On August 3, 2015, the Environmental Protection Agency (EPA) released a much-anticipated suite of regulations, featuring the final Clean Power Plan’s guidelines for carbon dioxide (CO2) emissions from existing power plants under Clean Air Act section 111(d). This package has sparked great interest, and early reactions run the gamut from enthusiastic support to entrenched opposition.
Substantial Changes to Proposal
The significance of changes in the final Clean Power Plan underscores an EPA acknowledgement that the proposed version had room for improvement. The EPA attempted to address 4.3 million comments with a final rule that simultaneously increases the 2030 stringency and slows the phase-in to allow a smoother transition for affected electricity generators and more time for states charged with developing implementing plans. And that’s just the beginning.
In a departure from the proposal, the rule sets nationally uniform technology-specific emission rates with subcategories for both (typically coal-fired) steam generating units and natural gas combined cycle units. In addition, the final rule limits the role of new gas-fired plants in driving compliance with standards intended to reduce emissions from the existing fleet. Among other things, these updates were designed to address criticism that the proposal could create competitive disadvantages between power plants that emit similar amounts of pollution.
Citing strengthening trends towards declining costs and increased performance for renewable energy (such as taller towers that increase electricity output and viability of wind turbines), the EPA relied more heavily on deployment of renewable power for determining the level of ambition in guidelines to states.
The nationally uniform emission rates for power plants, set to be cost-effective in the region with the highest costs, were used to calculate state goals that diverge on par with the share of coal versus gas in a state’s baseline mix. Thus, while the EPA’s revised methodology results in a narrower range of state goals than in the proposal, the impacts still vary across states.
Those states where coal has traditionally dominated the generation mix, and electricity rates tend to be lowest, face more pressure to diversify their fleets and embrace new approaches than states with clean energy programs in place and greater existing resource diversity.
But electricity typically doesn’t stop at state borders, and electrons already mix in vast networks operated by regional transmission organizations, balancing authorities, and others to supply electricity across regions. Accordingly, officials responsible for maintaining electric reliability have encouraged states to incorporate multistate approaches in their responses to the EPA rule.
Fortunately, the EPA improved upon cumbersome requirements for multistate collaboration to clear a path for “trading-ready” plans that offer a means to access emission reduction opportunities whether at the plant, within a utility fleet, or in another state with stronger renewable potential. That is good news, given that economic analysis by the Bipartisan Policy Center and others indicates that access to CO2 reductions across state lines offers lower-cost compliance, better alignment with interstate power flows and electricity markets, fewer early retirements of existing assets, and a more robust system to support electric reliability.
The Next Phase
The final rule has shifted the emphasis, as each state is now in the driver’s seat (albeit with a GPS system supplied by the EPA) to develop its own plan for the affected generators within its borders to achieve the EPA standards, whether alone or by tapping into a larger market for emission reductions.
Although a wide selection of ingredients appear to be at the states’ disposal, the Clean Power Plan provides a complicated recipe and, in most states, there will be multiple chefs in the kitchen.
The politics and legal challenges will be no small hurdle in the path toward implementation. Predictions of blackouts and spikes in electricity bills began well before the EPA released its final plan.
We know from the not-too-distant past that, while other federal power plant regulations have created plenty of drama in court, they have not caused blackouts or electricity price spikes. The deployment of renewable energy to help achieve the Clean Power Plan pushes beyond the experience in many states. Although Texas and California provide examples of what is possible, some regions will need to make progress on integrating variable resources. The final plan includes several provisions designed to address electric reliability and cost, including upfront analysis, flexibility mechanisms, the ability to choose a glide path and amend state plans, and a reliability safety valve.
Challenge and Opportunity Ahead
When all the smoke clears, I’d put my money on American ingenuity. Technological progress in renewable energy, energy storage, and grid improvements—as well as smart engineers and technicians empowered to tune, seal, automate, and upgrade their way to a more efficient fleet and to greater energy productivity on the consumer side of the meter—all fuel my optimism.
The power sector is in the midst of a dramatic transition, driven by factors as diverse as an aging fleet, technological progress in cleaner forms of energy, and implementation of the Clean Power Plan. Change brings both challenge and opportunity. As we learn from the past, we should not get stuck only looking through the rear-view mirror. The clearest view is straight ahead through the lens of the engineers, manufacturers, and laborers who know how to innovate, design for a challenge, and exceed all expectations.
I’ll keep my candles in the drawer, for now.
—Jennifer Macedonia ([email protected]) is a senior advisor at the Bipartisan Policy Center.
Ed.: This commentary will appear in the October issue of POWER.