# Presentation: 741826

## Multi-emission ProposalsJohn KinsmanEdison Electric InstituteWashington, D.C.

***March 18, 2003***
***Energy Information Administration***
***Washington, D.C.***

## Electricity from Coal Is Essential & Increasingly Clean

## The Clean Air Act’s Complex Set of Requirements

**The Clean Air Act’s Complex Set of Requirements**

- Phase II
- Acid Rain
- Compliance

- Mercury
- Determination

- Proposed
- Utility
- MACT

- New  Fine PM NAAQS
- Implementation Plans

- Designate Areas
- for Fine PM NAAQS

**Ozone**

**Acid Rain, PM****2.5****, Haze, Toxics**

- 1-hr Severe Area
- Attainment Date

- Compliance for BART Sources

**NSR Permits** for new sources & modifications that increase emissions

- 99

- 01

- 02

- 03

- 04

- 05

- 06

- 07

- 08

- 09

- 10

- 11

- 12

- 13

- 14

- 15

- 16

- 17

- OTC NOx
- Trading

- 1-hr Serious Area Attainment Date

- NOx
- SIPs
- Due

- Designate areas for
- 8-hr Ozone NAAQS

- NOx
- SIP Call

- 00

- 18

- Final
- Utility
- MACT

- Compliance
- with Utility MACT

- Assess Effectiveness of Regional Ozone Strategies

- Regional Haze SIPs due

- Latest attainment
- date for Fine PM NAAQS 3

- Compliance for BART sources under the Trading Program

- Second  Regional Haze SIPs due

- Marg-inal 8-hr Ozone NAAQS Attain-ment Date

- Possible Regional NOx Reductions ?
- (SIP call II)1

- Interstate Transport Rule to Address SO2/ NOx Emissions for Fine PM NAAQS and Regional Haze

**Note**: Dotted lines indicate a range of possible dates.
- 1 Further action on ozone would be considered based on the 2007 assessment.
- 2 The SIP-submittal and attainment dates are keyed off  the date of designation; for example, if PM or ozone are designated in 2004, the first attainment date is 2009
- EPA is required to update the new source performance standards (NSPS) for boilers and turbines every 8 years

- Serious 8-hr Ozone NAAQS attainment Date

- Moderate 8-hr Ozone NAAQS Attainment
- Date

- 8-hr
- Ozone
- Attain-
- ment
- Demon-
- stration
- SIPs due

- In developing the timeline of current CAA requirements, it was necessary for EPA to make assumptions about rulemakings that have not been completed or, in some case, not even started.  EPA’s rulemakings will be conducted through the usual notice-and-comment process, and the conclusions may vary from these assumptions.

**  ****Further progress under the Clean Air Act is complex, burdensome and uncertain**

## Multi-Emission Legislation – Possible Futures

- Environmental group alternative - “maxed out” emissions reductions, more lawsuits and limits on flexibility.
- Opposite extreme - poor economy, international strife, energy concerns and more lawsuits temper environmental regulations.
- Both of these alternatives are highly unlikely.
- In the middle are EPA’s regulatory alternative and the President’s Clear Skies Act.

**Notes:**
NRDC future 
extreme regulations re:  Hg MACT, 8-hour ozone, fine particles, regional haze, non-mercury HAP's
Lawsuits
all layered inefficiently on top of current Clean Air Act
E.g., Jeffords bill

Opposite extreme
increased recognition of the importance of cost-effective domestic energy supplies - especially coal

EPA regulatory future
Mercury MACT proposal (Dec. 15, 2003) 
NSR routine maintenance proposal (final by end of 2003 remotely possible?) 
regional transport rule to address fine particles (final by mid-2005, under which Administration?)
These are layered on top
Uncertain emissions reductions levels – for SO2 and NOx likely not as deep cuts as in Clear Skies; mercury = ?

## The Current Path Provides Little Certainty for Electric Providers, Shareholders or the Environment

- Increases complexity of multi-layered CAA.
- Increases difficulty of planning.
- Can lead to uneconomic decisions for companies.
- Causes higher prices for consumers.
- Increases shifts in fuels used (more natural gas).
- Can even undermine reliable electric generation.** **

**Notes:**
There are many disadvantages of staying on the current path of the Clean Air Act.

These disadvantages are magnified in the extreme Congressional proposals.

