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EPA issues proposed rule on CO2 emissions from existing power plants


From the June 3, 2014 issue of Public Power Daily

Originally published June 3, 2014

By Robert Varela
Editorial Director
Existing fossil-fueled power plants would have to reduce their carbon emissions by approximately 30 percent from 2005 levels by 2030 under a rule proposed June 2 by the Environmental Protection Agency. Rather than directly regulate individual plants, EPA proposed state-specific rate-based goals for carbon dioxide emissions (in pounds per megawatt-hour) from the power sector, as well as guidelines for states to follow in developing plans to achieve the state-specific goals. In response, APPA said "climate change should be addressed, but Congress, not EPA, should determine the best framework outside of the Clean Air Act to do so while ensuring affordable, reliable electricity from all fuel sources, including coal and natural gas."  

EPA yesterday also issued a separate proposed rule to limit carbon emissions from modified or reconstrued power plants (see story, this issue). 

"Public power utilities are good environmental stewards," APPA President and CEO Sue Kelly said. "But we need a middle path, one that respects the needs of energy producers and the pocketbooks of energy customers." (Editors’ note: The complete text of APPA’s statement was sent to Public Power Daily subscribers earlier today in a special edition and is posted on APPA's website.)  

Public power utilities using coal-fired generation—especially units that are now being upgraded and retrofitted to deal with current EPA regulations—need to be able to continue to use those facilities for their remaining useful life, APPA said. The association also voiced concern that utilities with only one baseload generation unit (coal or natural gas) will find it far more difficult to meet steeper CO2 reduction targets. "We will review the EPA proposed rule language to ensure suitable accommodation for the unique needs of single generation units," said Joe Nipper, APPA’s senior vice president, regulatory affairs and communications.  

"I want to give a shout out to all the local officials, rural co-ops, public power operators, and investor-owned utilities that have been leading the charge on climate change," EPA Administrator Gina McCarthy said in unveiling the proposed rule. 

The regulation, once finalized, is certain to wind up in court. The proposal generated plenty of controversy. "For years, I have expressed concern that EPA’s unilateral regulations will come at a high cost and harm the affordability and reliability of our energy supply," said Sen. Lisa Murkowski, R-Alaska. "Nothing I have seen today, including the general dismissal of concerns about the rule’s costs, has lessened my concerns."

EPA said a mix of four "building blocks" make up the best system of CO2 emission reductions under the Clean Air Act: make fossil fuel power plants more efficient (by increasing heat rates); make more use of lower-emitting power sources (natural gas combined-cycle units); use more zero- and low-emitting power sources (nuclear and renewables); and use electricity more efficiently.   

The state-specific emission reduction goals reflect EPA’s quantification of adjusted state-average emission rates from affected electric generating units (EGUs) that could be achieved at reasonable cost by 2030 through implementation of the four building blocks described above, the agency said. EPA said it considered the reductions achievable through measures that reduce CO2 emissions from existing fossil fuel-fired EGUs either by reducing the CO2 emission rate at those units or reducing the units’ CO2 emissions total to the extent that generation can be shifted from higher-emitting fossil fuel-fired units to lower- or zero-emitting options.  

EPA is proposing a two-part goal structure: an "interim goal" that a state must meet on average over the ten-year period from 2020-2029 and a "final goal" that a state must meet at the end of that period in 2030 and thereafter. Once the final goals have been promulgated, a state would no longer have an opportunity to request that EPA adjust its CO2 goal.  

Each state would have to determine, and include in its plan, emission performance levels for its affected plants that are equivalent to the state-specific CO2 goal in the emission guidelines, as well as the measures needed to achieve those levels and the overall goal. "A state plan must include enforceable CO2 emission limits that apply to affected EGUs," EPA said. "In doing so, a state plan may take a portfolio approach, which could include enforceable CO2 emission limits that apply to affected EGUs as well as other enforceable measures, such as [renewable energy and energy efficiency] measures, that avoid EGU CO2 emissions and are implemented by the state or by another entity."  

No less than every two years, beginning January 1, 2022, each state would be required to compare emissions performance achieved by affected EGUs in the state with the emissions performance projected in the state plan, and report that to EPA.  

States would be able to choose between a regional or state compliance approach. With the state approach, a state is assumed to comply with the guidelines by implementing measures solely within the state and emissions rate averaging occurs between affected sources on an intrastate basis only, EPA said. Under the regional approach, groups of states are assumed to collaboratively comply with the guidelines.  

All states must submit initial or complete plans by June 30, 2016, although individual states would be eligible for a one-year extension to June 30, 2017, to submit a final plan. Multi-state plans would be eligible for a two-year extension to June 30, 2018, and would need to submit a progress report in the interim by June 30, 2017. Once a state submits a complete plan, EPA said it would review the plan and make a determination, within 12 months, to approve or disapprove the plan through a notice-and-comment rulemaking process.   

Average nationwide retail electricity prices are projected to increase roughly 6 to 7 percent in 2020, and roughly 3 percent in 2030 (contiguous U.S.), compared to base case price estimates modeled for these same years, according to EPA. Average monthly electricity bills are anticipated to increase by roughly 3 percent in 2020, but decline by roughly 9 percent by 2030 because increased energy efficiency will lead to reduced usage, the agency said. The use of coal by the power sector will decrease by roughly 30 to 32 percent in 2030.   

EPA also projects that the electric power sector-delivered natural gas prices will increase by 9 to 12 percent in 2020, with negligible changes by 2030 relative to the base case. Natural gas use for electricity generation will increase by as much as 1.2 trillion cubic feet in 2020 relative to the base case, declining over time, the agency said.   

The agency said it looked at the types of changes in the generation fleet that were projected to occur through retirements, additional generation and energy efficiency. "The analysis did not raise concerns over regional resource adequacy," EPA said.  

EPA will take public comments for 120 days after the rule is printed in the Federal Register and plans to hold four public hearings. On July 29, one public hearing will be held in Atlanta and one will be held in Denver; on July 31, a public hearing will be held in Pittsburgh, Pa., while the final one will be held in Washington, D.C., during the week of July 28.  

The proposed rule and related documents are posted on EPA’s website athttp://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule.

EPA anticipates issuing a final rule by June 1, 2015.
 

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Vice President, Integrated Media and Communications
Meena Dayak
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Editorial Director
Robert Varela
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Jeannine Anderson
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