Electricity Markets

California releases its draft compliance plan for meeting EPA's Clean Power Plan

California has become the first state in the country to release to the public a proposed plan for complying with the Environmental Protection Agency's Clean Power Plan, the EPA's final rule, published last fall, which aims to cut carbon dioxide emissions from existing power plants.

The California Air Resources Board — the state air pollution control agency — on Aug. 2 published the proposed plan on its website. The CARB will take public comments on the plan, California's Proposed Compliance Plan for the Federal Clean Power Plan, from Aug. 5 until Sept. 19, Stanley Young, a spokesman for the CARB, told the American Public Power Association. People also will be able to provide comments at a public hearing on the plan that the CARB is holding on Sept. 22 in Sacramento, he said.

CARB believes the California plan could become a model for other states, Young said in an Aug. 4 interview with APPA.

"There's something for everyone" in the draft plan, he said, because California has taken a wide range of steps to reduce its CO2 emissions.

"Other states are moving toward cleaner energy," Young added. "We're hoping that what we're doing here will demonstrate" that other states also can meet the CPP's requirements, he said.

The CARB is using the "state measures" approach — one of the options for compliance provided by the EPA in its final CPP rule. That option allows states to use their own rules to meet the required cuts in CO2.

California is proposing to use its own cap-and-trade program for CO2, which began in 2012, as its state measure. The state agency said it is considering amending the cap-and-trade program to better dovetail with the CPP final rule.

As the draft CARB plan notes, the Clean Power Plan establishes both a rate- and mass-based, state-specific CO2 limit for the total affected power plant emissions in each state. CARB staff "are proposing to use the mass-based limit as it most readily conforms to the mechanism of mass emissions compliance instruments" used by the California cap-and-trade program.

The CARB staff "anticipates that the board will consider the plan as part of its overall evaluation of climate programs going forward, and will present the plan for final approval in spring 2017, in coordination with other proposed measures," according to the draft plan.

Supreme Court has imposed a stay on the EPA plan

The EPA's final Clean Power Plan rule was released by the federal agency a year ago and published on Oct. 23, 2015. Early this year, the Supreme Court put a stay on the EPA rule while litigation over it works its way through the courts. The Supreme Court's action was a response to requests filed by many states and other interested parties, including APPA.
The CARB anticipates that it will submit its proposed plan to the EPA — providing the plan wins final approval — once the stay has been lifted.

The federal compliance periods begin Jan. 1, 2022, and the full reductions required by the CPP must be achieved by Dec. 31, 2031, and maintained thereafter.

The CARB wrote its proposed compliance plan with the assistance of an interagency working group that included the California Energy Commission and the California Public Utilities Commission.

The plan "is designed to comply with CPP requirements, while ensuring smooth operation of California's existing suite of climate programs," CARB said in the draft plan, which is 77 pages long and has more than a dozen appendices.

Appendix A to the CARB draft compliance plan lists the affected electric generating units, or EGUs.

The age of California's fleet of affected EGUs "ranges from 67 years old to those that have not yet begun operation," according to the proposed plan. "The age of affected units is almost evenly split between those that are older than 25 years and those that are younger than 25 years."

Under the "states measures" approach that California is taking in its draft plan, EGUs that take part in the cap-and-trade program "will have a federally-enforceable obligation to comply with key program requirements, while other participants in the market program will continue to have only state-enforceable obligations," CARB noted in the draft plan.

State confident it will meet CPP requirements

The proposed plan said the state is confident that it will be able to comply with the Clean Power Plan and will not need a federal backstop.

"As required by the CPP, a federally-enforceable backstop measure is proposed for inclusion in the cap-and-trade program for CPP-affected EGUs, which will further ensure that federal emission targets are met," CARB said in the draft plan. "However, as the modeling described in this proposed plan explains, it is very unlikely that the backstop would be triggered."

A year ago, in a discussion paper issued by CARB, the agency noted that California "is committed to reducing greenhouse gas emissions from its electric power sector" through an array of state policies developed over decades, including the state's renewable portfolio standard, its emissions performance standards, its energy efficiency standards for buildings and appliances, and a suite of measures, including the cap-and-trade program, that were authorized by a California law, A.B. 32, called the Global Warming Solutions Act.