## Power Generators Requirements Under a New Multi-emission” Approach

- Reasonable targets and timing.
- Certainty (e.g., resolving NSR and other problems).
- Flexibility.

## The Right Multi-Emission Bill Benefits Electricity Producers, Consumers and the Environment

- Certainty due to simplified, streamlined Clean Air Act.
- Flexibility through market-based programs (emissions trading).
- Cost-effectiveness due to certainty and flexibility.
- Adequate time to install technology due to reasonable targets and timetables, preserving coal generation.

**Notes:**
Emissions will continue to decrease without a multi-emission bill, but with less impact and efficiency, and at greater cost 
For years, EEI and its members have promoted a comprehensive, flexible, and cost-effective approach
If done correctly, could lower compliance costs, save money for customers, and facilitate diverse fuel mix

Could reduce the litigation logjam that often postpones achievement of real air quality progress
Must allow sufficient time for the development and deployment of new technologies
The President’s CSI demonstrates leadership and vision toward a coherent statutory/regulatory framework; CSI’s major reductions will be extremely expensive
S.556 is unrealistic and contrary to sound energy, economic and environmental policy 
Carper bill is thoughtful serious contribution to debate albeit still problematic because of CO2, other impacts

## The Right Multi-Emission Bill Benefits Electricity Producers, Consumers and the Environment

- Minimal impact on natural gas prices due to less shifting to natural gas.
- Continued reliable, low cost power.
- Low cost impact for consumers and lesser impact on shareholders.
- Major emission reductions and substantial reduction in number of non-attainment areas and reduced action needed in remaining non-attainment areas.

**Notes:**
Emissions will continue to decrease without a multi-emission bill, but with less impact and efficiency, and at greater cost 
For years, EEI and its members have promoted a comprehensive, flexible, and cost-effective approach
If done correctly, could lower compliance costs, save money for customers, and facilitate diverse fuel mix

Could reduce the litigation logjam that often postpones achievement of real air quality progress
Must allow sufficient time for the development and deployment of new technologies
The President’s CSI demonstrates leadership and vision toward a coherent statutory/regulatory framework; CSI’s major reductions will be extremely expensive
S.556 is unrealistic and contrary to sound energy, economic and environmental policy 
Carper bill is thoughtful serious contribution to debate albeit still problematic because of CO2, other impacts

## Administration vs. Carper Bill –Emissions Caps and Timing 

|  | Administration bill | Carper bill |
| --- | --- | --- |
| Sulfur Dioxide | 4.5 million tons – 2010
3.0 million tons - 2018 | 4.5 million tons – 2008
3.5 million tons – 2012
2.25 million tons - 2015 |
| Nitrogen Oxides | 2.1 million tons – 2008
1.7 million tons - 2018 | 1.87 million tons – 2008
1.7 million tons - 2012 |
| Mercury | 26 tons – 2010
15 tons - 2018 | 24 tons – 2008
5 to 16 tons - 2012 |
| Carbon Dioxide | No cap | ~ 2.6 billion tons – 2008
~ 2.3 billion tons – 2012 |

## EPA’s Projected Attainment of PM2.5 and 8-hour Ozone Standards - Current and Under Clear Skies in 2020

**EPA’s Projected Attainment of PM****2.5**** and 8-hour Ozone Standards - Current and Under Clear Skies in 2020**

## EEI Reaction to Clear Skies

- The scope and framework of the Clear Skies Initiative are on target.
- The targets and timetables would be extremely difficult for some companies to meet.
- To be most effective, the Clear Skies Initiative must:
- include New Source Review reform;
- facilitate emissions trading;
- provide credit for early reductions;
- eliminate the allowance auction; and
- set the Phase 1 mercury cap to not exceed "co-benefits" from SO2 and NOx controls (the Administration's stated objective for Phase 1 reductions).

## Clear Skies Benefits

- _Cleaner_: Cuts sulfur dioxide, nitrogen oxides, and mercury emissions by 70 percent from current levels.
- _Sooner_**: **Achieves these additional emissions reductions faster than under existing Clean Air Act programs.
- _Cheaper_**: **Reduces costs and provides greater business certainty by eliminating multiple, overlapping regulations.
- _Certain_: Continuous emissions monitoring and large penalties for non-compliance.

