Stringency and Flexibility – Two Sides of the Same Coin in EPA’s Proposed Greenhouse Gas Emissions Regulations for Existing Power Plants

by Davis Wright Tremaine LLP
Contact

EPA’s ground-breaking proposal to cut carbon dioxide (CO2) emissions from existing power plants has been lauded by some for affording states considerable flexibility, while also being criticized by others for being stringent. In fact, it’s both.

Flexibility is provided in the proposed regulations by permitting emission reductions to be achieved within four “building block” policies. EPA would allow a state implementation plan to count CO2 emission reductions that occur as a result of (i) improving heat rate efficiency at coal-fired power plants; (ii) changing the dispatch of power plants so that existing combined-cycle natural gas plants are run more intensively and existing coal plants are run less intensively; (iii) expanding renewable generation and preserving existing nuclear plants at risk of retirement; and (iv) reducing end-use demand for electricity through adoption of energy efficiency programs.

These “building-blocks,” enable each state to design a least-cost system of CO2 emission reductions that best fits the electricity sector profile of the state. Additional flexibility is afforded states through optional use of (i) regional implementation plans, (ii) mass-based rather than rate-based emission standards, (iii) cap and trade systems, (iv) assumption of state responsibility for achieving some part of the emission reductions, (v) alternative timelines and goals for submitting implementation plans and for achieving emission limits, and (vi) retention of and reliance on existing state programs.

But, the flexibility of the four “building blocks” has a flip side. EPA uses the feasibility of implementing each building block as the basis for establishing the “stringency” of the CO2 emission performance standards imposed on each state. EPA euphemistically refers to the state emission performance standards as “goals,” but these standards are binding. Moreover, the standards are calculated by EPA using a uniform formula that presumes the feasibility and cumulative impact of policies and measures within each building block within each state. This is the inflexible aspect of EPA’s “building blocks.”

In this blog post, we briefly summarize EPA’s factual and policy determinations that underlie inputs to its formula for calculating the stringency of each state’s binding CO2 emission performance standards, which are established for the year 2030 and, on average, for the decade of 2020-2029. EPA invites comment on its formula and its input assumptions and determinations. The formula used to calculate the binding CO2 performance standard for each of the fifty states is specified and illustrated in the Goal Computation Technical Support Document.

  1. Improving power plant efficiency. EPA determines that every existing coal-fired power plant could improve its heat rate by at least 6%, yielding a 6% reduction in each plant’s net CO2 emission rate. EPA finds that this level of average heat rate improvements could be achieved, at reasonable cost, through equipment upgrades and adoption of best operating practices. EPA also assumes no installation of carbon capture and sequestration technologies at existing power plants and no conversion or co-firing of existing coal-fired power plants with natural gas.
  2. Redispatch from coal to natural gas. EPA determines that each natural gas combined-cycle (“NGCC”) plant could achieve a 70% utilization rate (i.e., capacity factor), and be substituted for coal and less efficient natural gas and oil generation. EPA assumes that this implied increase in the national average NGCC capacity factor from 46% in 2012 to 70% in 2020 (capped only by limits on how much natural gas could be substituted for other fossil generation in a particular state) could be achieved in a regional power pool or individual utility system utilizing security-constrained, economic dispatch, if a carbon price (estimated to be $30 per metric ton of CO2) or operating limits were imposed on existing coal-fired power plants. However, EPA also notes that while it assumes a 70% average capacity factor for application of its formula, it does not expect that the majority of states would operate their existing power plant fleet at this level of redispatch. See Goal Computation Technical Support Document at n.13.
  3. Renewables and nuclear power plants. EPA assumes that, after giving effect to announced retirements of several nuclear plants, approximately 6% of the historical nuclear fleet is at risk of early retirement, primarily due to unfavorable economics. In setting each state’s CO2 emission performance standard, EPA assumes retention of at-risk nuclear plants and completion of planned new construction of nuclear facilities.

EPA also assumes annual increases in renewable generation in each state, based on annual growth factors and maximum target percentages that EPA determined for six regions encompassing the continental U.S. The regional targets are based on the average Renewable Portfolio Standard requirements in those states within the region that have adopted such requirements. EPA does not differentiate among different renewable technologies, but it proposes to exclude hydropower from its calculations.

  1. Reductions in electricity demand. EPA developed a “best practices” demand-side energy efficiency scenario, which provides an estimate of the potential reduction in electricity demand that can be achieved at reasonable cost through demand-side measures already achieved or mandated by a number of states. EPA calculates that twelve leading states have achieved or will achieve at least a 1.5% annual reduction in electricity demand through these best practices for end-use energy efficiency. EPA applies this 1.5% annual incremental end-use energy efficiency savings factor to determine levels of CO2 emission reductions associated with foregone electricity generation achievable in every state (each of which starts from a different baseline).

The foregoing electricity sector policies and measures – the “building blocks” – comprise the “best system of emission reductions,” under Section 111(d) of the Clean Air Act, for which EPA calculates, using its uniform formula, the stringency of binding CO2 emission performance standards imposed on each state. Starting from this prescriptive, inflexible stringency, EPA’s proposed Section 111(d) regulations attempt to afford states considerable flexibility in developing their individual or regional implementation plans, which must be approved by EPA. Future blog posts will examine other aspects of EPA’s proposed regulations.

 

Written by:

Davis Wright Tremaine LLP
Contact
more
less

Davis Wright Tremaine LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!