# Clean Power Plan:

Overview of EPA’s Proposed Carbon Reduction Regulations
Marguerite McLamb, OAQPS, U.S. EPA

October 1, 2014

# Agenda ► 

## Discuss the origin of this proposal ► 

## Identify the four “building blocks” of the proposal ► 

## Describe how we used them to determine BSER and create state goals for reducing carbon pollution ► 

## Describe the process, components and flexibilities available 

## to the states in creating plans to meet these goals ► 

## Review the timeline for implementation and reductions

23

# The President’s Climate Action Plan (June 2013) ► 

## Directs EPA to: ► 

### Set flexible carbon pollution standards, regulations or guidelines, as appropriate, for power plants under section 111 of the Clean Air Act (CAA) ► 

### Propose standards, regulations or guidelines for modified, reconstructed and existing power plants by June 1, 2014 ► 

### Issue final standards, regulations or guidelines by June 1, 2015 ► 

### Require that states submit implementation plans by June 30, 2016 

### ► 

### Focus on certain elements when developing the standards ► 

### Stakeholder engagement on program design ► 

### Flexibilities in the program design ► 

### Costs ► 

### Continued importance of relying on a range of energy sources ► 

### Other regulations that affect the power sector

4 

# Reducing Carbon Pollution From Power Plants

# Power Plant CO2 

# Emission Reduction Actions Three related rulemakings issued under CAA s. 111: ► 

## Standards of performance for new sources under section 111(b) ► 

## Standards of performance for modified and reconstructed sources under Section 111(b) ► 

## Existing source emission guidelines under section 111(d)

– Extensive engagement undertaken for proposal



## – Defines BSER (best system of emission reduction) for existing sources



## – Translates BSER into state - specific goals • Preferred option: more time, more reductions (two options) 

### • Interim and final goals



## – Provides guidance to states on their existing source plan

5

# Benefits, Costs and Impacts ► 

### Coal and natural gas will remain the two leading sources of electricity 

### generation, with each providing more than 30% of the projected generation in 2030 ► 

### By 2030: ► Carbon pollution reduced due to this proposal: approximately 30% below 2005 levels ► Climate and health benefits including significant reductions of SO 2 , PM, and NOx: $54 billion to $89 billion ► Costs: $7.3 billion to $8.8 billion ► Net benefits: $47 billion to $80 billion ► National average retail electricity prices: roughly 2.7% to 3.1% increase ► National average impact on electric bills: roughly 8% lower 

### ► 

### Retirements ► EPA’s analysis projects that 19% of all coal -fired capacity would become uneconomic to maintain – only about 5% of all power generating capacity projected to be in service (or about 46 to 49 GW of coal -fired capacity)

6 Ranges reflect Option 1 Regional and State illustrative compliance scenarios.

# Determination of Guidelines and 

# Implementation Process Under CAA section 111(d): ► 

## EPA determines BSER ► 

### Key factors in BSER determination for existing power plants

– Feasibility

– Costs

– Size of reductions

– Technology 

### ► 

## EPA applies BSER ► 

### In the proposal, by using state - specific data to derive the emissions rate that represents the state goal for covered sources reflecting BSER ► 

## State develops standards of performance that implement that goal and establishes those standards in its plan, along with 

## implementing and enforcing measures ► 

## The state applies that standard as appropriate

7

# Building Blocks and BSER ► 

## EPA identified four categories of carbon - reducing measures that together constitute BSER 1. Lowering the carbon intensity of generation at individual existing EGUs through heat rate improvements 2. Reducing emissions of the most carbon - intensive existing EGUs by shifting generation to less carbon - intensive existing fossil fuel -fired EGUs 

### 3. Reducing emissions of carbon - emitting EGUs by expanding the amount of new, lower (or no) carbon - intensity generation 

