UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

MEMORANDUM

To: Docket EPA-HQ-OAR-2015-0199

From: U.S. Environmental Protection Agency, Office of Air and Radiation

Date: August 2015

Subject: Gas Shift Emission Rate Credit (GS-ERC) Technical Support Document (TSD)

INTRODUCTION

This memorandum and appended spreadsheet (GS-ERC Calculations.xlsx) provide the 

calculations that EPA used in determining the calculations for Gas-Shift Emission Rate 

Credits (GS-ERCs). Building Block 2 (BB2) of the Best System of Emission Reduction 

(BSER) determination in the Clean Power Plan EGs describes shifting generation from 

fossils steam units to NGCC units because NGCC units generate electricity at a less 

carbon intensive rate. BB2 describes NGCC units generating at 75 percent of the unit’s 

annual operating capacity. This level of generation, for most NGCC units, would 

represent an increase in annual generation from a 2012 baseline and for every hour of 

electricity generated by an NGCC unit beyond its 2012 baseline (i.e., incremental 

generation), there is a corresponding emission reduction in the power system.1The EPA 

is proposing to reflect the emission reductions of BB2 by crediting all NGCC generation 

on a pro rata basis that reflects expected incremental NGCC generation to 75 percent 

capacity. This means that for every hour that an NGCC unit generates electricity, it will 

also generate a partial credit associated with the generation shift from fossil steam to

NGCC units. All affected NGCC generation will be credited, with ERCs, by a factor that 

represents the described emission reductions from incremental generation; ERCs 

credited in this are proposed to be designated as Gas Shift ERCs (GS-ERCs). Most 

specifically the spreadsheet shows the proposed determination of the least stringent 

regional Incremental Generation Factor (IGF) and values that all facilities subject to the a 

rate-based federal plan would use under the proposal. The IGF is one of three factors 

proposed to be used to calculate GS-ERC generation for a given NGCC unit and is the 

only factor in the calculation that is not unit specific. The IGF would be determined by

 

1

It is assumed that any increase in NGCC generation above 2012 levels is displacing 

fossil fuel-fired steam EGU generation.
2

the EPA as shown in the spreadsheet. The IGF and the other two factors (GS-ERC 

Emission Factor and NGCC Generation) are used through the following expression to 

calculate the amount of GS-ERCs that a facility generates:

GS-ERCs	=	NGCC	Generation	*	Incremental	Generation	Factor	*	GS-ERC	Emission	Factor

The data in this spreadsheet is the same data that was used to determine the 

subcategorized standards for NGCC units and steam generating units. 

The EPA is proposing that the IGF used for each compliance period be based on which 

region, on average, produces GS-ERCs at the highest rate (i.e., GS-ERCs generated per 

MWh). To do that the EPA calculated the anticipated average GS-ERC Emission Factor 

(column X) and multiplied it by the IGF (column Y) which gives the average GS-ERC 

Generation Rate for the region for the given year as shown in column Z. Note that 

although an average GS-ERC Emission Factor is used in determining the least stringent 

IGF, for compliance calculations determining the quantity of GS-ERCs that an individual 

NGCC earns the GS-ERC Emission Factor is a unit level calculation. The region with the 

highest average GS-ERC Generation Rate (Column Z) averaged over the compliance 

period is proposed to be the least stringent region. Each region’s average annual GS-ERC 

generation rate is calculated as shown in cells AD13:AI17. The least stringent average 

(i.e., maximum) of the GS-ERC Generation Rates for each compliance period is used as 

the determination to designate which region is “least stringent” and the IGF values to be 

used. The corresponding region’s IGF values for the compliance period are averaged and 

shown in cells AD20:AI22. These values are the proposed IGF values to be used in 

calculating GS-ERC generation for a NGCC unit.

GS-ERC FACTORS

As described above, there are three factors that go into determining the generation of 

GS-ERCs by an NGCC unit. The first factor that determines GS-ERC generation is the IGF. 

The IGF is an EPA calculated value that varies from compliance period to compliance 

period, and is based on calculations involving the projections of NGCC generation 

growth and renewable energy replacement. These calculations are shown in the 

spreadsheet. This factor distributes the anticpated collective incremental NGCC 

generation, as described by Building Block 2 of the CPP’s BSER determination, over all 

NGCC generation. The purpose of the IGF is to allow NGCC units to generate GS-ERCs for 

all MWh of generation. This factor distributes the anticipated incremental NGCC 

generation and the GS-ERCs associated with it over all NGCC generation. 

