Although there has been plenty of discussion in the U.S. power industry about the challenges posed by the Environmental Protection Agency’s (EPA’s) proposed Clean Power Plan (CPP), Missouri-based Ameren Corp. is the first generating company to go public with a specific set of proposed revisions.
On Feb. 11, Ameren released a white paper that proposed what the company calls “constructive and common-sense alterations” to the CPP that are needed to avoid imposing staggering costs on utility customers and significant risks to electric grid reliability.”
White Paper Highlights
The main elements of the proposal are:
- Eliminating the 2020 interim goals and giving states more flexibility to determine the “glide path” toward reaching the final goals.
- Enhancing interim reporting requirements by the states to ensure that progress is being made to achieve the 2030 target.
- Allowing full credit for the retirement of coal-fired power plants.
- Offering states a “reasonable extension of the 2030 deadline if utilities are making substantive progress” toward the CPP’s final goals.
Ameren is clearly hoping to take advantage of all these revisions. A press release announcing the white paper said that, “Under the Ameren GHG strategy, by 2035 Ameren would retire more than 1800 MW (about one-third) of its coal-fired fleet, add approximately 500 MW of renewable generation, extend the license of its 1200 MW Callaway Nuclear Energy Center, add a 600 MW natural gas combined-cycle unit, and continue to offer robust energy efficiency programs.”
The company has been focused on these options and timeframe since the CPP was first announced. Company representatives made the timeframe in particular a key talking point during last summer’s EPA hearings on the proposed plan.
Ameren CEO Comments at Environmental Conference
Warner L. Baxter (Figure 1), CEO of Ameren Corp., commented on the company’s proposal during his keynote presentation at the Energy, Utility & Environment Conference in San Diego, Calif., Feb. 16.
While some experts have suggested that just saying “no” is an option for states in response to the EPA’s proposed plan, Baxter sees a more productive way forward. “I think most importantly, I don’t come here just saying ‘No.’ I come here with some solutions—potential solutions—that we believe will help move the plan forward,” Baxter said.
Baxter suggested that all utilities “want to be good environmental stewards,” but he raised several concerns with the way in which the CPP addresses carbon emission reductions.
He noted that Ameren has a 20-year plan that results in significant changes to its generation portfolio. The plan includes optimization of the company’s existing coal power plants and results in the retirement of one-third of its coal-fired fleet. Baxter said that Ameren has a robust energy-efficiency program and continues to add renewable generation. The company is expanding its natural gas generation capacity and is in the process of extending the license for its Callaway nuclear plant, while keeping open the option of more nuclear in the future. With this type of strategy, Baxter believes his company is doing exactly what the EPA, the Obama administration, and its own customers want utilities to do.
“By us executing our plan, and taking all of these actions over the next 20 years, we will achieve the targets that were established by the EPA in their Clean Power Plan,” Baxter said.
But the reality is that there are some challenges to be overcome. Baxter said that the 2020 target is really where the difficulty begins. In Ameren’s case, the company’s carbon emissions must be reduced 62% by 2020. He noted that in some states, the target requires a 75% reduction by 2020, which creates a regulatory cliff.
“We’re here sitting in 2015. It’s not that far away. And so it becomes a big deal. It becomes a big deal in terms of what you need to do to really achieve those things,” he said.
Likely legal challenges to the rule are a major concern too. Baxter noted that many important operational decisions would need to be made based on the 2020 interim target date, but that the final plan could change based on the outcome of the legal challenges.
Baxter suggested that accelerating the construction of natural gas–fired plants to meet CPP targets would cost Ameren customers $4 billion. He also said that grid reliability would be at risk due to early retirement of coal-fired facilities.
“We want to be a world leader in terms of how we’re addressing greenhouse gas emissions, and we will be, even if we achieve these things in 2030. We will absolutely be a world leader in terms of reductions of greenhouse gas emissions,” Baxter concluded.
