Rule hangs tougher targets on renewables, interstate pacts

Source: Jean Chemnick and Emily Holden, E&E reporters • Posted: Tuesday, August 4, 2015

The final Clean Power Plan released today sets tougher targets than last year’s draft version because it assumes that renewable energy and regional approaches have even greater capacity for helping the power sector shed emissions, U.S. EPA air chief Janet McCabe said today.

Speaking on a call with reporters an hour after the rule’s release, McCabe touted the changes the agency had made to make it easier for states to comply.

These changes were many and varied:

  • Where last year’s draft was more restrictive in the interim compliance period, the final rule not only moves that period back two years to 2022 but also lets states craft their own “glide paths” to show progress toward their goals. An interim goal still applies, however.
  • Demand-side energy efficiency is no longer part of the basis for targets, although it can be used to achieve them.
  • States that have nuclear power plants in the pipeline will no longer have to make up the lost emissions reductions elsewhere if those nuclear projects aren’t in operation by the interim period.
  • Where the draft rule had no provision in case implementation interfered with grid reliability, the final version would allow plants to remain online an additional 90 days — although a longer delay would require states to rework their implementation plans, McCabe said.
  • And where the draft rule built new nuclear into the baseline, under the final rule, states would be allowed to tap into new reactors and those with increased output through “uprates” to comply, providing relief to states like Georgia, South Carolina and Tennessee, where new units are under construction.

The final rule includes both rate-based goals and mass-based goals that would cap the short tons of CO2 a power fleet could emit. It also includes an incentive program for early action in renewable energy and energy efficiency.

Yet EPA says the rule overall will cut power-sector emissions by 32 percent compared with 2005 levels by 2030 rather than the 30 percent the draft would have achieved.

The rule would achieve these extra emissions savings because EPA found renewable energy and interstate cooperation allow for even more reductions than were assumed in the draft — leading to a generally more stringent final rule overall, McCabe said.

EPA tapped new data from the Energy Department’s National Renewable Energy Laboratory and other sources that showed that wind and solar are growing at a faster rate than was thought last year when the draft was released.

“That information showed that the cost is coming down and the pace of construction of those activities is picking up,” McCabe said.

Renewable energy is one of three building block assumptions EPA used to set state targets. The other two are heat-rate improvements at existing coal plants and fuel switching from coal to natural gas. EPA seems to have offered a separate mass-based standard that would need to include emissions from new power plants.

“States that choose a mass-based goal must assure that carbon pollution reductions from existing units achieved under the Clean Power Plan do not lead to increases in emissions from new sources,” EPA fact sheets said. “EPA is offering an option to simplify this requirement for states developing plans to achieve mass-based goals.”

New state emission targets

EPA uses those three inputs to set targets for states that are more uniform than the ones the draft rule proposed and that place states in vastly different positions relative to the draft.

Where state targets under last year’s draft varied widely from state to state based on a complex algorithm, all final state goals fall between 771 pounds per megawatt-hour for states that have only natural gas plants and 1,305 lb/MWh for states that have only coal or oil plants. States with mixed energy portfolios fall between those extremes.

Some states will find the final rule a relief, at least compared with the draft. And others that had very light responsibilities under the draft have found themselves suddenly on the hook for hefty new responsibilities.

“We think that these goals are realistic for all of the states,” McCabe said on the call, adding that the utility sector was already reducing carbon emissions and the rule tracks with that.

One of today’s winners is Arizona, which under the draft rule would have been forced to reduce its emissions to 702 pounds of CO2 from a baseline of 1,453 lb/MWh by 2030. Ninety percent of that final target would have come due after 2020, which the state warned would require drastic cuts in a hurry, including the closure of one of the youngest coal fleets in the country. Now the Grand Canyon State has a far laxer final goal of 1,031 lb/MWh for the rule’s end date.

Texas’ requirements will be reduced, too, to a roughly 33 percent drop in carbon emissions over the next 15 years. The state’s draft goals had been about 5 points higher.

North Dakota, meanwhile, had a proposed final target of 1,783 lb/MWh and now must reach a standard of 1,305 for 2030.

Among the states with tougher goals: Ohio and Pennsylvania. Ohio’s new targets are about 10 points higher than what the draft rule set. Pennsylvania’s is about 4 points higher.

Alaska, Hawaii, Vermont and the District of Columbia are exempt from the rule. Vermont and the District of Columbia don’t have plants that qualify to be regulated under the standards, while Alaska and Hawaii were deemed to have special circumstances that justified their not being covered now.

“Actually, I wouldn’t use the word ‘exempt,'” McCabe said. “I would use the word ‘defer.'”

The agency lacked information to craft rules for non-contiguous states, she said, but the agency intends to work with those states to finalize a plan for them. There is no current schedule.

The final New Source Performance Standard for future fossil fuel units requires gas plants to achieve a 1,000 lb/MWh rate — a level in line with the 2013 proposal. But future coal-fired power plants would be held to a standard of 1,400 lb/MWh as compared with the proposed 1,100 lb/MWh.

Where the prior proposal would have allowed utilities to comply by capturing 40 percent of their emissions using carbon capture and storage, the final version allows for 20 percent capture, co-firing with natural gas or potentially integrated gasification combined-cycle technologies to turn coal into gas.

Reporters Scott Detrow and Hannah Northey contributed.