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Power Over Pollution: STATE COMPLIANCE STRATEGIES FOR EPA’S CLEAN POWER PLAN Ari Peskoe Energy Law Fellow Harvard Law School Environmental Policy Initiative [email protected]
Power Over Pollution: STATE COMPLIANCE STRATEGIES FOR
EPA’S CLEAN POWER PLAN
Ari Peskoe Energy Law Fellow Harvard Law School Environmental Policy Initiative [email protected]
Clean Power Plan Overview
• EPA set an emission rate (CO2 / MWh) goal for each state, to be achieved in 2030
• Goals represent a statewide average emissions rate from existing Electric Generating Units (EGUs)
State Rate = CO2 Emissions in 2030 from Existing Power Plants
MWh in 2030 (Existing Fossil + RE + NuclearNEW + .058 * NuclearEXISTING + Energy Efficiency)
Clean Power Plan Overview
State Rate = CO2 Emissions in 2030 from Existing Power Plants
MWh in 2030 (Existing Fossil + RE + NuclearNEW + .058 * NuclearEXISTING + Energy Efficiency)
Three compliance strategies: 1. Reduce the numerator; 2. Increase the denominator; or 3. Comply with an equivalent cap
States Comply with Enforceable Plans
• Each state submits a plan to EPA with enforceable measures
• A measure in a plan is enforceable if it specifies: 1) parties with the legal obligation; 2) a technical requirement; 3) a compliance time; 4) a method for determining compliance.
Example: • State law requires 1) investor-owned utilities 2) to
procure 1 GWh of solar energy 3) in 2030, 4) as determined by holding sufficient RECs
Many States Already Have Enforceable Requirements for RE
Example States: PA and FL
Examine whether two States can comply with the Clean Power Plan using existing laws and regulations
PA FL Generation divestment? Yes No
In a regional ISO? Yes No
MWh Generated / Retail Sales 1.5 1 EPA 2030 Goal (lbs / MWh) 1,052 740
Electric Generation in Pennsylvania
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Coal
Natural Gas
Nuclear
MWh Generation, 1990–2012
Energy Production in Pennsylvania
State Rank Trend Natural Gas Production 2 +1500% since ‘08
Coal Production 4 Peaked in 1918
PA Illustrative Compliance Plan
1. Reduce CO2 from existing coal-fired generators while allowing emissions from natural gas to increase Air Pollution Control Act (1959)
2. Generate more from zero-emission sources Alternative Energy Portfolio Standard (2004) 3. Increase end-use energy efficiency programs Act 129 of 2008
PA Air Pollution Control Act
• Provides PA Department of Environmental Protection (DEP) with authority to implement and enforce EPA’s Clean Air Act regulations
• DEP issues Title V Operating Permits to all Electric Generating Units (EGUs) in Pennsylvania
PA Air Pollution Control Act
Excerpt from EGU Operating Permit
PA Illustrative Compliance Scenario – Part I: Reducing the Numerator
DEP can use its existing authority to cap each coal-fired EGU’s annual CO2 emissions.
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Million tons 27% Reduction by 2030
Capacity Factors of 20 Largest Coal-Fired EGUs
20 largest EGUs emit 85% of CO2 from coal-fired power plants MW CF (2010-12)
Cheswick Power Plant 637 0.40 Conemaugh 936 0.64 Conemaugh 936 0.73 FirstEnergy Bruce Mansfield 914 0.68 FirstEnergy Bruce Mansfield 914 0.76 FirstEnergy Bruce Mansfield 914 0.80 FirstEnergy Mitchell 299 0.37 Hatfields Ferry Power Station 576 0.62 Hatfields Ferry Power Station 576 0.65 Hatfields Ferry Power Station 576 0.67 Homer City Station 660 0.55 Homer City Station 660 0.54 Homer City Station 692 0.62 Keystone 936 0.69 Keystone 936 0.70 PPL Brunner Island 405 0.69 PPL Brunner Island 790 0.64 PPL Montour 806 0.59 PPL Montour 819 0.66 Seward 585 0.56
Capacity Factors of 20 Largest Coal-Fired EGUs
20 largest EGUs emit 85% of CO2 from coal-fired power plants MW CF (2010-12)
Cheswick Power Plant 637 0.40 Conemaugh 936 0.64 Conemaugh 936 0.73 FirstEnergy Bruce Mansfield 914 0.68 FirstEnergy Bruce Mansfield 914 0.76 FirstEnergy Bruce Mansfield 914 0.80 FirstEnergy Mitchell 299 0.37 Hatfields Ferry Power Station 576 0.62 Hatfields Ferry Power Station 576 0.65 Hatfields Ferry Power Station 576 0.67 Homer City Station 660 0.55 Homer City Station 660 0.54 Homer City Station 692 0.62 Keystone 936 0.69 Keystone 936 0.70 PPL Brunner Island 405 0.69 PPL Brunner Island 790 0.64 PPL Montour 806 0.59 PPL Montour 819 0.66 Seward 585 0.56
Capacity Factors of 20 Largest Coal-Fired EGUs
20 largest EGUs emit 85% of CO2 from coal-fired power plants MW CF (2010-12) CF 2030
Cheswick Power Plant 637 0.40 0.29 Conemaugh 936 0.64 0.47 Conemaugh 936 0.73 0.53 FirstEnergy Bruce Mansfield 914 0.68 0.50 FirstEnergy Bruce Mansfield 914 0.76 0.56 FirstEnergy Bruce Mansfield 914 0.80 0.58 FirstEnergy Mitchell 299 0.37 0.27 Hatfields Ferry Power Station 576 0.62 0.45 Hatfields Ferry Power Station 576 0.65 0.47 Hatfields Ferry Power Station 576 0.67 0.49 Homer City Station 660 0.55 0.40 Homer City Station 660 0.54 0.39 Homer City Station 692 0.62 0.46 Keystone 936 0.69 0.50 Keystone 936 0.70 0.51 PPL Brunner Island 405 0.69 0.50 PPL Brunner Island 790 0.64 0.46 PPL Montour 806 0.59 0.43 PPL Montour 819 0.66 0.48 Seward 585 0.56 0.41
PA Illustrative Compliance Option – Part II: Increasing the Denominator
State Rate = CO2 Emissions in 2030 from Existing Power Plants
MWh in 2030 (Existing Fossil + RE + NuclearNEW + .058 * NuclearEXISTING + Energy Efficiency)
RE: PA Alternative Energy Portfolio Standard (AEPS)
Utilities’ obligations are divided into two ‘tiers’ Tier I (8% by 2021) • Solar, Wind, low-impact hydro, geothermal, biologically derived
methane, fuel cells, biomass, coal mine methane Tier II (10% by 2021) • Waste coal, distributed generation, demand-side management,
large-scale hydro, municipal solid waste, wood byproducts, integrated combined coal gasification
Proposal: Amend the AEPS so that all zero- or low-emitting technologies are in the same tier, and require utilities to procure at least 10% from that tier.