### 4. Reducing emissions of carbon - emitting EGUs by increasing demand side energy efficiency 

## ► 

## For each building block, EPA identified a target level of performance that reflects more or less aggressive 

## performance ► 

## EPA applied assumptions to state -specific data (e.g. existing generation mix) to set state -specific targets 8

# Building Block Technologies Translated to State Goals Technology/BSER Building Block Option 1 Option 2 1. Heat rate improvement (Avg. Reduction for Coal) 6% 4% 2. Dispatch to existing and underconstruction NGCC Utilization of NGCC up to 70% capacity factor Utilization of NGCC up to 65% capacity factor 3. Dispatch to new clean electric generation Includes new nuclear generation under construction, moderate deployment of new renewable generation, and continued use of existing nuclear generation 4. Demand -side Energy Efficiency (% annual incremental electricity savings) 1.5% annually 1.5% annually Goal Option 1 Option 2 Average nationwide goal for covered sources (lbs/MWh) 25% to 30% below 2005 levels 20% to 25% below 2005 levels

9

# State Goals

10 

### State CO 2 

### emissions from fossil fuel fired power plants (lbs)

State electricity generation (MWh)



###  Each state goal is a rate  encompasses the dynamic variables in the power system that ultimately determine how much carbon pollution is emitted by fossil fuel power plants  calculated to account for the mix of power sources in each state and the application of the building blocks that make up the best system of emission reduction 

###  Each state’s goal is different because each state has a unique mix of fossil 

### fuel and other power sources, emissions, and energy efficiency opportunities Basic formula for state rate - based goal (coal gen. x coal emission rate)+ (OG gen. x og emission rate) + (NGCC gen. x NGCC emission rate) +”Other” emissions Total Fossil Generation MWh + Nuclear MWh + RE MWh + EE MWh Detailed formula

# State Goals – Calculations Methodology : A state’s historical emission rate is broken into its technology components: Historical fossil rate = (coal gen. x coal emission rate)+ (OG gen. x og emission rate) + (NGCC gen. x NGCC emission rate) + “Other*” emissions Total Fossil Generation

• Block #1 : Adjust each state’s coal emission rate down by 6% to reflect a fleet-wide average HR improvement
• Block #2 : Adjust each state’s coal and O/G steam generation downwards, and NGCC generation upward, to reflect re - dispatch to natural gas up to 70% (plan to request comment on whether regional re- dispatch is more appropriate)

– Total state - level fossil generation from coal/OG steam, & NGCC remains the same; only change is its apportionment among the three technologies
• Block #3 : Add MWh from under construction nuclear, at- risk nuclear, and renewable into denominator.

– Renewable includes both existing RE and new RE
• Block #4 : Add MWh of avoided generation into denominator due to EE for 2020 and 2030 respectively

– % values vary by state After these adjustments are made: the equation is rolled into a single emission rate that constitutes the state emission rate goal. The resulting state goal is no longer just a fossil rate, but includes non -fossil/zero- emitting sources. State goal is provided in lbs/net MWh State Emission Rate Goal = ( coal gen. x coal emission rate)+ ( OG gen . x og emission rate) + ( NGCC gen . x NGCC emission rate) +”Other” emissions Total Fossil Generation + Nuclear MWh + RE MWh + EE MWh 11 *”Other” includes sources covered under 111(d) applicability, but not subject to redispatch (e.g., IGCC, low utilization CTs, an d useful thermal output from cogeneration units).

# Application of BSER to North Carolina Technology/BSER Building Block Application to NC 1. Heat rate improvement (Avg. Reduction for Coal) Improve the heat rate at existing coal units 6% to reduce the emission rate from 2,268 lbs/MWh to 2,132 lbs/MWh 2. Dispatch to existing and underconstruction NGCC Shift generation from fossil -fired boilers to NGCC units up to a 70% capacity factor, increasing NGCC generation from 26,782 GWh to 52,152 GWh 3. Dispatch to new clean electric generation Increase generation from renewable sources from 1,698 GWh in 2012 to 3,663 GWh in 2030. Incentivize preservation of 1,818 GWh of generation (~5.8%) from historic nuclear fleet 4. Demand -side Energy Efficiency (% annual incremental electricity savings) Improve end - use energy efficiency to decrease electricity demand 9,216 GWh, equivalent to avoiding 11.4% of projected electricity sales in 2030

