EPA’s Clean Power Plan - A Diet for US Fossil Fuel Usage

EPA signed the groundbreaking Clean Power Plan on August 3, 2015, which promises to substantially reduce CO2 emissions from the electric power sector by shifting generation to natural gas and mandating substantial investment in zero carbon generation (i.e., renewable or nuclear).  The Clean Power Plan is among the most dramatic and impactful regulations in the history of the Clean Air Act.

The path for this highly controversial regulation was set early in the Obama administration, when EPA signed a consent agreement in 2010 promising to issue two types of rules regulating CO2 emissions from coal power plants:  New Source Performance Standards (NSPS) for new units and Emission Guidelines (EG) for existing units.  In the final rulemaking, EPA exceeded the requirements of the consent agreement by issuing regulations applicable to not only steam electric plants (boilers) but also to combined cycle combustion turbines.  Confusingly, the rule uses the moniker “goals” to define the state-by-state limits set by EPA.  Regardless of the term used, the state-by-state emissions limits set by EPA are enforceable requirements.  EQ_Russell photo

The regulations are based on applying emission rates (best systems of emissions reduction, or BSER) of 1,305 lb CO2/MW-hr for power boilers and 771 lb CO2 / MW-hr for CCCT, applied across the units in each state (both on net basis).  These emission rates are extremely low, at approximately 60% and 86% of the 2012 Eastern interconnect boiler and CCCT values, respectively, and even below the NSPS values for entirely new units.  EPA justifies these BSER values by greatly expanding the concept of “source” to not be restricted in any way by equipment type.  Unlike prior NSPS or EG, where the limits were specific to the equipment, the BSER for the Clean Power Plan is instead set by considering any action that an owner or operator can take irrespective of where or what, so long as it is something that is possible for an owner or operator to do; this new definition effectively includes any action that does not require governmental action.  For example, an owner/operator can invest in power generation from solar or wind, but could not effect new building codes or efficiency standards.

There are many options that state regulatory agencies can consider in developing the state plan, such as:

  • Limit-types
    •  Rate-based (lb CO2/MW-hr)
    •  Mass based (tpy)  (unlike in the proposed rule, EPA provides these values in the final rule)
    •  Mass based with new source complement (tpy)(an attempt to avoid “leakage”)
  •  Geographic – individual state or groups of states
  • Form
    • Emission standards (traditional limits for each affected power plant)
    • State measures (other approaches to achieve equivalent results)
    • Optional components 
  • Optional components
    • Clean Energy Incentive Program (credits for reductions in 2020 and 2021)
    • Energy efficiency requirements

Implications of the rule begin to unfold almost immediately.  There are three stages in the Interim Period (2022-2024, 2025-2027, 2028-2029), that allow less stringent limits than those applicable in the final period from 2030 onward.  Initial state plan submittals are due in September 2016, with the potential to obtain a two year extension to 2018.  One lawsuit filed requesting a stay of the rule has been rejected by the DC Circuit – barring a stay via a future lawsuit, states will have to continue rule development and plan submittal while the lawsuits proceed towards likely eventual resolution at the Supreme Court.

Affected sources should stay in touch with their state agency regarding SIP development.  Several states have already contacted affected sources regarding potential efficiency improvements available at individual sources. Also, sources should monitor the ongoing legal process for this rule;  its unprecedented nature will require ongoing diligence from all affected sources as the process unfolds.