Affordable Clean Energy proposal polarizes stakeholders
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December 13, 2018
Affordable Clean Energy proposal polarizes stakeholders

Action could slow the decline of coal-fired energy

Public comment on the EPA’s proposed Affordable Clean Energy (ACE) rule closed October 30, 2018, and, as expected, the thousands of responses highlighted the radically diverse opinions on coal-fired energy and climate change held by Americans and industry stakeholders. The ACE proposal (August 31, 2018, Federal Register (FR)) comprised revisions of three existing regulations contained in the Obama administration’s Clean Power Plan ((CPP); October 23, 2015, FR)—the best system of emission reduction (BSER) for existing coal-fired power plants; emissions guidelines clarifying the roles of the EPA and the states in implementing the BSER; and determining the applicability of New Source Review (NSR) permitting for existing power plants.

The ACE proposal was issued in conjunction with the Agency’s proposed repeal (October 16, 2017, FR) of the CPP. The objectives of the CPP and the proposed ACE are related but different in key respects. While both actions seek to reduce emissions of carbon dioxide (CO2), a greenhouse gas (GHG) emitted by coal-fired power plants, the additional goal of the CPP is to pressure energy companies into shuttering older plants and replacing lost capacity with renewable energy or, at a minimum, natural gas generation, a fuel that produces about one-half the CO2 as combusted coal. In contrast, the ACE was designed to prolong the working life of those plants.

Both the CPP and the proposed ACE would result in reduced GHG emissions over a baseline scenario—i.e., no regulation at all—but reductions under the proposed ACE would be less. The current EPA has downplayed the differences, stating that the CO2 emissions under the proposal would be about the same as those under the CPP. But observers respond that there is considerable uncertainty about what ACE reductions would actually be since the proposal does not set numeric reduction limits as is the case with statewide budgets set under the CPP. The ACE limits would instead be established by individual states for individual plants. The proposal would increase the time states are provided to submit the relevant implementation plans for power plants to the EPA from 9 months to up to 3 years. Furthermore, the proposal would allow states to determine the appropriate compliance deadlines for affected units based on the standards of performance determined through the state plan process.

Much of the legal impetus behind the ACE proposal is the current EPA’s contention that the CPP exceeds the authority of the Clean Air Act (CAA) because it endeavors to dictate the composition of the energy sector rather than pollution emitted by stationary sources. The CPP has a building-block approach to the BSER—improve the heat rate at coal-fired units; shift generation to lower-emitting natural gas units; and shift generation from fossil fuel units to renewable energy generation. In the ACE proposal, the EPA is seeking a singular definition of the BSER—heat rate improvement (HRI) at existing coal-fired units. In other words, the performance standards established for power plants would only reflect those emissions reductions that can be achieved through making existing plants more efficient. The proposal includes a list of the “most impactful HRI Measures”; these include neural network/intelligent soot blowers, boiler feed pumps; air heater and duct leakage control, variable frequency Drives, blade path upgrades, and improved O&M Practices.

The current EPA has acknowledged that implementation of the proposal may bring about a rebound effect, that is, efficiency gains may lead to increased electricity generation by fossil fuel-fired plants instead of relying on other electricity generation technologies, thereby increasing absolute emissions and, to some extent, offsetting the emissions reductions from HRI.

Under the NSR rules, major modifications of existing power plants may not proceed until the facility obtains a permit specifying that modern pollution control equipment will also be installed. To determine if an NSR permit is required, the facility undergoes an applicability test. The current applicability test regulations indicate that any facility that undertakes an HRI project may trigger the requirement for an NSR permit. Under the proposal, NSR would not be triggered by an HRI if the modification does not increase emissions on an hourly basis even if the modification increases annual emissions. An annual emissions increase is possible because an energy company will be inclined to operate a more efficient unit more hours in a year.

The EPA estimates that, overall, the proposed ACE will reduce costs when compared to the CPP by $700 million in 2025. The proposal would also result in what the Agency calls “foregone benefits,” that is, an increase in human mortality and illness resulting from persistence of copollutants such as particulate matter and ozone, which will occur in the absence of the CPP.

With that background, here are views the ACE proposal has prompted from experts and other stakeholders.