EE: PA Act 129 of 2008
• Requires utilities to reduce customer consumption by 3% by 2013
• PUC evaluates the program every five years and is authorized to set new goals if the previous program passes a cost/benefit test
• Act 129 sets a spending limit: each utility may spend no more than 2% of its 2006 revenues on EE programs
Proposal: Add long-term goals and raise spending limit
• Statewide savings in 2013 were 5,403 GWh after four program years (1,350 GWh / year average)
EE: Results and Proposal
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GWh savings 1,830 GWh per year incremental savings
• Use existing authority under 3 state laws (two laws require modest amendments)
• Reduce CO2 emissions from coal-fired power plants by 27% by 2030, while allowing NGCC plants to increase output
• Maintain the 18% by 2021 requirement under the AEPS but require 10% from zero emission sources
• Pursue aggressive EE policies to increase current levels by approximately 40% per year
Recap of PA Illustrative Compliance Option
• DEP may be allowed to enable allowance trading • Greenhouse Gas Regulation Implementation Act
probably does not provide sufficient authority for PA to join RGGI
Cap and Trade?
Florida: Vertically Integrated Utilities
Only utilities that serve retail customers may be granted permission to build power plants larger than 75 MW.* Utilities generate 90%
of all power, including 96% of power from coal, 100% from nuclear
Electric Generation in Florida
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MWh Generation, 1990‒2012
Renewable Energy?
• In 2008, the Florida Legislature passed a law that directed the PSC to develop an RPS and the DEP to develop a cap-and-trade program • Neither program was implemented; the relevant provisions
of the law were repealed in 2012
• Other provisions of FL law about RE: • PSC authorized to “consider . . . energy conservation and
the efficient use of alternative energy resources” when it fixes just and reasonable rates
• PSC must take into account “whether renewable energy . . . as well as conservation measures, are utilized to the extent reasonably available” when making determination of need
• Utilities must offer a standard-offer contract; Duke’s contract prices in 2014 averaged $35–$40 per MWh
Energy Efficiency?
• Florida Energy Efficiency and Conservation Act of 1980 requires the PSC to “adopt appropriate goals for increasing the efficiency of energy consumption and increasing the development of demand-side renewable energy systems . . . ” every five years
• 2014 goals were ≈90% lower than 2009 goals
EE in Florida
LBNL, The Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs, March 2014:
“At this time, we cannot definitively explain the higher savings-weighted average CSE for program administrators in Florida.”
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Total Sales
MWh Retail Sales, 1990‒2012
Annual Retail Sales
Utility Incentive: Increase Ratebase
• In December, the PSC approved a $200M investment by Florida Power & Light in an Oklahoma gas drilling project
• Office of People’s Counsel: “a new way to decouple shareholder risks from shareholder profits”
FPL NG price forecasts – 2009 (red line) vs. 2014 (blue line)
Florida: What Might the Utilities Do?
Build New Nuclear Reactors
• In 2014, the Florida Siting Board approved two new FPL nuclear reactors (2,200 MW total capacity)
• The Nuclear Regulatory Commission is scheduled to release a draft EIS in March
• In 2006, the Legislature passed a law allowing for cost recovery before reactors go into service
Close Old Coal-Fired Plants
• Retire coal-fired power plants that went online prior to 1978, which were responsible for 1/3 of CO2 emissions from coal in 2012
Florida: What Else Could Regulators Do?
• Stronger goals under FEECA?
• Approve proposals by utilities to make them legally enforceable?
Conclusion
• Using current laws as a starting point or even as a basis
for an entire plan is possible . . . for some states • If other states like Florida want different outcomes,
they need to change the process, possibly through new legislation or with different thinking by regulators
EE Cost-Benefit Tests
Participant Total Resource Cost Rate Impact Measure
Benefits Bill Savings Yes - - Incentives Yes - - Tax Credits Yes - - Avoided Generation - Yes Yes Avoided Energy - Yes Yes Costs
Participant Contributions Yes Yes -
Equipment - Yes Yes Administrative - Yes Yes Incentives - - Yes
Lost Revenues - - Yes