Not Just an Ameren Concern
POWER asked Ameren how many other generating companies and states might benefit if the EPA were to adopt the recommendations made in its white paper. Joe Power, vice president for federal legislative and regulatory affairs, responded via email that “Many regions and states would benefit from a responsible plan that helps to ensure reliability. Based on our discussions with other utilities we believe most utilities support our position. In fact, [the Edison Electric Institute’s] comments to the EPA on behalf of the industry align with our point of view.”
He added many system operators—including the Midcontinent Independent System Operator, the Southwest Power Pool, and the Electric Reliability Council of Texas—have raised reliability questions about the proposed CPP. “The North American Electric Reliability Corporation has concluded that a number of states could fall below reserve margin standards deemed necessary to ensure reliability,” he said.
Other Timing Considerations
When asked if, under Ameren’s proposed revisions, there would be any incentive for making emissions reductions (through whatever means) sooner rather than later, Power noted that although this wasn’t a focus of the white paper, the company supported such incentives in its written comments to the EPA.
“While Ameren supports credit for early action, we focused on the issues identified in the white paper because they go a long way toward mitigating the problems with the rule, and their adoption would allow us to implement our generation strategy,” he responded. “Similarly, the Clean Power Plan does not currently provide any credit for early action prior to 2020, when the proposed rule would take effect.”
Additionally, he noted, “Ameren Missouri does have plans to make investments in new renewable generation and energy efficiency prior to the proposed rule’s effective date. Should the rule be modified to allow for those credits, and provided there are no further changes, it would help any utility that would build new renewable generation and implement energy efficiency programs to achieve compliance at the effective date.”
The economics of natural gas–fired generation and dropping costs for renewable generation and storage are behind many generators’ decisions these days. When asked about how much those dynamics are likely to drive greenhouse gas (GHG) emissions reductions relative to GHG reductions resulting from the CPP by 2020 and 2030, Power said, “We don’t believe the economics of natural gas and storage and renewables by itself will be the primary driver. Our view is that the CPP, [Mercury and Air Toxics Standards], [renewable portfolio standards], and other environmental regulations will be the primary driver of the transition. If natural gas by itself were the driver then the price of gas would need to go even lower to displace more coal. However, natural gas prices are already low and not expected to go lower—in fact they are expected to increase over the next 10 to 15 years, such that the market will not naturally shift to a greater gas dispatch than currently exists without regulation forcing it. Renewables and storage are not currently competitive with existing coal either, but technology advances could change that and could have an impact. With that said, companies, including Ameren, are already shifting their portfolios to be cleaner and more diverse in general recognition of the need to offer more environmentally sustainable energy. This shift is why EPA should adopt the modifications to the rule that Ameren proposed. There is simply no need to force an outcome that is occurring based on already existing environmental regulations combined with an aging coal fleet.”
As noted above, some have suggested that states can “just say no” to the proposed CPP. Although that approach is likely to provide increased employment for lawyers, Ameren rejects that more antagonistic approach.
Powers explained why Ameren chose the white paper route: “This is a critically important issue that we as a nation must get right. That’s why we are advocating for common-sense changes that minimize costs and protect system reliability on behalf of our customers and to protect system reliability.
“While we believe the rule is legally flawed, we need to be prepared for the possibility that the courts will disagree and the rule will become law. Thus, Ameren’s view is not to ‘just say no’—we want to offer solutions and a pragmatic approach moving forward.”
He added, “Our goal was to begin a dialogue regarding these issues and to encourage the EPA to consider our position as a way forward. Ameren’s plan ultimately meets EPA’s 30% CO2 reduction targets while minimizing the rate impact on customers and protecting jobs, the economy, and system reliability.”
Ameren and the rest of the industry will have to wait until the EPA issues its final rule under the Clean Air Act Section 111(d) this summer to find out whether or not the agency adopts Ameren’s suggestions.
—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine) and Gail Reitenbach, PhD, editor (@GailReit, @POWERmagazine)