EPA’s Final Clean Power Plan: Overview

Steve BurrAQD, SIP Section

September 1, 2015

Slide 2

Overview

Status

Review of Clean Power Plan Basics

– Legal Basis

– BSER Building Blocks

Major Changes from Proposal

Initial Submittal

Regulatory Framework Options

Clean Energy Incentive Program (CEIP)

Slide 3

CPP Status

On August 3, 2015, EPA Signed final CPP rule and published supporting

documents:– http://

www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants#CPP-final

Signed final NSPS for new, modified and reconstructed EGUs:– http://

www2.epa.gov/cleanpowerplan/carbon-pollution-standards-new-modified-and-reconstructed-power-plants

Proposed federal CPP rules for states that fail to submit a plan:– http://

www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants#federal-plan

Slide 4

Legal Basis

Clean Air Act § 111: Standards of Performance for New Stationary Sources (NSPS)

Section 111(b) requires EPA to:– List categories of stationary sources that EPA finds

cause, or contribute significantly to, “air pollution which may reasonably be anticipated to endanger public health or welfare.”

– Promulgate “standards of performance” for emissions of air pollutants from new sources in the listed categories

Slide 5

Legal Basis

Standard of Performance: § 111(a)(1) defines as a standard which– Reflects the emission limitation achievable from

the “best system of emission reduction” (BSER) that

– Taking cost, non-air quality environmental impacts and energy requirements into account

– “the Administrator determines has been adequately demonstrated.”

Slide 6

Legal Basis

Section 111(d)– Requires EPA on adopting an NSPS to establish

guidelines and procedure for regulating existing sources that would be subject to the NSPS if they were new.

– The procedure must require states to submit a plan that “establishes standards for performance” (i.e. BSER) for covered existing sources

– If a state fails to submit a 111(d) plan or EPA disapproves a submitted plan, EPA must establish a plan for the state (similar to FIP under 110(c)).

Slide 7

Legal Basis

NSPS– Proposed January 8, 2014 for GHG emissions from

new fossil-fuel fired electric generating units (EGU)– Proposed June 18, 2014 for modified and

reconstructed EGUs– Final rule for all 3 adopted August 3, 2015, same

date as final CPP CPP consists of 111(d) guidelines for same

sources

Slide 8

BSER “Building Blocks”

Proposed BSER was based on “strategies, technologies and approaches already in widespread use by power companies and states”

Strategies include:– Measures to reduce the CO2 emissions rate of

individual generating units.– Measures to reduce the use of fossil-fuel fired

generating units.

Slide 9

BSER “Building Blocks”

EPA proposed 4 “Building Blocks” (BB) as BSER:– BB1: Reduce carbon intensity of generation from

coal-fired units through heat-rate improvements.– BB2: Shift generation from coal-fired and oil- and

gas-fired steam turbines to natural-gas fired combined cycle (NGCC) units.

– BB3: Increase reliance on renewable energy generation, which has zero CO2 emissions.

– BB4: Reduce demand for fossil-fuel fired generation by improving energy efficiency of electricity consumers.

Slide 10

BSER “Building Blocks”

State-Specific Goal Rates– Metric: lbs CO2/ MWh– Based on application of BSER over 2020-2029 to

state’s generation mix– Interim goal for 2020-2029 average– Final goal for 2030+– Arizona

• 1453 baseline• Assumed reduction to 778 by 2020 as result of BB2• 735 interim goal (49 % reduction)• 702 final goal (52 % reduction)

11

Changes from Proposal

Proposal Goals based on application

of BSER to each state

Final Goals based on application

of BSER to 3 regions:– Eastern Interconnection– Western Interconnection– Texas Interconnection

Goals based on least stringent rate for any region

12

Changes from Proposal

Proposal Single form of goal: state-

specific rate

Final Multiple forms:

– National uniform performance rates for 2 subcategories: NGCC and fossil fuel steam (FFS)

– State goals based on performance rate and mix of generation

– Mass-based goals

13

Changes from Proposal

Proposal Full application of BB2 by

2020 assumed– In AZ = complete retirement

of coal generation by 2020

Final Application of BB2 phased

in beginning in 2022

14

Changes from Proposal

Proposal Final

Energy efficiency (BB4) included in BSER and used to calculate goal

BB4 no longer used to calculate goal, but may be used for compliance

Utility-scale RE in operation in 2012 + “at-risk” nuclear counted in goal calculation and compliance

