We have learned a lot about the effects of the Environmental Protection Agency’s controversial Clean Power Plan since it was first introduced back in June.
State regulators in Virginia say the plan will cost Dominion Virginia Power up to $6 billion to comply. Another study places the cost of compliance at $366 billion nationwide.
What’s more, the plan depends largely on the displacement of coal in favor of natural gas to meet state targets for carbon dioxide (CO2) emissions, a fact that power producers are deeply concerned about, especially after last year’s polar vortex, which sapped America’s gas supplies as they were re-routed for home heating. Power producers are rightfully worried the plan could accelerate the shutdown of coal-fired generation in the U.S., putting reliable and affordable power at risk by becoming too reliant on natural gas and its insufficient infrastructure.
Under the proposed rule, each state’s CO2 reduction target is based on four building blocks: 1) Heat rate improvements; 2) Dispatch changes among affected units; 3) Increasing the use of renewable energy; 4) Demand-side energy efficiency.
Some power producers have expressed concern that the plan does not provide enough flexibility to comply. For some states, building block 2 is the only option for meeting the reduction targets. Power producers have questioned the feasibility of the plan, pointing to deficient gas pipeline capacity and the value created by major investments in much of the nation’s coal-fired generation. Under the proposed rule, the benchmark year would be 2012, which means any improvements completed at coal-fired plants during that year or before will not be recognized.
The feedback has led the EPA to issue a request for more input about the methodology being used to meet the plan’s CO2 emission targets.
The EPA’s request for more information “is a frank admission that the plan is a ‘glorious mess’ forcing the agency to deploy procedural belts and suspenders to hold it together,” said National Mining Association President and CEO Hal Quinn. “With enormous costs and unmeasurable benefits, the only option EPA should consider is withdrawal of this symbolic but expensive gesture on climate change.”
According to Standard & Poor’s, up to 75,000 MW of coal-fired generation may be shuttered by 2020 due to a host of new regulations targeting coal-fired plants. “We are really in for a wild ride for five to six years because of the amount of coal shutting down in such a short amount of time and the transformation toward more gas being used to generate electricity,” Philip Moeller, a member of the Federal Energy Regulatory Commission, told Bloomberg.
The Clean Power Plan would require existing power plants to reduce carbon dioxide emissions 30 percent below 2005 levels by 2030. Although the national average would be 30 percent below 2005 levels by 2030, the specific reduction target for each state will vary. EPA is expected to issue a final rule by June 2015. States would have until June 2016 to file their compliance plans, with one- and- two-year extensions available to qualifying states.
“I’ve heard some states aren’t going to do it. They’re going to say give us a federal plan,” said Jacob Hollinger, former Clean Air Act attorney for EPA Region 2. “I’m not sure that’s a good idea. If the state doesn’t submit a plan, EPA is going to impose a federal plan. If you end up with a federal plan, you’re going to have more burdens on EGUs than you are under a state plan.”
In addition to concerns about the plan’s impact on reliability, many states contend the EPA proposal is unlawful. The staff of the Virginia State Corporation Commission said the proposal would impose substantially more stringent emission requirements for affected, existing generating units in Virginia than the standard for new units, yet to be built.
Jeff Holmstead, former assistant administrator of the EPA and one of the nation’s leading climate change lawyers, said the rule will likely be overturned by the courts.
“The idea that this somehow gives the EPA authority to require all states to fundamentally change the way electricity is produced and consumed in their state is a real stretch,” Holmstead said. “This is something that won’t withstand judicial scrutiny.”
To withstand the certain legal challenge, EPA will need to modify its proposal by offering more compliance options. Changes to the EPA proposal will be forthcoming.
The Clean Power Plan will be the topic of a Mega-Session entitled “Potential Impact of GHG Regulation on the Future of the Power Industry” at POWER-GEN International 2014. The session begins at 10 a.m. Dec. 11 at the Orange County Convention Center in Orlando, Florida.
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