BSER

“The proposed ACE rule rests on a stronger legal foundation and a sounder economic analysis than the stayed CPP. In particular, the choice of a BSER based on heat-rate efficiency, a measure of CO2 intensity, is much more consistent with the Clean Air Act than was the CPP’s statewide budget approach.”—The George Washington University Regulatory Studies Center

“EPA’s ACE proposal provides an incomplete menu of technologies that nominally improve the heat rate of coal plants, but provides states the option of requiring nothing at all from power plants. The ACE proposal imposes no deadlines for implementing control measures to the extent that any are required. This proposal is inconsistent with the Clean Air Act, and it abandons EPA’s responsibility to take effective actions to reduce carbon pollution from power plants, which has been found by sound science to endanger public health.”—Howard A. Learner, Executive Director, Midwest Environmental Law & Policy Center

“The Clean Power Plan respects and harnesses what grid experts recognize as the defining feature of the U.S. electric grids: their operation as a single interconnected synchronous system.  The CPP uses these features of the grid to advantage, allowing for and encouraging the reduction of pollution by shifting generation away from the grid’s dirtiest power sources. By working with the fundamental characteristics of the grid, not against them, the CPP results in lower-cost, meaningful pollution reduction. By contrast, the proposed ACE Rule aims to reduce pollution by drawing only from a tightly constrained set of measures that can be applied at individual facilities. Its focus is limited to a subset of measures that can be applied to sources on-site, namely, only those measures that result in HRI at individual coal-fired power plants.”—UCLA School of Law

Emissions

“Unlike the Clean Power Plan that would have required many of these units to significantly reduce generation or shut down, this proposal appropriately confines the requirements to what can be achieved ‘inside the fence line.’ This proposal also appropriately recognizes the important statutory role the states have in ultimately determining each individual electric generating unit compliance obligation based on unit specific factors considering EPA general guidance and determination of BSER.”—National Rural Electric Cooperative Association

“Under the ACE proposal, emissions of carbon dioxide and criteria pollutants will continue to decline more rapidly than if the CPP was withdrawn without replacement. Carbon dioxide, sulfur dioxide, nitrous oxide, and mercury emissions will all be reduced by 2030 as compared to an electric power sector free of carbon regulations under the Clean Air Act. Altogether, ACE will lead to power sector carbon dioxide emissions in 2030 that are 33% below 2005 levels.”—U.S. Chamber of Commerce

“While the emissions intensity of coal plants declines by 4.5 percent, the number of coal plants in operation and total coal-powered electricity generation increase. This rebound effect offsets the benefits of emissions intensity improvements and causes the total emissions reduction to be small compared to the emissions intensity improvements. Total CO2 emissions are projected to increase at a number of the affected plants. Of the 333 model coal plants that would be in operation in 2030 under no policy, 93 of those (or 28 percent) are projected to have higher total CO2 emissions under the ACE. Additionally, under the ACE, five additional model coal plants are projected to be operating in 2030 that would have been idled or retired under no policy.”—Resources for the Future

State authority

“The ACE proposal offers a framework that allows states to tailor their plans based on state and local market conditions and established emission policies. The proposal gives states the flexibility to regulate emissions at the plant level while considering factors like remaining useful life.”—American Public Power Association

“ACE emphasizes the authority of the states in both determining standards of performance for affected generation units and implementing and enforcing the rule.”—Montana Public Service Commission

“The proposed rule would remove the requirement that emission guidelines include information concerning known or suspected endangerment of public health or welfare by the designated pollutant. EPA ignores the fact that such information is crucial to development of state plans for pollutants whose regulation is justified in the first instance by such endangerment. The nature of a pollutant, its localized effects (if any) and information regarding its effective control must be provided to states so they can effectively develop their standards of performance.”—Letter submitted to EPA by 18 states, the District of Columbia, six cities, and 1 county

NSR

“Adopting an hourly test would help alleviate uncertainty about whether NSR permitting will be triggered when plant changes do not result in actual emissions increases. As EPA is aware, other types of applicability tests have resulted in determinations that emissions increases occurred when there were no actual emission increases, and in some cases, emissions actually decreased as a result of the project changes. For these reasons, INGAA recommends that EPA expand the applicability of the proposed hourly emissions test to all stationary sources and undertake a separate rulemaking to that effect.”—Interstate Natural Gas Association of America

“EPA’s proposal appropriately recognizes that the uncertainty and complexity created by the NSR program remains a significant obstacle to efficiency improvements. This uncertainty and complexity, however, is not limited to the utility industry. NSR rules similarly discourage other industries, like the refining and petrochemical manufacturing industry, from exercising the discretion to undertake energy efficiency improvement projects. As relevant to EPA’s current proposal, API supports the addition of an hourly emissions test within the existing major NSR applicability framework, because such a test would provide a simpler way of prospectively identifying whether a project will result in an emissions increase triggering NSR.—American Petroleum Institute

“Unfortunately, coal-fired power plants have a long history of exploiting ambiguities in NSR regulations—undertaking comprehensive, life-extending renovations but claiming (with varying degrees of success) that the upgrades do not qualify as “modifications” within the meaning of relevant Clean Air Act provisions and rules. By amending the NSR program in ways that make coal plant upgrades even less likely to trigger additional pollution control obligations, the Proposed Rule will, in effect, expand the grandfathering of old coal plants. As a result, it might also extend the economically useful lives of these highly polluting facilities.”—New York University School of Law

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