Emissions, Policy & Regulations

Uncertainty perhaps the only sure thing about EPA Clean Power Plan

Nearly three months after the Environmental Protection Agency (EPA) issued its Clean Power Plan, electric utilities and many states are still trying to grasp the proposal to cut carbon emissions 30% by 2030.

That was a recurring theme during GenForum and the opening of PennWell’s Coal-Gen conference in Nashville Aug. 19-20. A lot of people think utilities can “energy efficiency our way into the future,” said Tennessee Valley Authority (TVA) Vice President of Stakeholder Relations Joe Hoagland.

As for the EPA plan to have states cut CO2 emissions from the power sector, some states still don’t have a solid idea of who will be in charge of drafting the state implementation plan – state environment agencies or state public utility commissions, Hoagland said.

“The state folks are just trying to understand how they are going to do this,” Hoagland said. TVA had initially felt good given its dramatic CO2 reductions, but this doesn’t appear to have been fully credited by EPA, Hoagland said.

TVA’s Hoagland along with executives from American Electric Power (NYSE:AEP); and Southern (NYSE:SO) headlined a GenForum panel discussed titled “Coal isn’t Dead; but Gas is the life of the party.”

AEP Executive Vice President/Generation Mark McCullough said if the nation abandons too much coal too hastily then, “the party’s over.” Although AEP built a new coal plant only a couple of years ago, many of its coal units are approaching 60 years old.

Given the direction that EPA is moving, it is conceivable that the nation could one day be looking at a generation mix that is 75% natural gas and 25% renewables, McCullough said.

“The fact is all capacity is not created equal,” McCullough. Intermittent renewable energy could not significantly increase output during the polar vortex, but during the period AEP relied heavily on aging coal units – many of which will retire for regulatory reasons in the next year, he added.

Hoagland said that the 111(d) rule proposal, as written, doesn’t appear to properly credit TVA for completion of the Watts Bar 2 nuclear unit in Tennessee.

When asked about the potential for forming a regional greenhouse gas alliance, the trio said regional approaches hold potential but require plenty of work to form. Developing a regional group from scratch would be tough because various states are in very different compliance situations.

Southern System Planning Vice President Jeff Burleson said subsidiary Mississippi Power will gasify lignite coal and capture about two-thirds of the resulting carbon dioxide.

Southern planners are figuring out what combination of generation, transmission and energy efficiency investments will best serve its customers and comply with government standards.

“When we are making decision we are looking at the full suite of proposed rules” and not looking at them in isolation, Burleson said. The Southern system maintains a flexible system that enables it to “dial back” coal or natural output depending on fuel price and other factors, he added.

Holmstead doubts current version of EPA CO2 plan can survive

Some lawsuits are already being filed against the rule proposal and more suits are on the way, Hoagland said during the utility panel.
“What needs to happen with the Clean Power Plan” is that it needs to comply with the Clean Air Act, Burleson said. It also needs to be achievable, the Southern official said.

In his presentation Bracewell & Giuliani partner Jeffrey Holmstead predicted that the current version of the Clean Power Plan won’t be implemented.

Holmstead was a top EPA air quality official during the George W. Bush administration and is now an industry attorney. The current EPA theory is that CO2 emissions can be reduced by reducing electric demand or shifting power generation to less-emitting sources, he said.

It is the sort of rule that would be easy for a subsequent presidential administration to undo, Holmstead said. Even if that doesn’t happen, he expects the rule will be thrown out by the courts, Holmstead said.

The idea that 111(d) of the Clean Air Act gives EPA to dictate the way energy is regulated in all states “is a real stretch,” Holmstead said. The problem, however, is that the legal fighting could take years and utility decisions must be made now, Holmstead said.
The power industry doesn’t want to “just say no” to carbon reductions, but they want something that’s easier to make work, McCullough said.

Most expect gas, renewables to continue to dominate new construction

Alstom Power “shares the view” that little if any new coal-fired capacity will be brought online in the United States anytime soon, said Alstom Managing Director North America for Environmental Controls Mike Kaplan. That, however, is not the case elsewhere in the world.

If and when new coal-fired capacity is built in North America it will likely need coal-capture technology such as oxy-combustion, which Alstom is using at the White Rose plant in Britain, hold potential, Kaplan said.

The Midcontinent ISO (MISO) is already predicting that 15% of its region’s coal-fired power capacity will be retired by the end of 2016 largely as a result of the Mercury and Air Toxics Standards (MATS), said MISO Senior Director of Policy & Economic Studies John Lawhorn.

“I keep seeing baseload capacity going away,” Lawhorn said. “Coal capacity is retiring and not being replaced in kind,” said the MISO official. Reserve margins in MISO are decreasing, he noted.

“Our generating resources going forward are looking to be solar, wind and gas,” Lawhorn said. This is based on current patterns and government incentives, he said.

This article was republished with permission from GenerationHub.