The IGF is calculated by taking the number of MWh beyond the 2012 baseline needed 

for the corresponding region to reach the BSER level of NGCC generation capacity and 

dividing it by the NGCC BSER regional capacity for that compliance period, which 

produces the factor. Or in other words, it is taking the complement of the regional 2012 

NGCC baseline generation (MWh) divided by NGCC BSER regional capacity for the 
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compliance period (MWh). The NGCC BSER regional capacity is the level of generation 

that the BSER assumes a region can reach for that year. This NGCC BSER regional 

capacity also accounts for both the growth of NGCC generation in each compliance 

period, reaching the 75% capacity factor in 2030, and for the replacement of fossil fuel 

generation via Building Block 3. The IGF can be summarized by the following expression:

Incremental Generation Factor = 1 −

Regional 2012 NGCC Baseline

NGCC BSER Regional Capacity

The IGF is a factor that the EPA calculates and determines as described above and 

shown in the spreadsheet. The value of the IGF is transparently provided by the EPA.. 

The number of GS-ERCs generated is also dependent on the other two factors described 

below, which are unit specific. The IGF is proposed to be calculated for every 

compliance period based on the least stringent region’s IGF, which is based on increased 

utilization of RE and its replacement of fossil fuel fired generation (i.e., based on 

Building Block 3 of the CPP EGs). For the calculation of this factor the EPA is proposing to 

use the least stringent region for each compliance period and applying it for all GS-ERC 

calculations subject to the federal plan. The EPA is requesting comment on an 

alternative approach that IGFs are calculated and applied at a regional level; this may 

better align with the relative emission reduction value of incremental NGCC generation 

than a nationalized “least stringent” approach. The EPA also requests comment on 

whether the “least stringent” region should be based on the least stringent IGF values or 

the least stringent regional average GS-ERC generation rate (column Z), as proposed.

The result of the IGF for each compliance period is shown in the cell block AD25:AI27. 

The interim goal IGF (cell AH27) is not being incorporated into the proposed federal 

plan, but is shown for consistency with the CPP Emission Guidelines.

The second factor is the GS-ERC Emission Factor. The purpose of this factor is to

measure the degree that an NGCC unit is emitting at a rate less than the average fossil 

steam unit. This measure reflects the shift in generation from fossil steam to NGCC units

and quantifies the avoided emissions through this shift. For purposes of calculating an 

IGF, the spreadsheet uses an anticipated average GS-ERC Emission Factor. When the 

EPA calculates the number of GS-ERCs a NGCC generates, the GS-ERC Emission Factor 

will be unit-specific, by incorporating its own emission rate, as described below (note 

that the NGCC Generation term will also be unit specific).

For the IGF calculations, the anticipated average GS-ERC Emission Factor for each region 

and each year are calculated (column X). These values are used in the proposed 

calculation and determination of the least stringent region and the IGF value. The 

anticipated average GS-ERC Emission Factor is calculated by taking the least stringent 
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fossil steam rate2standard among the regions (maximum value for the year in column 

V) and using it against that specific region’s historical average emission rate (column I) 

to calculate the anticipated average GS-ERC emission factor (column X). The GS-ERC 

Emission Factor is expressed by taking the complement of the ratio of the NGCC 

standard to the fossil-steam standard. It can be summarized by the following 

expression:

GS-ERC Emission Factor = 1 −

NGCC emission rate

Steam Standard

The EPA is using the least stringent steam rate standard because that is the value that 

has been used in the the goal setting calculations. The EPA is using the average NGCC 

emission rate of the region in which a given NGCC unit is located to determine the GSERC Emission Factor for the IGF determination. This average GS-ERC emission factor is 

being used solely for the determination of calculating the IGF value described above. 

The calculation of a GS-ERC Emission Factor is unit specific. The NGCC unit takes the 

complement of its emission rate divided by the steam standard (note: this proposed 

treatment of GS-ERCs is solely intended for use in the subcategorized two-rate system 

where fossil steam units and NGCC units have different emission standards). An example 

of this is illustrated below. 

The third factor in calculating an NGCC’s generaton of GS-ERCs is the NGCC Generation. 

