# Clean Power Plan:



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

September 19, 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

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# Carbon Pollution and Health ► 

## Unchecked carbon pollution leads to climate changes, including rising global temperatures, rising sea level, 

## changes in weather and precipitation patterns, and changes in ecosystems, habitats and species diversity ► 

## Public health risks include: ► 

### More heat waves and drought ► 

### Worsening smog (also called ground - level ozone pollution) ► 

### Increasing the intensity of extreme events, like hurricanes, extreme precipitation and flooding ► 

### Increasing the range of ticks and mosquitoes, which can spread disease such as Lyme disease and West Nile virus

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### ► 

## Issued in June 2013 ► 

## Calls on the federal government to work with states, 

## cities, industries, consumers and the international community to address climate change ► 

## EPA action under the President’s Climate Action Plan ► 

### Reducing carbon pollution from power plants ► 

### Building a 21 st 

### century transportation sector ► 

### Cutting energy waste in homes, businesses and factories ► 

### Reducing methane and hydrofluorocarbons (HFCs) ► 

### Preparing the U.S. for the impacts of climate change ► 

### Leading international efforts to address global climate change

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# The President’s Climate Action Plan

# President’s directive to EPA: ► 

## Set flexible carbon pollution standards, regulations or 

## guidelines, as appropriate, for power plants under section 111 of the Clean Air Act (CAA) ► 

### for modified, reconstructed and existing power plants by no later than June 1, 2014 ► 

### Issue final standards, regulations or guidelines, as appropriate, by no 

### later than June 1, 2015 ► 

### Include in the guidelines addressing existing power plants a requirement that states submit to EPA the implementation plans by no later than 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 6 

# Reducing Carbon Pollution From Power Plants

### ► 

## EPA conducted a robust stakeholder engagement process ► 

### Participated in meetings with more than 300 utility, labor and environmental groups ► 

### Developed video webinar about the Climate Action Plan and CAA section 111(d), viewed more than 5,400 times ► 

### Held 11 public listening sessions around the country • 3,300 attendees; oral statements from more than 1,600 people 

### ► 

## Engagement process has given EPA several key insights and takeaway messages ► 

### Reliable, affordable energy supply is vital ► 

### Flexibility is key ► 

### Power plants are part of a large and complex interstate system ► 

### Allow for, or even encourage, regional solutions ► 

### Account for state leadership and the many measures that states are already undertaking 7 

# Engagement

# Power Plant CO 2 

# Emission Reduction Actions ► 

### Three related rulemakings issued under CAA section 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) ► 

### Emission Guidelines Package ► 

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

### Translates BSER into specific state - by-state goals • Primary proposal achieves approximately 25% to 30% CO 2 reduction from 2005 levels by 2020 

### • Takes comment on a less aggressive option with a shorter compliance time -frame ► 

### Provides additional guidance to states on their existing source plan • Components of a plan 

### • Flexibility in compliance options 

### • Timing for submittal 

### • Timing of reductions

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# Flexibilities Available ► 

### States will have a 10 to 15 -year window for planning and achieving reductions in carbon pollution ► 

### States will choose how to meet the goal through measures that reflect their particular circumstances and policy objectives; e.g., they can: ► 

### Design plans that use innovative, cost- effective regulatory strategies ► 

### Tap into the investments already being made to upgrade aging infrastructure ► 

### Achieve meaningful reductions in carbon pollution ► 

### Help Americans save money and energy in the long run ► 

### Proposal allows states to collaborate and to develop plans on a multi state basis ► 

### Electricity is transmitted across state lines ► 

### State measures may impact and be designed to reduce regional CO 2 

### emissions from utilities

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# 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)

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

# Clean Air Act Section 111 ► 

### Authorized in 1970 ► 

### Establishes a mechanism for controlling air pollution from stationary 

### sources ► 

### Applies to sources for which the Administrator, in her judgment, finds “causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare” ► 

### Can apply to new, existing, modified and reconstructed sources ► 

### More than 70 stationary source categories and subcategories are currently regulated under section 111 ► 

### Lays out different approaches for reducing air pollution from new and existing sources ► 

### New sources under section 111(b) 

### • Federal standards for new, modified and reconstructed sources ► 

### Existing sources under section 111(d) 

### • State programs for existing sources that are equivalent to federal guidelines

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# Clean Air Act Section 111(d) ► 

## Requires a different approach for achieving emission reductions than the 

## approach used for new sources ► 

## Provides that EPA establish ► 

### A procedure for states to issue performance standards for existing sources 

### in the source category and ► 

### Guidance about the appropriate level of the standard 

### ► 

## EPA has established section 111(d) 

## regulations for existing sources for 5 source categories

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### Section 111(d) regulations

- Sulfuric acid plants (acid mist)

- Phosphate fertilizer plants (fluorides)

- Primary aluminum plants (fluorides)

- Kraft pulp plants (total reduced sulfur)

- Municipal solid waste landfills (landfill gases)

# Determination of Guidelines and Implementation Process ► 

## Under CAA section 111(d): ► 

## EPA determines BSER ► 

## 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

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# BSER: Best System of Emission Reduction ► 

### From CAA 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.” ► 

### Key factors in BSER determination for existing power p lants ► 

### Feasibility • System of emission reductions must be technically feasible

– Reliability considerations ► 

### Costs • Costs of the system are reasonable

– Impacts on electricity rates and fuel prices ► 

### Size of reductions • Consideration given to the amount of emission reductions the system would generate ► 

### Technology • Promotion of the development and diffusion of technology can be taken into account
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# Building Blocks and Determining BSER ► 

### EPA has identified four categories of measures providing the basis for determining and quantifying BSER ► 

### They entail a combination of addressing emissions rates and levels of utilization at the affected source in the power sector: 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 ► 

### Together, the four building blocks constitute BSER, with each state’s goal established through applying BSER to its fleet of affected sources ► 

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

### The assumptions are then applied to state specific data (e.g. existing generation mix) to set state specific targets 15

# Building Blocks 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

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# State Goals

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### 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

# 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 18

# Section 111(d) State Plan Process ► 

## The state develops standards of performance that implement its BSER-derived goal and establishes those 

## standards in its 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 that standard to the appropriate entities
• 

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

## emission reductions 19

# 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 20

# Potential Pathways for State Plans ► 

### Multiple pathways exist for states’ plans ► 

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

### Pathways that EPA anticipates include implementation of the following actions, 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

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# Timing for State Plan Submittals ► 

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

### 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 ► 

### Proposal provides states with additional time to submit complete plans if justified and if states provide specific information ► 

### 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

22By 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

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# 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 24

# APPENDIX

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# 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.” 26

# 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.”

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