12 Historical Emission Rate Interim Goal Final Goal Proposed Option 1,772 1,077 992 Alternative Option 1,772 1,199 1,156

# Section 111(d) State Plan Process ► 

## State develops standards of performance to implement its goal; establishes the standards in a plan, along with 

## implementing and enforcing measures
• 

## EPA recognizes states’ requests for both flexibility and 

## specificity

– States can choose to meet rate - or mass - based goal



### – EPA would allow and encourage multi - state and regional plans

– EPA would support building off existing reduction programs


## • 

## EPA recognizes states’ concerns regarding timing for submission of plans

– Phased plan submittals considered 

## ► 

## The state applies the standard to the appropriate entities
• 

## EPA recognizes the need for accountability and verifiability of attaining CO 2 

## emission reductions

13

# Potential Pathways for State Plans ► 

## Multiple pathways exist for states’ plans ► 

## May include emissions reduction measures identified in building blocks or others ► 

## Examples that EPA anticipates, alone or in various combinations: ► 

### Direct emission limits on EGUs ► 

### Collaboration with RTOs and ISOs regarding re - dispatch 

### prioritization ► 

### State policies to deploy new, lower- or non - carbon - emitting generation capacity, such as NGCC sources, renewable energy 

### (RE) sources such as solar and wind, and/or nuclear ► 

### Energy efficiency (EE) deployment programs ► 

### Legislation or regulations establishing EE resource standards (EERS) and/or renewable portfolio standards (RPS) ► 

### Regional emissions reductions agreements ► 

### Integrated Resource Plan -type approaches for reducing utility fleet CO 2 

### emissions

14

# BSER and Compliance Options Compared Building Block BSER Examples of State Compliance Measures 1. Make fossil fuel fired power plants more efficient Efficiency Improvements Efficiency improvements Co-firing or switching to natural gas Coal retirements Retrofit CCS (e.g., Parish in TX) 2. Use lower emitting power sources more Dispatch changes to existing natural gas CC Dispatch changes to existing natural gas CC 3. Build more renewable energy sources Renewable Energy Certain Nuclear New NGCC Renewables Nuclear (new and up - rates) New coal with CCS 4. Use electricity more efficiently Demand -side energy efficiency programs Demand side energy efficiency programs Transmission efficiency improvements Energy storage 15

# State Plan Components ► 

## Emission guidelines would include a list of state plan components ► 

## Recommendation: Require state plans to include: ► 

### Identification of affected entities ► 

### Description of plan approach and geographic scope ► 

### Identification of state emission performance level ► 

### Demonstration that plan is projected to achieve emission performance level ► 

### Identification of milestones ► 

### Identification of backstop measures ► 

### Identification of standards of performance ► 

### Demonstration that each standard of performance is enforceable, 

### quantifiable, surplus, permanent and verifiable (recognizing non traditional nature of some potentially affected entities) ► 

### Identification of monitoring, reporting and recordkeeping requirements ► 

### Description of state reporting ► 

### Certification of hearing on state plan ► 

### Supporting material 16

# Timing for State Plan Submittals ► 

## Individual and multi -state plans due June 30, 2016 ► 

## Proposal provides states with additional time to submit 

## complete plans if justified and if states provide specific information ► 

### Some states may reasonably need additional time to submit complete plans, due to factors such as timing of legislative approval 