These and other state efforts "have already helped California develop and maintain one of the lowest-carbon electricity sectors in the country," CARB said in the September 2015 discussion paper.

‘Off to a running start'

"California's been off to a running start here for years," with its emphasis on renewable energy resources, said Craig Segall, a senior lawyer with the CARB, in an Aug. 4 interview with APPA.

The CARB's draft compliance plan notes that the state is on track to meet a 33 percent renewable portfolio standard by 2020. In addition, California is currently planning the next round of renewable generation to meet a 50 percent renewable target by 2030, as required by the recently adopted Senate Bill 350.

In April 2015, Gov. Jerry Brown signed an executive order establishing a California greenhouse gas reduction target of 40 percent below 1990 levels by 2030.

This "represents the most aggressive benchmark enacted by any government in North America to reduce GHG emissions over the next decade and a half," and is "consistent with the scientifically established levels needed to limit global warming below 2 degrees Celsius — the warming threshold at which scientists agree that there will likely be major climate disruptions," the CARB said in its draft plan.

CARB recalculated EPA data on targets, affected EGUs

The draft California plan notes that the EPA "calculated interim and final corresponding mass targets for each covered state, based on the application of the required emission rates to that state's fleet of existing EGUs." The CARB staff has recalculated these goals to account for the final list of affected EGUs in California.

In its proposed plan, the CARB explains that, in order to determine the status of each EGU, CARB staff applied definitions in the CPP. The agency said that, as defined by the EPA rule, a steam generating unit "means any furnace, boiler, or other device that combusts fuel and produces steam plus any integrated equipment that produces electricity or useful thermal output to the affected facility or auxiliary equipment. Nuclear steam generators are not included."

The CPP provides eight exemptions from its definition of "affected units," including an exemption for small generating units that have a capacity of 25 megawatts or less.

Based on information it received and research by staff, the affected units that CARB staff identified "differ somewhat from those identified in the initial list of units published by U.S.

EPA," the CARB noted in the proposed plan. In addition, the megawatt ratings of some units "differ from U.S.EPA's list based upon the best data available," the CARB said.

"Although the affected EGU list is largely the same, some units which U.S. EPA believed to be affected EGUs are not covered by the CPP; others which were not identified as affected units have been added to the list of affected units."

Out-of-state generation imported into California "would also be subject to California's cap-and-trade program," as it is now, the draft plan said.

CARB aims to address concerns of public power utilities, balancing authorities

The draft compliance plan notes that some public power utilities in the state, such as Pasadena Water and Power and Silicon Valley Power in Santa Clara, are members of the California Independent System Operator, while others either act as their own balancing authority or are members of other balancing authorities. For example, the plan said, the Los Angeles Department of Water and Power and the Imperial Irrigation District serve as their own balancing authorities. The Sacramento Municipal Utility District is a member of Balancing Authority of Northern California, along with Roseville Electric and Redding Electric Utility.

To ensure reliable electric service, all balancing authorities in California are required to meet reliability standards set by the North American Electric Reliability Corporation and the Western Electric Coordinating Council, the plan noted.

Staff of the CARB and the California Energy Commission "have repeatedly consulted with state balancing authority area staff in developing this proposed plan," said the draft plan, adding that staff contacted representatives of the following balancing authority representatives: the Balancing Authority of Northern California, the California Independent System Operator, the Imperial Irrigation District, the Los Angeles Department of Water and Power, the Northern California Power Agency, the Southern California Public Power Authority, and the Turlock Irrigation District.

The draft plan will be shared with the balancing authority representatives upon its release, and CARB "is seeking feedback from these organizations," the plan states, adding that CARB staff "will address any reliability concerns raised through this consultative process before offering the proposed plan for final approval."

"The Clean Power Plan will encourage cleaner energy" in the West and elsewhere, said the CARB lawyer, Craig Segall. "Carbon intensity will drop."