very exciting concept for the commercial building market.

Thank you very much for this opportunity to share our perspective on these cross border issues. I look forward to working more closely together.