Far-reaching rules that form the backbone of the U.S. commitment to cutting global greenhouse gas emissions do much to "help ease the pain" to states and the energy industry, as one state regulator described.
The Obama administration’s final Clean Power Plan, which the White House will officially announce this afternoon, includes a slew of changes responding to constructive criticism and aiming to bolster U.S. EPA’s legal defense to imminent challenges. The rule gives states two extra years to submit plans and start making cuts, eases interim goals into a "glide path" and contains grid reliability assurance mechanisms (Greenwire, Aug. 2).
It also provides states with a model plan and with "trade-ready" elements for swapping compliance credits with one another. The regulation adopts a uniform emissions rate and assigns states’ goals based on their energy mixes, which will even out disparate state targets, EPA chief Gina McCarthy said on a call with reporters yesterday afternoon.
The rule will incentivize early action to build renewable energy and implement user-side energy efficiency programs in low-income communities. The aim is to shift toward renewables rather than encourage an early surge toward natural gas as a means of replacing coal power, McCarthy said.
The Clean Power Plan will no longer count under-construction nuclear plants in state targets, but it will give states credit for them and for increases in existing nuclear generation. Standards for new coal-fired power plants will require carbon capture and storage, but at a lower rate than previously proposed, McCarthy said. A senior administration official later clarified that new power plants that primarily run on coal could operate without deploying CCS. Requirements can be met with a range of technological options, including co-firing and, potentially, integrated gasification combined-cycle technologies to turn coal into gas, the official said.
The organization of state air administrators who will write compliance plans "gives EPA two thumbs up for responding" to many of their concerns, said Bill Becker, executive director of the National Association of Clean Air Agencies.
Electric-sector interests were cautiously optimistic about the revisions, while coal industry representatives said the new plan is a "change without a difference" and vowed to fight it until the bitter end.
Rhea Suh, president of the Natural Resources Defense Council, called the Clean Power Plan "a simple idea that will change the world." She pledged NRDC would "fight with everything we’ve got to ensure the plan moves forward and provides the necessary momentum for unified global action."
Power plant carbon emissions under the rule would fall 32 percent below 2005 levels by 2030 — 2 percentage points more than originally proposed.
"When the United States leads, other nations follow," McCarthy said. "Since we proposed the rule last year, the U.S. has made joint announcements with China and Brazil where each country made major new commitments to cut carbon pollution. Since three of the world’s largest economies have stepped up, we’re confident other nations will follow, and the world will reach a climate agreement in Paris later this year."
Utility industry awaits plan details
"Left in place are targets for replacing affordable energy with costly energy," the National Mining Association said. "This is not a course correction."
Edison Electric Institute President Tom Kuhn said the organization of investor-owned utilities needed to review the final guidelines in their entirety, but its "primary concern remains the overall timing and stringency of the near-term reduction targets."
"The industry asked that EPA provide sufficient time for states to craft compliance plans and then subject those plans to critical reliability reviews, and we are hopeful the final guidelines will address this issue," Kuhn said.
The leader of the National Rural Electric Cooperative Association (NRECA), Jo Ann Emerson, said her group appreciates EPA’s "efforts intended to help offset the financial burden of rising electricity prices and jobs lost due to prematurely shuttered power plants." But she said the rule "still appears to reflect the fundamental flaws of the original proposal."
Kirk Johnson, NRECA’s senior vice president for government relations, said that based on what is known about the changes in the rule, his guess is "some co-ops will find themselves with the other utilities in their states in a slightly easier position and others will find themselves in a harder positions relative to the proposal."
More time to write plans, start carbon cuts
Becker said state air regulators are "particularly pleased with the additional time provided to develop and submit plans and to begin meeting the interim compliance deadline." The rule gives states until 2018 to submit final plans and until 2022 to start making reductions.
"These changes help make good on EPA’s promise to give states significant flexibility in meeting their goals," Becker said.
"States and utilities told us they needed more time than the proposal gave them — and we listened," McCarthy said yesterday. "That’s why, in the final rule, required pollution reductions don’t kick in until 2022. That’s a two-year extension. We want to make sure utilities have plenty of time to take carbon pollution into account with the investments they’re already making and shift to a low-carbon future."
Scott Segal, an industry lobbyist with law firm Bracewell & Giuliani, said, "While the final rule reflects some concession from EPA on this point, it should be noted that the final rule remains a very difficult task over a very compressed time period."
McCarthy said to encourage states to invest early in wind and solar power, as well as energy efficiency in low-income communities, EPA is creating a voluntary matching fund program.
In a change E&E reported Saturday, EPA will no longer include energy efficiency as a building block for setting state goals, although states can still pursue programs to cut energy use as a compliance method (Greenwire, Aug. 1).
Malcolm Woolf, Advanced Energy Economy’s senior vice president for policy and government affairs, said AEE is "pleased with the increased commitment to renewable energy and energy efficiency in the final rule, but disappointed that there is no credit for action taken between now and 2020, and that not all energy efficiency is eligible for credit between 2020 and 2022."
"These are missed opportunities in the short run. But in the long run, the final Clean Power Plan will drive improvement in the electric power system," Woolf said.
Answers for states that ‘just say no’
EPA will also provide a model plan and propose a federal implementation standard for states that do not write their own blueprints. A handful have already vowed they will refuse to comply, and more may join them, depending on the structure of the federal plan.
Bob Perciasepe, president of the Center for Climate and Energy Solutions and former EPA deputy administrator, said he knows from conversations with state leaders and utility CEOs that "even those who may openly oppose the rules are thinking hard about how to meet them."
