Carbon Pollution Standards for Future Power Plants DickMunson Recycled Energy Development 24 May 2012

My name is Dick Munson, and fm senior vice president ofRecycled Energy Development, a cogenerationand waste-energy-recovery developerbased here in Chicago. Ihad the opportunity to participate in EPA's listening sessions on NSPS and have worked with the Alliance for Industrial Efficiency to submit comments. My basic message is to commend the Environmental Protection Agency for recognizing the economic and environmental benefits ofefficiency. The Utility MATS sensitivity analysis showed a handful ofenergy-efficiency activities would reduce compliance costs ofthatrule by $II billion by 2020. The benefits ofefficient combined heat and power are equally startling; according to the Oak Ridge National Laboratory, aggressive deployment ofcogeneration would reduce C02 emissions by more than 800 millionmetric tons per year, prompt $234 billion ofnew investments, and create nearly I million new highly-skilledjobs. My hope is EPA continues its efficiency focus in the forthcoming NSPS rules for existing sources. Concentrating onefficiency, EPA in recent rulemakings has appropriately changed its metric for measuring pollutionto an output-based standard. By expressing pollution limits as emissions per unit ofuseful energy output (e.g., pounds per megawatt hour), this approach rewards generators withthe highest"outpul'ofmegawatthours and the lowest"outpul'ofpollutants.

In addition to offering commendations, allow me to make a few suggestions to further enhance efficiency in ways that save money and reduce pollution. Take the issue ofthermal energy. EPA wisely recognized power plants produce two products-electricity and heat. In fact, the generation ofheat andpower accounts for a whopping 69 percent ofthe nation's C02 emissions, almost five times the pollution from all the automobiles onthe road. While the agency implicitly defined gross outputto include thermal energy, EPA shouldmakethe availability ofa thermal credit more explicit, in part by highlighting it in the preamble. EPA, moreover, should not arbitrarily limit credits to 75 percent ofthe thermal output, but instead shouldencourage the efficient generation ofboth heat andpower. Following the example ofThomas Edison, whose early power plants sold both electricity and steam to nearby buildings, EPA should supportthe generation ofthese two products with the efficient burning ofa single flame-ratherthan one flame in a turbine orengine to generate electricity and another flame in a boilerto provide heat. That can be done by providing credit for I00 percent ofthe useful thermal output.

Another issue is the draft rule's narrow definition ofCHP. While EPA is to be commended for recognizing the benefits ofefficiency cogeneration and clean waste energy recovery. the agency should amendits definition by deleting"steani'as a descriptive term for a CHP generating unitsince a few cogeneration units use hot oil orothermediato simultaneously produce electricity and thermal energy from the same primary energy source. I also encourage EPA to follow the example ofseveral states andprovide separate definitions for CHP and waste energy recovery because those two approaches have different attributes and benefits. Finally, the agency should set some standards to ensure a CHP unit's efficiency; the tax code, for instance, calls for 60 percent efficiency and at least 20 percent ofthe unit's output must be for useful thermal applications.

EPA asked about the wisdom ofadopting net-output based standards. Allow me to weigh in favorably. By basing output-based standards on net-energy output, facilities wouldhave an incentive to minimize parasitic energy demands from pollution- control equipment, and, as a result, spur further efficiency.

EPA also asked about adopting a 5-percentcredit for CHP units that avoid transmission and distribution line losses. The agency is to be applauded for recognizing a problem that loses 236 million megawatt-hours ofelectricity peryear, equivalent to the annual consumption of California, and costs the U.S. economy some $23 billion annually- yet EPA's 5-percentfigure is
too low. Average line losses are almost 7 percent and exceed 20 percent when wires are at peak load. Recent research from Carnegie MellonUniversity and Massachusetts Institute of Technology suggests the gridbenefits ofdistributed CHP range from 20 to 45 percent. While there may be no perfect number. it's clear 5percent is too low.

In conclusion, EPA is to be commended for highlighting efficiency, output-based standards. and cogeneration. Thank you for your considerationofmy suggestions to strengthen the rule.