EPA Final Rule on Reducing Greenhouse Gas Emissions

DATE:    August 11, 2015

TO:         All AABE Members

FROM:  Rick Thigpen, Chair

                Legislative Issues and Public Policy Committee  (LIPPC)

RE:         LIPPC Alert - EPA Final Rule on Reducing Greenhouse Gas Emissions from Existing Electric Power

               Plants   

On August 3, 2015, the Environmental Protection Agency (EPA) issued concurrently three separate rules pertaining to emissions of carbon dioxide (CO₂) from fossil fuel-fired electric generating units (EGUs):

The Final Clean Power Plan (CPP), applicable to existing fossil fuel-fired electric EGUs;

The Final Carbon Pollution Standards Rule, applicable to new, modified and reconstructed fossil fuel-fired EGUs; and

The Proposed Federal Implementation Plan applicable to states that fail to submit an approvable plan that achieves CPP goals.

The EPA projects that the set of rules will result in power sector emission reductions of 32 percent from 2005 levels by the year 2030, with most of that attributable to the CPP.

The CPP final rule is substantially different from the proposed rule published in the Federal Register on June 18, 2014.  As under the proposed rule, the final CPP sets state-specific CO₂ emission goalstoreduce power sector emissions on a state-by-state basis. CPP emission reduction goals consist of an Interim Goal, which must be met on average during the years of 2022-29, and a Final Goal for 2030 and beyond. In a notable change from the proposed rule, EPA has shifted the compliance start date (Interim Goal) from 2020 to 2022 and lowered the emissions reduction goal for that time frame.

The Best System of Emissions Reduction (to guide state compliance) is now being based upon the application of three Building Blocks:

1)      Block 1, improving the average efficiency (or “heat rate”) of coal-fired steam EGUs heat rate by 2.1- 4.3%.

2)      Block 2, displacing fossil steam generation by increasing generation from existing natural gas combined cycle (NGCC) facilities up to 75% of net summer capacity.

3)      Block 3, reducing fossil fuel-fired generation through increased zero-carbon generation, based upon regional technical potential for incremental renewable generation.

EPA eliminated Block 4 of electricity end-use energy efficiency (EE) as a basis for the goals but does maintain that EE is still important in mitigating emissions and will be a viable alternative means for compliance. In fact, through its announced Clean Energy Incentive Program (CEIP), EPA will be rewarding early action during 2020 and/or 2021, providing “matching” emission credits or allowances to entities that invest in EE in low-income communities, and renewable energy projects (but only for wind and solar) in participating states. EPA will seek public input on the development of this aspect of the Plan subsequently. In addition, the renewable energy assumptions for Block 3 have changed considerably in the final rule, with EPA expecting renewable energy generation levels in 2030 to be more than twice the levels estimated in the proposed rule.

EPA is seeking to address electric system reliability concerns in the final rule with the follow changes from the proposed CPP:

1)      Moving the compliance start date from 2020 to 2022;

2)      Including a new requirement that each state plan demonstrate that it has considered reliability, including consultation with the appropriate reliability entity;

3)   Allowing a state to revise its plan in the face of unanticipated reliability challenges;

4)   Adding a temporary, 90-day “safety-valve” for individual EGUs when Clean Power Plan requirements

       conflict with reliability obligations; and

A memorandum of understanding between EPA, the Department of Energy, and the Federal Energy Regulatory Commission has been formalized to address how the agencies will cooperate, monitor implementation, share information, and work to resolve difficulties with the rule in order to ensure reliability.

The CPP becomes effective 60 days after it is published in the Federal Register. States will then have at least 1 year (up to 3 years in special circumstances) to develop and submit plans to EPA for approval. Plans do not go into effect until 2022. The final “Carbon Pollution Standards” rule applies to any facility that commenced construction after January 8, 2014, or modification or reconstruction after June 18, 2014, with requirements becoming effective 60 days after the rule is published in the Federal Register.  Public Comment on the Federal Plan must be received within 90 days of its publication in the Federal Register.

AABE is pleased that EPA has reacted to stakeholder concerns with the CPP in issuing the final rule. However, the implications of how states and EGUs will deal with these changes are yet to be determined. Compliance and implementation plans will likely follow as states decide how to abide by the rule. AABE will be guided by its Principles in providing comments to state and federal proceedings as regards the rule to ensure that the interests of historically underserved communities are observed.