### process and complexities associated with regional approaches ► 

### Proposed timing of extensions to submit a complete plan, if justified 

### and supported: • Submit initial plan by June 30, 2016 

### • Individual state plans: a one -year extension (June 30, 2017) 

### • Multi - state plans: a two -year extension (June 30, 2018)  Would submit a progress report on June 30, 2017

17By June 30, 2016 State submits initial multi state implementation plan and request for 2-year extension EPA reviews initial plan and determines if extension is warranted by June 30, 2017 State submits progress report of implementation

plan by June 30, 2018 States submits multi state implementation plan State submits Negative Declaration
State submits complete Implementation Plan by June 30, 2016
State submits Initial Implementation Plan by June 30, 2016 and requests 1 -year extension EG Promulgation June 1, 2015 by June 30, 2016

State submits negative declaration

State submits multi -state Implementation Plan by June 30, 2016 and requests 2 -year extension EPA publishes FR notice

by June 30, 2016 State submits implementation plan

by June 30, 2016 State submits initial implementation plan and request for 1-year extension EPA reviews initial plan and determines if extension is warranted within by June 30, 2017 State submits complete implementation plan Compliance period begins 2020 2015 2019 

# Clean Power Plan Implementation Timeline

2020

EPA reviews plan and publishes final decision within 12 months on approval/disapproval

EPA reviews plan and publishes final decision within 12 months on approval/disapproval

EPA reviews plan and publishes final decision within 12 months on approval/disapproval 2016 2017 2018

18

# Timing of Reductions ► 

### Timing of reductions can vary, depending on a state's situation ► 

### Some states have existing programs that are achieving results ► 

### Some measures are more easily implemented and/or may obtain reductions promptly; others may require longer to implement and/or realize reductions ► 

### Early emphasis on effective implementation of EE programs could allow more EE to substitute for other, more expensive measures ► 

### New multi - state programs (or additions to existing multi - state programs) would 

### need time to achieve goals ► 

### State plans must be designed to achieve and maintain affected EGU emissions performance consistent with final post-2029 goal, as well as an interim goal ► 

### Interim emissions performance goals apply during the years 2020-2029 on a 10 - 

### year average or cumulative basis, as states ramp up programs to meet their final goals • Milestone requirements and emissions reporting are proposed to track interim progress and enable corrective action if necessary ► 

### States must achieve and maintain final goals after 2029; a three -year averaging 

### period (2030 -2032) is proposed for demonstration that final goal will be initially achieved ► 

### States must maintain the final - goal level of performance over time 19

# APPENDIX

20

# Clean Air Act Section 111 – Excerpts ► 

### Section 111(a)(1) (Definitions): ► 

### “The term ‘standard of performance’ means a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account 

### the cost of achieving such reduction and any non - air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.” ► 

### Section 111(d)(1) (Standards of performance for existing sources; remaining useful life of source): ► 

### “The Administrator shall prescribe regulations which shall establish a procedure similar to that provided by section 7410 of this title under which each state shall submit to the Administrator a plan which • (A) establishes standards of performance for any existing source for any air pollutant ( i ) for which air quality criteria have not been issued or which is not included on a list published under section 7408 (a) of this title or emitted from a source category which is regulated under section 7412 of this title but (ii) to which a standard of performance under this section would apply if such existing source were a new source, and 

### • (B) provides for the implementation and enforcement of such standards of performance. Regulations of the Administrator under this paragraph shall permit the state in applying a standard of performance to any particular source under a plan submitted under this paragraph to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies.” 21

# Clean Air Act Section 111 – Excerpts (cont.) ► 

## Section 111(d)(2) (Standards of performance for existing sources; remaining useful life of source): ► 

### “The Administrator shall have the same authority • (A) to prescribe a plan for a state in cases where the state fails to submit a satisfactory plan as he would have under section 7410 (c) of this title in 

### the case of failure to submit an implementation plan, and 

### • (B) to enforce the provisions of such plan in cases where the state fails 

### to enforce them as he would have under sections 7413 and 7414 of this title with respect to an implementation plan. ► 

### In promulgating a standard of performance under a plan prescribed under this paragraph, the Administrator shall take into consideration, 

### among other factors, remaining useful lives of the sources in the category of sources to which such standard applies.”

22