Renewable Groups Urge EPA To Boost Solar, Wind Assumptions In ESPS

Source: By John Siciliano, Inside EPA • Posted: Tuesday, January 27, 2015

Renewable energy groups say EPA used old data in calculating states’ greenhouse gas (GHG) reduction targets under the existing power plant rule, which underestimates the potential of solar, wind and other renewables in meeting the goals and creates a scenario where states may “over-rely” on natural gas to meet the rule’s targets.

The renewable industry groups are urging EPA to update the existing source performance standards (ESPS) to reflect higher values for renewable energy potential, include more accurate cost assumptions, and adopt the “alternative approach” that EPA proposed that the industry believes is a more accurate method to calculate the rule’s state-specific targets.

Such a move, in addition to other recommendations such as including distributed generation resources in states’ targets, would have the effect of increasing the rule’s GHG goals because EPA would assume that states can cost-effectively develop a greater amount of renewable generation.

The formal comments largely echo recommendations from environmentalists who have urged EPA to sharply strengthen states’ targets by assuming much more renewable generation potential in many states.

The ESPS, developed under section 111(d) of the Clean Air Act, establishes state-specific targets to reduce power sector GHG emissions beginning in 2020. It calculates each target by assessing a state’s ability to lower emissions through the use of four “building blocks” that include heat-rate improvements at coal plants, increased electricity production from existing gas-fired power plants, and greater renewable energy and energy efficiency.

The solar industry says its recommended changes “will ensure that the EPA’s emission reduction targets accurately reflect application of the” best system of emission reduction (BSER) for affected power plants by including higher amounts of renewables, according to its Dec. 1 comments, echoing similar concerns raised by the wind industry and other groups.

“In fact, with these adjustments in building block 3,” which focuses on zero-emitting resources such as renewables, “the EPA will find that renewable energy potential is nearly double what EPA originally calculated, increasing from roughly 530 [terrawatt hours (Twh)] to 973 Twh,” according to the Solar Energy Industry Association (SEIA) comments.

The American Wind Energy Association (AWEA), in separate Dec. 1 comments, says EPA’s cost assumptions significantly underestimate wind potential and must be updated. “As a result of certain assumptions and provisions, we believe the proposed rule significantly underestimates the degree to which renewable energy, in particular, wind energy can help states cost-effectively meet their carbon reduction goals,” AWEA says.

In an interview with InsideEPA/climate before the comments were released, AWEA’s Tom Vinson said the change could drive up overall targets, but not in an overly stringent manner.

Both SEIA and AWEA say the alternative approach to calculating renewable targets would resolve many of their concerns because the approach takes into account the replacement of existing generation through technological development beyond what is accounted for under the proposed calculation approach, which is calculated by creating a regional average of state renewable portfolio standards (RPS).

AWEA says the alternative approach provides a broader assessment of renewable energy growth and potential compared to relying on existing state policies and mandates that only capture a limited amount of wind’s true development potential. Similarly, SEIA urges EPA to “update its cost and penetration data for solar when determining state emission reduction targets to ensure that the BSER is correctly reflected in state goals.”

The Geothermal Energy Association (GEA) in its comments says both the “proposed RPS-structure and the alternative technical and economic approach are overly conservative,” recommending that EPA also review “interstate opportunities” in calculating renewable energy targets, as opposed to looking only within a given state.

“As a result we believe the EPA should propose in the final rule emissions reductions that go further than what is in the draft Clean Power Plan, particularly in light of the lengthy compliance period” that extends from 2020 thru 2030, GEA says.

Natural Gas Concerns

Compared to other renewable industry groups, SEIA is more forceful on voicing concerns about the climate rule’s impact on the use of natural gas. The group says that “while natural gas will play an important role in the transition to a clean energy future, SEIA urges the EPA to ensure that its final rule does not require or incentivize states to over-rely on natural gas” under building block 2.

In the run up to ESPS compliance, SEIA fears states will make plans to switch more of their power generation to gas-fired plants, arguing that an “over-reliance on natural gas in the near term will incentivize significant natural gas infrastructure build out over the next few years that will undermine the EPA’s long term carbon reduction goals.”

“Once the infrastructure is built, it will be more difficult and expensive for states to switch to lower and non-emitting sources like renewable energy in the future,” SEIA says, which could cause price swings and increased volatility in the regional energy markets.

The solar group urges EPA to craft a final rule that “encourages energy diversity,” freeing states from “extreme price volatility” in the natural gas markets, “such as was experienced by ratepayers during the 2014 polar vortex” when the extreme cold caused power demand to spike resulting in unprecedented price surges across regional power markets.

“Thus, the EPA should craft a final rule that allows states to avoid unnecessary costs by encouraging energy diversity and recognizing the long term price certainty and emission reduction value provided by renewable energy,” the group says.

Distributed Generation

SEIA and other groups representing a burgeoning market for distributed generation (DG) also urge EPA to include these smaller generation resources in state targets, noting that DG both enhances efficiency and reduces the need for large baseload power plants.

SEIA says EPA should include distributed photovoltaic (PV) solar panels as part of its BSER determination, adding that a “failure to include” PV as BSER “in EPA’s final rule would be arbitrary and capricious.”

It adds that “Distributed PV is one of the largest and fastest growing segments of the renewable energy market, and is currently procured by entities that own and operate affected [power generation]. Therefore, under EPA’s system wide approach, distributed PV is necessarily part of the BSER.”

The solar industry is concerned the rule would only encourage development of utility-scale solar plants and not smaller units that in the aggregate can contribute to significant carbon reductions, while offsetting the need for new baseload power plants.

Meanwhile, the Fuel Cell and Hydrogen Energy Association (FCHEA), representing another growing form of low-emitting DG, urges EPA to credit fuel cells for the efficiency the devices add to the electricity system by eliminating the need for transmission lines and other facilities.

Moving electricity across long distances from the source of generation to the demand can result in significant “line losses,” which result in a less efficient use of fuel to produce electricity. Line losses would be greatly reduced if power was produced closer to the source of demand, resulting in fewer GHG emissions, the group says.

FCHEA in its comments notes that fuel cells, because they are primarily built to support the local grid, help eliminate line losses and the associated GHG emissions. As such, EPA should include fuel cells and similar resources under its building block 4 assumptions, according to the comments. FCHEA also wants EPA to explicitly cite fuel cells as a resource states can include in their ESPS compliance plans.

“Specifically, EPA should include stationary fuel cells under Block 4, as these technologies represent a more efficient method of generating electricity,” the group says, saying EPA should adjust a state’s emission rate based on the amount of avoided GHG emissions from installed fuel cells that offset transmission line losses.