Analysis of EPA’s Proposal 

to Reduce CO2 Emissions 

from Existing Units

November 12, 2014
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The generation fleet in MISO is being affected by fuel prices, 

energy policies and multiple environmental regulations

???

• Increased costs

• Other potential 

impacts depend 

on regulations 

MATS CSAPR 

& CWIS

Regulation Mercury and Air 

Toxics Standards

Cross State Air Pollution 

Rule and Cooling Water 

Regulations (316(b))

New air quality standards/ 

Coal ash storage

Compliance 

Dates 2015 / 2016 As early as 2015

Impacts • Significant coal 

retirements

• Outage coordination 

challenges

• Shrinking reserve 

margins around MISO

• Growing dependence 

on natural gas

NAAQS 

& Coal 

Ash

CO2from existing and 

new power plants 

• New coal requires 

CCS; base load 

capacity options 

reduced

• Significant coal 

retirements

• Increased 

dependence on gas 

and CO2 neutral 

resources

2015/16 (New)

Beginning in 2020 (Existing)

• NOx requirements 

tightened

• Higher plant 

compliance costs 

influence retirement 

decisions

Draft

Clean Power 

Plan

111 (b) & (d)
MISO Mission

• Drive value creation through efficient reliability / market operations, 

planning and innovation.

• Ensure reliable, least-cost delivered energy for all electricity 

consumers.

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Disclaimer 

• The studies referenced in this presentation show predictions of 

potential future costs. These costs are indicative based on the 

assumptions used in the modeling. Capital, fixed operating and 

maintenance and production cost increases are only captured. 

• These do not include additional costs related to:

– Electric transmission expansion 

– Gas infrastructure expansion

– Stranded generation facilities 
The purpose of MISO’s analysis... 

...is to inform stakeholders of potential impacts on the generation fleet and 

load resulting from the EPA’s proposal to reduce CO2 emissions from 

existing electric generating units. 

June 

2014

Draft 

rule 

issued

December 

2014

Deadline for 

providing 

comments to 

EPA

June 

2015

Rule 

finalized

June 2016

State plans due

June 

2017

State plans 

due (with 

one year 

extension)

June 

2018

Multi-state 

plans due 

(with a 2-

year 

extension)

January

2020 –

2029

Interim 

goal in 

effect

January 

2030 

onward

Proposed 

goal in 

effect

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Key Findings (All costs shown are indicative)

• Compliance costs vary based on the reduction 

strategy.

– ~$90B net present value for EPA’s Four Building Blocks

– ~$55B net present value for regional optimization 

• Regional compliance is approximately 40% less 

expensive.

– $55B (regional) vs $83B (sub-regional) CO2 emissions reduction

• Entities subject to the rule may need to take action 

by 2020, which may challenge their ability to 

implement least-cost compliance strategies.

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EGEAS, a strategic assessment model was used to study 

the impacts of the draft CO2 emissions reduction rule

OPTIMIZATION CONSTRAINTS

 Planning Reserve Margin

 CO2 emission constraint (mass-based)

 Resource availability

INPUT DATA ASSUMPTIONS

 Demand and energy forecast

 Fuel forecasts

 Retirements

 CO2costs

 RPS requirements

EXISTING RESOURCES DATA

 Unit capacity

 Heat rate

 Outage rate

 Emissions rate

 Fuel and O&M costs

NEW RESOURCES DATA

 Capital cost

 Construction cash flow

 Fixed charge data

 Years of availability 

OPTIMIZED RESOURCE PLAN

 20-year resource expansion forecast

 Amount, type and timing of new resources

 Total system Net Present Value (NPV) of costs

 Annual production costs for system

 Annual fixed charges for new units

 Annual tonnage for each emissions type

 Annual energy generated by fuel type

 Annual system capacity reserves and generation 

system reliability

EGEAS

EGEAS stands for Electric Generation Expansion Analysis System

Total System Costs = Sum of Production Cost + Fixed O&M Cost + Capital Carrying Costs.
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Each state has a proposed interim and final state-wide 

CO2 emissions rate goal calculated as:

Statewide CO2emissions from covered fossil fuelfired power plants (lbs)

State electricity generation from covered fossil plants + 

renewable energy + nuclear (at-risk portion and New) + 

energy efficiency (EE) (MWh)

Rate

(lbs/MWh)

• Numerator – sum of CO2 emissions from existing generating units

• Denominator – electricity generation in the state excludes existing hydro 

and new thermal resources

• Every state is assigned a different proposed rate goal (lbs/MWh) for the 

interim (2020-2029) and the final (2030 onward) periods

• For modeling purposes, rate-to-MISO-equivalent mass was calculated:

– Emissions in tons = (2012 generation from covered fossil plants + renewable and 

EE mandate-driven energy forecast) * (proposed state CO2 emission rate goal) 

– Only the MISO portion of the state was modeled
An assessment of EPA’s proposed building blocks to 

calculate their costs and emissions reduction potential

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Building 

Block 1

Building 

Block 4

Building 

Block 3

Building 

Block 2

All 

Building 

Blocks

Regional 

(Footprint-wide)

Sub-Regional 

(Local Resource 

Zones)

Cost of Compliance

Emissions Reduction Achieved

Cost of Compliance

Emissions Reduction Achieved

Cost of Compliance

Emissions Reduction Achieved

Cost of Compliance

Emissions Reduction Achieved

Cost of Compliance

Emissions Reduction Achieved
EPA’s Technical Support Documents provided modeling 

assumptions for the Four Building Blocks

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Scenario Modeling Assumptions (per EPA’s Clean Power Plan) and Methodology

Reference Case MISO’s MTEP-15 Business As Usual future assumptions*

Building Block 1 In 2020, apply a 6% heat rate improvement to all the coal-fired units at a capital cost of 

$100/kW (amortized over 10 years). 