**Notes:**
Sooner:  Administration analyses indicate that 35 million additional tons would be eliminated during the next decade under the Clear Skies Initiative compared to the current Clean Air Act.

Cheaper:  Reduce costs and provide greater business certainty by eliminating multiple, overlapping regulations and establishing specific emission-reduction requirements that remain unchanged for a definite period of time.

## S. 3135 (Carper Bill) – Some Key Issues

- Carbon dioxide emissions reductions of about 20% in 2012 and 28% in 2020.
- Early, tight caps for SO2, NOx and mercury.
- Trading of mercury allowances would be limited by forcing each unit to either reduce emissions by 50-70% or to meet a specific emissions rate.

## Modeling for EEI by Charles River Associates and E&MC Group

- Costs incremental to a reference case of Title IV (acid rain) plus the NOx SIP call (Eastern U.S. 2004 ozone program).
- Costs would be much less if the reference case included future regulations for mercury, fine particles, 8-hour ozone and regional haze.  However, it is difficult to predict the regulatory future in order to quantify these costs.
- Assumptions include EIA Annual Energy Outlook 2003 natural gas reference case costs.

## Clear Skies vs. Carper Bill  

| SCENARIO | NPV Cost
(2004-2020,
$1999) | Year
2010 Cost | Year 
2015 Cost  | Year
2020 Cost |
| --- | --- | --- | --- | --- |
| Clear Skies  | $32-37 billion,
depending on SCR capital costs
(~ $2/MWh) | $4.8-5.5
billion | $6.2-7.0
billion | $11.2-12.3
Billion
(~$5-5.50/MWh) |
| Carper bill
(modest carbon offsets) | $54-64 billion,
depending on mercury cap
(~ $3-4/MWh)
 | $7.3-8.7
billion | $10.4-12.1
billion | $13.9-16.3 
Billion
(~$6.50-8.15/MWh)
 |

## Clear Skies vs. Carper Bill

| SCENARIO | 2020 Average Coal Unit Capacity Factor | 2020 Coal Consumption
(compared to predicted future) | 2020 Gas Consumption
(compared to predicted future) |
| --- | --- | --- | --- |
| Clear Skies  | 75-77%

(vs. reference of 79-80%) | 10-12% decline

(little change from present usage) | 13-14% increase
 |
| Carper bill (modest carbon offsets) | 63-67% | 22-27% decline | 22-28% increase |

## S. 366 (Jeffords Bill)

- Introduced in February 2003; essentially same as S.556.
- Extremely tight caps starting in 2009 for SO2, NOx  and CO2 and in 2008 for mercury.
- Major new provisions in bill passed by S. E&PW (S.556):
- “Birthday” provision at age 40 starting in 2014.
- Reduce non-Hg hazardous air pollutants by 2008.
- Coal combustion products treated as hazardous waste.
- Must purchase virtually all emissions allowances.
- No sections of Clean Air Act eliminated or modified to provide certainty.

## Jeffords Bill (S.556) – Costs and Fuel Impacts

- EIA evaluated _**S.556**_ in _July 2001:_
- Earlier, less burdensome version of bill.
- Costs for the period 2001-2020 of $140 billion.
- Coal-based generation would be reduced about 40 percent and natural gas generation increased 60 percent.
_**S.556**_ voted out of E&PW in June 2002 has much greater impact:
- The Congressional Budget Office in November 2002 estimated that S.556 could cost the power generation sector as much as $40 Billion _in_ 2009 and $60 Billion _in_ 2012.

## Sufficient Time is Needed for Reliable Electric Generation and Cost-effectiveness

- Retrofits of 100 GW or more of SCR, FGD, activated carbon/sorbent and probably fabric filters.
- Need to spread installations over time to ensure reliability (to avoid having too many units off-line concurrently).
- Need to avoid labor and materials shortages and bottlenecks.
- Permitting of landfills for FGD products can take years.
- Need to allow advanced mercury controls to be developed.
- Need to allow expenses to be spread over time to minimize issues re: securing financing.