"Many are very interested in the types of incentive and market-based approaches EPA is encouraging," he said. "It behooves every state to sit down with stakeholders — mayors, consumers, businesses — and craft a plan that fits it best. States should take advantage of the opportunity to innovate and make their economies stronger and more sustainable."
In another big shift that could please some states and upset others, the rule will apply a uniform carbon emissions rate for plants.
"Using uniform national carbon pollution rates for similar types of power plants, we’ve set individual state goals based on where each state currently gets its energy," McCarthy said. "In short, a plant in Ohio is now treated the same as a plant in New Mexico."
The revision will bring state goals — which in the draft rule ranged from emissions rate reductions of 11 percent to 72 percent — closer together. That could require much more of some states and anger those that had less stringent goals under the proposed rule.
Boosting renewables, downplaying natural gas
While environmentalists and renewable energy advocates were sanguine about the changes, the natural gas industry balked at the White House’s objective of minimizing the switch from coal to gas.
"The White House appears to be making a shift that ignores the market reality that natural gas stands ready today to cost-effectively meet our environmental and energy challenges," said Dan Whitten, spokesman for America’s Natural Gas Alliance. "An accelerating move to natural gas is critical to keeping the lights on, heating and cooling our homes, and fueling growth in domestic manufacturing, all while reducing air emissions."
Whitten added that the gas industry would work with states now to ensure their plans "help them make the transition to a cleaner energy future, powered by greater use of natural gas."
"The news today that EPA will shift the emphasis of the rule away from natural gas toward renewables would make it an even more costly and unrealistic rule," added the American Energy Alliance.
McCarthy said that after the rules are implemented, coal power is projected to represent 27 percent of generation capacity in 2030 — down from an expected average of 36 percent in 2015.
The U.S. Energy Information Administration said that without the draft Clean Power Plan, coal power would make up 30 percent of generation capacity through 2040.
The coal industry, which stands to lose market share under assumptions for both the draft and the final rule, said the final version’s tougher targets "mean the calculation for governors does not change," according to Luke Popovich, spokesman for the National Mining Association.
States should still refuse to comply with the rule, he said, because the White House’s effort to boost renewables "spells higher costs from transmission infrastructure and monthly utility bills."
"Are governors now willing to stick their consumers with the bill so this president can have his ‘legacy’?" Popovich said.
"The nation’s governors now have a clear choice to make about their course: Accept this flawed plan and put their citizens at risk, or reject it and challenge EPA’s authority and competence to manage their state’s energy economy from Washington," said NMA President Hal Quinn.
The coal trade group filed a request yesterday with EPA to stay the rule while the courts weigh in on the rule, and it plans to ask the courts for a judicial stay in the likely event that fails. It is unclear how later deadlines for state implementation plan submission and compliance might hurt opponents’ chances of securing a stay, for which they must prove that the rule will do irreparable harm in the near term.
"Rest assured we won’t stop fighting until this illegal and economically destructive rule is overturned by the courts," added Mike Duncan, president and CEO of the American Coalition for Clean Coal Electricity.
Nuclear power gets relief
The final plan gives the nuclear power industry two of the changes it pressed hard for, one of them affecting the treatment of the five nuclear units currently under construction in Georgia, South Carolina and Tennessee. Their output now won’t be counted until the plants are actually operating, which eases those states’ compliance challenges. Increased nuclear power production from "uprates," or capacity increases at existing plants, will also count as zero-carbon sources in meeting state requirements, making such projects more valuable.
But McCarthy did not mention a third issue — how the final plan deals with a part of the existing nuclear plant fleet that is considered "at risk" of shutting down prematurely because of competition with wind farms and natural gas generation. That may be an issue that EPA puts in the states’ hands, through new carbon trading programs that are expected to emerge, some analysts predict.
Tim Echols, a Georgia electricity regulator, said the nuclear changes were the No. 1 request from Southern states, and they will "help ease the pain."
Rule includes reliability assurances
Much of the criticism of the draft rule revolved around how it may hurt grid reliability.
McCarthy cited two approaches in the final plan for avoiding potential reliability issues that could threaten power deliveries. The new plan will address fears of a "cliff edge" situation where a block of coal generation in a state retires faster than utilities can replace it. "We’re taking care of that through the startup change," McCarthy said, referring to the extended 2022 compliance date, "as well as a more gradual interim step-down standard."
The final plan also includes a "narrowly crafted" safety valve, she said. "This is an opportunity to deal with the situation that frankly we don’t see happening, but it is an insurance policy against any situation that would threaten the energy system," she said.
The safety valve is modeled after EPA’s relief mechanism in its regulation of mercury and toxic power plant emissions, she said, without offering more details. "We don’t really expect that safety value to ever actually have to be used." States will also have to consider reliability in their plans.
Susan Tierney, a senior adviser with the Analysis Group, said the fine print should answer some key issues. "Will power generators or states have to go through a checklist to show EPA they really need more time?" Another question is whether states that were given more immediate breathing room on carbon reduction would have to do more later to get back on track with its goals, she said.
The Obama administration will announce the rule in a ceremony at the White House at 2 p.m. today. An EPA spokeswoman said the full rule will be available on the agency website today, and EPA will follow "normal procedures for publishing in the Federal Register, which is as soon as practicable."
"Bring a toothbrush," McCarthy told reporters. "It’s kinda long."
Reporters Jean Chemnick, Elizabeth Harball and Manuel Quiñones contributed.