The NGCC Generation is the total net energy output generation of the affected NGCC 

unit during the year that GS-ERCs are being calculated. This factor is not incorporated 

into the spreadsheet and played no role in determining the IGF. The three factors 

combine to make the following equation:

GS-ERCs	=	NGCC	Generation	*	Incremental	Generation	Factor	*	GS-ERC	Emission	Factor

The GS-ERC equation above gives the number of GS-ERCs that an NGCC will generate. 

The IGF and GS-ERC Emission Factor combine to make the GS-ERC generating rate for a 

given NGCC unit. This functions by the IGF prorating all incremental NGCC generation 

and the GS-ERC Emission Factor designating the proportion of the incremental NGCC 

generation that will generate ERCs. The GS-ERC generating rate multiplied by the total 

NGCC Generation gives the total GS-ERCs generated by the NGCC for the year. The GSERC generating rate, as described in relation to the IGF determination, is the proposed 

method for determining the least stringent region.

 

2 Note that in the attached spreadsheet for this document that the term “fossil steam” is 

used and is synonymous to the term “steam generating unit” used in the proposed 

federal plan and model rule preamble.
5

The calculation of GS-ERCs for an NGCC is independent of the calculation of ERCs 

generated or owed against the NGCC standard. It is possible that an NGCC will owe ERCs 

against its assigned emission standard for every MWh generated, but still be generating 

GS-ERCs. GS-ERCs may only be used to meet steam generation units’ compliance 

obligations.

The EPA is using all values from a region for a particular year (with the exception of fossil 

steam rate) to calculate the factors that determine the least stringent region. Once all of 

the factors are calculated and used, the least stringent region is determined. This 

process identifies the least stringent region for purposes of calculating GS-ERCs. The EPA 

solicits comment on the determinations made in defining the least stringent region for a 

given year.

EXAMPLE

As an example that was used in the proposal preamble, an NGCC unit is connected to 

the grid and generates 1 million MWh of electric output for the first year of the final 

performance period (i.e., 2030). During this year it emits 850 million pounds of CO2

giving it an emission rate of 850 lbs CO2/MWh. The NGCC unit is subject to a Final Period 

emission rate limit of 771 lbs CO2/MWh. Since the NGCC unit is always subject to its 

NGCC rate-based emission standard of 771 lbs/MWh and it is operating at a rate above 

that standard it will owe non-GS-ERCs for its own compliance. The ERCs owed are 

calculated by solving for the number of ERC MWh the NGCC unit will need to adjust its 

rate down to its emission rate limit. This is shown in the following equation:

850,000,000 lbs CO / [1,000,000 MWh + ERC MWh] = 771 lbs CO/MWh

When that equation is solved for the number of ERC MWh needed, the NGCC unit would 

need to acquire 102,465 ERCs to adjust its emission rate to its rate-based emission 

standard.

Additionally, the GS-ERC Emission Factor for this NGCC unit is calculated by using 850 lbs 

CO2/MWh for the NGCC emission rate and 1,305 lbs CO2/MWh for the SGU emission 

standard in the equation described above.3

GS-ERC Emission Factor = 1 −

850 lbs/MWh

1,305 lbs/MWh

This calculation results in a GS-ERC Emission Factor of 0.35. The IGF is calculated by the 

EPA and is found in cell AI27 of the attached spreadsheet to be 0.26. By using the GS-

 

3 Note that in the example that was used in the proposal preamble, incorrect values for 

the NGCC emission rate (771 lbs/MWh was used instead of 850 lbs/MWh) and SGU 

standard (1,404 lbs/MWh was used instead of 1,305 lbs/MWh) were applied.
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ERC Emission Factor and Incremental Generation Factor calculated above with the NGCC 

unit’s generation for the year, the number of GS-ERCs for this NGCC unit can be 

calculated as follows:

0.35 ∗ 0.26 ∗ 1,000,000 = 91,000 GS-ERCs

The calculation results in 91,000 GS-ERCs being generated. Because an NGCC unit 

cannot use the GS-ERCs it generates to meet its compliance obligations, this NGCC unit 

will both generate ERCs (91,000 GS-ERCs) and owe ERCs (102,464 non-GS-ERCs against 

the NGCC standard). This NGCC unit may sell (or otherwise transfer) or bank its GS-ERCs. 

If a GS-ERC is sold, those proceeds may, in turn, be used to acquire non-GS-ERCs to 

satisfy the NGCC unit’s compliance obligations.