Not counted for either purpose– Effect is a “wash”

15

Changes from Proposal

Proposal Wide range of state goal

rates:– Lowest: 215 (WA)– Highest: 1989 (Navajo)

Final Narrower range of goal

rates:– Lowest: 771 (3 states)– Highest: 1305 (5 states)

Arizona goals:– Interim: 735 (49 % reduction)– Final: 702 (52 % reduction)

Arizona goals:– 1,173 (24 % reduction)– 1,031 (34 % reduction)

Slide 16

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Arizona Goal Rates

Proposal

lbs C

O2/

MW

h

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Arizona Goal Rates

ProposalFinal

lbs C

O2/

MW

h

Changes from Proposal

17

Changes from Proposal

Proposal Rate-to-mass conversion

left to states

Trading allowed, but details unspecified

Final Rule establishes state mass-

based goals

Trading requirements and limitations established in rule for various emission standard types

18

Changes from Proposal

Proposal “Portfolio approach”:

federal enforceability of measures other than emission standards required

Final “State measures approach”:

federal enforceability of measures other than emission standards not required; backstop required

No credit for early emission reductions; NODA sought comment

Clean Energy Incentive Program (CEIP)– Optional– Included in federal plan

19

Changes from Proposal

Proposal Plan submission deadline:

6/30/2016 If initial submittal:

– 6/30/2017 deadline for single-state plans

– 6/30/2018 deadline for multi-state plans

Final Plan submission deadline:

9/6/2016 If initial submittal:

– 9/6/2017 update on progress– 9/6/2018 deadline for all

plans

Slide 20

Initial Submittal

Must include– Identification of final plan approach or approaches,

including a description of progress made to date– Explanation of need for additional time to submit final

plan– Demonstration or description of

• Meaningful engagement with stakeholders, including vulnerable communities, during the initial submittal preparation period

• Opportunity for public comment on the initial submittal• Plans for engagement during development of the final plan

9/6/2017 update on progress: must include commitment to one approach and draft or proposed legislation or regulations

Slide 21

Regulatory Framework Options

Goals– 2 Rate-Based

• Separate, nationally uniform, “performance rates” for fossil fuel steam (FFS) and NGCC

• State “rate-based CO2 goals” based on application of performance rates to each state’s 2012 generation mix

National Performance Rates (lbs CO 2/MWh)

Subcategory Interim FinalFossil Steam 1,534 1,305 NGCC 832 771

Arizona Rate-Based Goals (lbs CO 2/MWh)

Interim Final 1,173 1,031

Slide 22

Regulatory Framework Options

Goals (cont’d)– 2 Mass-Based

• For existing EGUs only

• For existing EGUs with “new source complement”

– State plan must demonstrate achievement of one of these goals

Arizona Mass-Based Goals (short tons CO2)Interim Final

33,061,997 30,170,150

Arizona Mass-Based Goals with New Source Complement (short tons CO2)

Interim Final34,486,994 32,380,196

Slide 23

Regulatory Framework Options

2 plan types:– Emission standards

• Imposes requirements solely on affected EGUs in the form of federally enforceable emission standards

• Emission standards suffice to achieve goal– State measures

• May impose emission standards that partially achieve goal or no emission standards at all

• Measures other than emission standards must be enforceable at state level but do not become federally enforceable

• Must demonstrate compliance with mass-based goal• Must establish backstop emission standards plan

Emission standard types (next page)

24

Regulatory Framework Options

Slide 25

Clean Energy Incentive Program

Eligible Projects – Located in or benefit a state implementing CEIP– Commence construction (RE) or operation (EE)

after submission of final plan– During 2020-2021, either (a) generate metered

MWh from any wind or solar resource or (b) result in quantified and verified electricity savings through demand side EE in low-income communities

Slide 26

Clean Energy Incentive Program

Credits– Allocated from state budget for 2022-2029 interim

compliance period; EPA provides matching credits as the incentive for participation

– RE Projects: For every 2 MWh generated, project receives 1 ERC from state and 1 matching ERC from EPA

– EE Projects: For every 2 MWh generated, project receives 2 ERCs from state and 2 matching ERCs from EPA

– For mass-based program, project receives ERC equivalent in allowances; in TSD EPA applies emission factor of 0.8 short tons CO 2 per MWh FF generation