EPA Releases Final Clean Power Plan

On August 3, President Obama announced the U.S. Environmental Protection Agency’s (EPA) final Clean Power Plan (CPP).  First proposed in June, 2014 the goal of the CPP is to reduce carbon dioxide (CO2) emissions from existing power plants 32% from 2005 levels by 2030.  This is an increase from the originally proposed goal of a 30% reduction; and not the only change from proposed rule.  Before reviewing other key changes between the proposed and final rule let’s recap what sources are covered by the CPP.

CPP - PowerSectorCO2Emissions

Source: U.S. EPA

The CPP covers larger electric generating units (EGUs) that sell power to a utility distribution system.  Covered EGUs include any boiler, integrated gasification combined cycle, or combustion turbines (simple or combined cycle) that:

  1. is capable of combusting 250 million BTUs per hour or more
  2. combusts fossil fuel for 10% or more of its total annual heat input
  3. sells the greater of 219,000 MWh per year and one third of its potential electrical output
  4. was in operation or had commenced construction as of January 8, 2014

Given the electrical production numbers above, and assuming a capacity factor of 100%, the smallest possible generating unit that would be covered is 25 MW.  More realistically, covered EGUs will be at least twice this size.

Key Changes in the Final CPP

Mass-Based State Goals: One of the key changes from the proposed to the final rule is the addition of mass-based goal in addition to rate-based goals for each state.  The proposed rule only included rate-based goals. Mass-based goals were added to expand options for states when developing their plans, in particular it facilitates states’ use of mass-based trading programs.

Trading-Ready Mechanisms:  states have the option of developing trading-ready programs, which means EGUs can trade creditable reductions between states without the need for an interstate agreement to be in place beforehand.  EPA is committed to facilitate trading by helping states track emissions and credits.

Compliance Glide Path: one of the biggest criticisms of the proposed rule was the compliance cliff in 2029.  The final rule phases in EGU performance rates over three time periods: 2022-2024, 2025-2027, and 2028-2029; with final compliance in 2030.

BSER made up of Supply Side Building Blocks: EPA sets the level of reductions for EGUs by looking at the Best System of Emission Reductions (BSER) demonstrated for a pollutant.  In the proposed rule the BSER was made of four building blocks, including energy efficiency, a demand-side block.  The final rule only includes the supply-side building blocks shown below:

  • Improved Efficiency at Power Plants
  • Shift Generation from Higher Emitting Coal to Lower Emitting Natural Gas
  • Shift Generation to Zero-Emitting Renewables

Revised Building Block Assumptions: in addition to removing the demand-side building block EPA also revised the assumptions for the remaining supply-side building blocks based on feedback received on the proposed rule.

Building Block Proposed Rule Final Rule
Improved Efficiency at Power Plants Assumes a 6% improvement is possible for coal units 2.1% – 4.3% depending on region of the U.S.
Shift Generation from Higher Emitting Coal to Lower Emitting Natural Gas Increase the capacity factor to 70% for natural gas combined cycle EGUs 75% of net summer capacity
Shift Generation to Zero-Emitting Renewables increase use of renewable resources Assumes more renewables due to falling costs – excludes existing nuclear and renewables

For a complete overview of all the key changes see the EPA fact sheet Clean Power Plan: Key Changes and Improvements; a full list of EPA fact sheets on the CPP is at the bottom of the article.

Implementation and Compliance Timeline

In addition to increasing state flexibility and encouraging trading as a compliance tool the EPA also pushed back the first compliance milestone from 2020 to 2022.  The timeline for submitting plans has been pushed back two months, with at least an initial plan due by September 6, 2016.

CPP - Timeline2

Source: U.S. EPA

The extended timeline may give states greater flexibility in that it will give more time for economic fuel switching from coal to natural gas to continue to play out in the electric generation sector.  Just last week the Energy Information Administration (EIA) announced that power sector CO2 emissions hit a 27 year low in April.  The EIA notes that April is typically the month with the lowest CO2 emissions, and that April 2015 was the lowest of any month since April, 1988.  Comparing these two months 27 years apart the EIA notes that:

  • Natural gas consumption in the sector has tripled
  • Renewable energy consumption doubled
  • Nuclear energy consumption increased 47%
  • Coal consumption decreased 17%

All of these trends have naturally led to a less carbon intense power sector with generation up 44% over the period, but energy use increasing only 33% and CO2 emissions up just 4%.  The graph below shows that the monthly power sector carbon emissions have been trending down since 2005. The full EIA piece is here: Monthly power sector carbon dioxide emissions reach 27-year low in April.

 

 

EPA Clean Power Plan Fact Sheets: