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October 30, 2013
Assessing the impact of EPA's power plant proposal

EPA’s proposed New Source Performance Standards (NSPS) for greenhouse gas (GHG) emissions from new coal-fired power plants are widely regarded as one of the most significant federal rulemakings since environmental law made its debut in the early 1970s.  But the impact of the proposal and any follow-up rule are largely symbolic since it is unlikely that any facility will actually be subject to a final action.  The real import of the proposal is that it is a necessary legal step before the Agency can issue standards controlling GHG emissions from existing power plants.

Here are additional revealing facts/observations about the two GHG standards for power plants gathered from a recent report from the Congressional Research Service (CRS).

New plants

  • The first NSPS proposal, issued in April 2012, prompted 2.5 million public comments, the most ever for a proposed EPA rule.  But currently, there are only three coal-fired power plants under construction nationwide; two of these, and possibly the third, will not be subject to the proposed NSPS because construction commenced within a           12-month exemption cushion of the proposal. 
  • The EPA based the proposed NSPS for new sources on carbon capture and sequestration (CCS), which imposes very high additional costs on power plants.  Primarily, the energy required to run equipment that can remove CO2 from an emissions stream (referred to as the parasitic load) is in the range of 30 percent for most demonstration projects.  In addition, a CCS-equipped unit might incur costs for underground storage of the captured CO2 (unless it is used for enhanced oil recovery) and possibly significant costs for building and operating a pipeline to transport the CO2 to the storage location.  Overall, based on Department of Energy (DOE) estimates, using today’s commercially available CCS technologies would add around 80 percent to the cost of electricity for a new pulverized coal plant and around 35 percent for a new advanced gasification-based plant.
  • Apart from DOE-sponsored or other demonstration projects, the EPA does not expect that any coal-fired power plant will be built in the next 10 years whether or not the proposal is finalized; therefore, no units will be required to use CCS before the EPA must review the proposed standard.
  • Since no new coal-fired capacity subject to the standards will be built, the proposed standards would do little to stimulate the development of CCS technology.  Put another way, the EPA has been exaggerating the benefits of the proposed NSPS, says CRS analyst James E. McCarthy.
  • According to EPA’s analysis, the price of natural gas would have to increase to $10 per million Btu (MMBtu) for coal boilers without CCS to become competitive with combined-cycle natural gas units.  The Energy Information Administration (EIA) reports that the highest projected annual natural gas price in any of EIA’s 2013 scenarios is $6.64/MMBtu.  Therefore, the primary role of the final NSPS would be to serve as a backstop if those projections are inaccurate. 
  • Legal challenges to EPA’s judgment that such a costly technology can be considered “adequately demonstrated,” as required by the Clean Air Act, would have to be filed in the D.C. Circuit Court of Appeals.

Existing plants

  • Existing coal-fired power plants account for about 27 percent of all GHG emissions in the country.  The president directed the EPA to propose guidelines for existing sources by June 1, 2014, and to issue a final rule by June 1, 2015.  This means that states would need to submit state implementation plans (SIPs) showing how they will abide with the guidelines by June 30, 2016.  If a state does not meet that deadline, the EPA is empowered to impose a federal implementation plan (FIP) on the state. 
  • With the principal mobile source categories already subject to GHG regulations, the EPA will have addressed the sources of more than half of all U.S. emissions once it promulgates regulations for existing power plants.

The CRS report

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