Building Block 2 Calculate and enforce, starting in 2020, a minimum fuel burn for existing CC units to 

yield an annual 70% capacity factor. 

Building Block 3 Calculate and add the equivalent amount of wind MWs to meet the incremental regional 

non-hydro renewable target. 

Building Block 4 Calculate the amount of energy savings for the MISO footprint and incorporate it as a 

20-year EE program in the model.

All Building 

Blocks

Application of all building blocks. 

* Assumptions matrix is available at https://www.misoenergy.org/Events/Pages/PAC20140820.aspx
Implementing the EPA’s building blocks changes the 

energy mix of the system, and...

 

BB1

BB3

BB2

BB4

Reference Case All Building Blocks

Energy production from new gas is less than 2.3% in all the scenarios. 

“Other” category includes energy from biomass, hydro, demand response, energy efficiency and solar.

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All charts show MISO 

system 2030 energy 

production by fuel type.
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...the application of all four building blocks achieves the 

required CO2 emissions reduction for the MISO footprint
Alternative compliance options achieve the proposed level of CO2

reduction at a lower cost than the EPA Building Blocks by 

approximately $3.5B annually.

Thinking outside the blocks

In the reference scenario, energy production from new gas is less than 2.3%. “Other” category includes energy from biomass, hydro, demand response, energy efficiency and solar.

The results shown for the CO2 Constraint case are indicative. Further model optimization is required as shown in Phase 2 which indicates potential additional value from increased energy 

efficiency and coal retirements. 

The difference in the “Other” category is due to modeling assumptions: EPA assumes 1.5% annual growth in 

energy efficiency as a % of energy sales; MISO assumes continuation of existing energy efficiency programs. 

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2030 MISO Energy: 

CO2 Constraint

$38/ton

2030 MISO Energy:

All Building Blocks

$60/ton

MODELING ASSUMPTIONS

Building Blocks 

BB1 = Efficiency improvements

for existing coal units

BB2 = Increased CC dispatch

BB3 = Expanded renewables 

and sustained energy 

production from nuclear units

BB4 = Expanded demand-side 

energy efficiency

CO2 Constraint Case

System-wide CO2constraint

New gas units more efficient 

than existing gas units 

(results in increased 

dispatch of new 

CCs/decreased dispatch of 

higher-CO2-emitting units)

Current Renewable Portfolio 

Standards & state energy 

efficiency targets assumed 

unchanged
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All combinations of the following policy and 

economic sensitivities were modeled

0.80%

3.44

Existing RPS 

Mandates 

0

No 

additional 

Base

No Nuclear 

Retirements

60-year life 

Nuclear

50% of EPA’s 

Building Block 4

EPA’s Building 

Block 4

25% 

(13.9GW)

50% 

(28.3GW)

10 25 50

15% 

Regional

20% 

Regional

4.30 5.16

1.50%

Energy 

Efficiency 

as a % 

of sales

Additional Coal 

Retirements

Nuclear 

Retirements

CO2 Costs 

($/ton)

Renewable 

Portfolio 

Standards

Natural 

Gas Prices 

($/MMBtu)

Demand and 

Energy Growth 

Rates
Lower-cost 111(d) compliance strategies retire 

up to an additional 14GW* of coal capacity

The cost of compliance 

for the MISO system 

ranges from $20 - $80B.

Each diamond represents one 

policy and economic 

sensitivity. 

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* In addition to the 

12.6 GW of capacity 

already projected to 

retire.
Regional compliance options avoid costs of 

approximately $3B annually compared to subregional compliance

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$38/ton

55

83

$5B 

annual 

costs

$8B 

annual 

costs

$57/ton
Is there enough time to reliably implement 

lower-cost compliance strategies? 

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Additional Information 

• EPA Regulations webpage

https://www.misoenergy.org/WhatWeDo/EPARegulations/Pages/EPARegulations.aspx

• Planning Advisory Committee: Study Results 

Presentation

https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/PAC/2014/20140917/20140917%20PAC%

20Item%2002%20GHG%20Regulation%20Impact%20Analysis%20-%20Study%20Results.pdf

• MISO One-Pager on Initial Study Results 

https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/PAC/2014/20140917/20140917%20PAC%

20Item%2002%20MISO%20CO2%20Analysis%20One%20Pager.pdf

• Additional Information, please contact:

Aditya Jayam Prabhakar

ajayamprabhakar@misoenergy.org

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