What the Clean Power Plan Means for the Southeast

Guest Blog | June 23, 2014 | Climate Change, Coal, Energy Policy

On Wednesday, June 18, the Environmental Protection Agency’s proposed Clean Power Plan was published in the Federal Register, officially starting the 120-day comment period.  Released on June 2, the Clean Power Plan is EPA’s first regulation aimed at reducing carbon dioxide (CO2) emissions from existing coal-fired power plants.  In previous SACE blogs, we’ve provided a brief introduction to the Clean Power Plan, explained the energy efficiency implications of the proposed rule and told you about our meeting with EPA Region 4 and regional allies to discuss the rules impacts in the Southeast.  This blog digs a little deeper into the Clean Power Plan and explains how it will affect our Southeastern states. (For a full discussion and presentation of this topic, please listen to the SACE webinar, What the Clean Power Plan Means for the Southeast.)

Red states pump out more carbon than blue states. Source: Grist.org

In 2012, over 366 million tons of CO2 were emitted from roughly 270 coal units at 82 coal-fired power plants across our 8 Southeast states.  Overall, our Southeastern states contribute around 22% of our nation’s total annual carbon dioxide emissions – a disproportionate amount.  Some Southeastern utilities, such as the Tennessee Valley Authority, Duke Energy and Georgia Power, have recently taken important steps to decrease their reliance on coal-fired power.  The Clean Power Plan will help ensure that these utilities do not back-peddle on plans to retire coal-fired power plants and should help drive investments in renewable energy and energy efficiency measures across the Southeast.

The Clean Power Plan is built around Section 111 of the Clean Air Act, which uses Best System of Emission Reduction (BSER) to control a particular pollutant – in this case, CO2. (Learn more here about the history behind carbon regulation).  When determining the BSER, EPA considers, among other things, the costs associated with reducing those particular emissions and technical feasibility for emission reduction. EPA had the choice of setting BSER for the CO2 rule on a plant-level basis (individual coal plants/units), a fleet-level basis (across a state’s entire coal plant fleet) or a system-level basis (across all of a state’s energy resources, including energy efficiency resources). They chose to have the Clean Power Plan establish BSER as a system-level approach.  

Using this BSER methodology, EPA has determined four building blocks for how states can reduce their emissions system wide:

1) Increase efficiency of existing coal-fired plants

2) Increase utilization of natural gas

3) Increase utilization of renewables and nuclear

4) Increase the amount of energy efficiency

To be clear, states do not need to use each of these building blocks to comply with the Clean Power Plan. Instead, these four building blocks can be mixed and matched in different ways – giving states maximum flexibility in deciding how best to comply with the rule.  EPA determined each state’s unique 2030 CO2 emission rate by calculating the amount of emission reductions each state could achieve through each one of these four building blocks.

First, EPA estimated the amount of CO2 reductions achievable if a state improved the efficiency of its coal units by 6% (Building Block 1).  Next, EPA estimated the CO2 reductions achievable through increased reliance on a state’s existing natural gas combined-cycle (NGCC) units and through increasing efficiency of these NGCC units to 70% (Building Block 2).  After that, EPA estimated CO2 emission reductions from retaining 6% capacity of existing nuclear generation as well as reductions a state will achieve when proposed nuclear units in the state begin operation (Building Block 3).  It should be noted that EPA names only 6 proposed nuclear units in the Clean Power Plan, all are or will be located in the Southeast (GA, TN, SC).

For both wind and solar, EPA took existing in-state resources and assumed a percentage growth over time up until the 2030 goal.  EPA then estimated the amount of CO2 emission reductions from increased reliance on these zero-carbon energy sources. (Also, Building Block 3).  EPA treated energy efficiency like wind and solar, calculating CO2 emission reductions based on an assumed percentage of growth, setting a maximum national goal of reducing a state’s total electric sales by 1.5% annually through increased demand-side energy efficiency implementation.

Now, let’s take a look at the proposed carbon dioxide emission limits for our states.  EPA is using an emission rate of pounds of CO2 per MWh as the metric for the CO2 limits under the Clean Power Plan.  Below are EPA’s proposed 2030 emission rates for our Southeastern states as well as their 2012 emission rates.

These state goals reflect the realities of how each state produced energy in 2012.  For example, Kentucky’s percentage reduction of CO2 seems rather low, at 18%, but still represents a measurable reduction in emissions for Kentucky as it is over 90% reliant on coal-fired power.  In contrast, South Carolina must reduce its emissions by 51%.  South Carolina, however, is only about 30% reliant on coal-fired power and also has two proposed nuclear units, which were included in EPA’s BSER calculations for the state.

In order to comply with the Clean Power Plan, states must develop a State Implementation Plan (SIP) that outlines a method to reduce emissions to the appropriate state CO2 emission rates, as well as how the state will measure and verify emission reductions.  States then submit these plans to EPA for approval.  If a state fails to submit a SIP or submits an inadequate SIP, EPA may develop a Federal Implementation Plan (FIP) for that state.  Assuming the schedule goes according to plan, and not held up by litigation, states must submit SIPs to EPA in June 2016.  EPA has allowed flexibility with this timeline, if states choose to submit regional compliance plans.

It remains to be seen how each state will craft its SIP.  While much of the rhetoric in our region has been about the pain (in the form of higher bills) that this new rule will bring to the average customer, EPA actually estimates that if a state chooses to rely heavily on increased energy efficiency as a compliance method, customers will see a decrease in utility bills over time.  We are hopeful that implementation of the Clean Power Plan will result in increased clean energy resources in the Southeast.  Stay tuned for additional SACE insights as we continue to analyze the Clean Power Plan and work with our states to comply with the rule in a way that helps build a clean energy economy in the Southeast.

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