CLEAN POWER PLAN

N.C. may stay 'inside the fence line,' setting up EPA battle

RALEIGH, N.C. -- North Carolina may be one of the few states that doesn't ask U.S. EPA for more time to craft an emission-reduction scenario for the agency's Clean Power Plan.

But the state may focus solely on improving the efficiency or "heat rate" at coal-fired power plants, which means its plan likely won't meet the federal plan's goal of cutting carbon emissions by 32.1 percent, the director of Duke University's Nicholas Institute for Environmental Policy Solutions said yesterday.

"That plan as I understand will only have a Building Block 1 approach and only reflect the reductions that can be made inside the fence line," said Tim Profeta. "What the state is saying it will produce is going to be somewhat de facto insufficient."

EPA's draft Clean Power Plan focused on four "building blocks," or ways states could meet their emission-reduction targets. Those were coal plant efficiency, increased use of natural gas, development of renewables and increased demand-side efficiency. Energy efficiency was removed in the final rule, but states can still use it to comply with EPA's targets.

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Some states say that only the first building block is inside the traditional fence line of EPA air regulation, and they are looking at filing a plan that focuses on that portion only.

If North Carolina does that, it "may be the first state that has a real confrontation with EPA about what the plan is supposed to be," Profeta said during a Clean Power Plan discussion at the N.C. Sustainable Energy Association's "Making Energy Work" conference here.

States must file an initial plan by September 2016, though a number have signaled they will file legal challenges once the rule is filed to the Federal Register. Several others have said they will file a plan but then ask for a two-year extension.

North Carolina plans to sue. It also has started to consider using nuclear to meet its goals, a state official said recently (EnergyWire, Sept. 28). The Energy Policy Council is exploring the option, a spokesman for the North Carolina lieutenant governor confirmed.

Arvin Ganesan, vice president for federal policy at Advanced Energy Economy, said the driving factor in how North Carolina wants to comply with the Clean Power Plan is that the state expects the law to be overturned. He encouraged the state to develop long-term energy planning to operate in a carbon-constrained world.

"Planning is actually a silver bullet to any cost and reliability issues," he said, noting North Carolina's significant clean energy industry, which essentially gives the state a leg up in meeting EPA's goals. North Carolina also was the only one in the Southeast to adopt a mandatory renewable energy standard.

"I'm hoping that over time, in a less political environment, North Carolina is able to take advantage of those opportunities," Ganesan said.

States have to decide whether they want to pursue a mass-based plan or a rate-based one. They also can set up regional markets to trade emissions.

A rate-based plan would require the power fleet to adhere to an average amount of carbon per unit of power produced. A mass-based plan would cap the total tons of carbon the power sector could emit each year.

North Carolina's main power provider is Duke Energy Corp., which also supplies electricity to neighboring South Carolina and several other states. That Duke serves such a large area strengthens the argument that North Carolina should be open to working with other states, Profeta said.

He used another large Southeast utility, Southern Co., as an example.

"Southern Co. spans four states in the South. They don't want to have to do something on rates in Mississippi and then have to do something on mass in Georgia," he said.

North Carolina stands to benefit further from regional cooperation if Duke does pursue additional nuclear reactors. This is because the reactors that Duke continues to seek federal approval for would actually be in South Carolina, just across the state border.

Profeta pointed out that Duke, as an electric company, manages the North Carolina-South Carolina border as if it doesn't exist. But the states are taking two very different approaches to preparing their Clean Power Plan responses, he said.

While South Carolina's officials also object to the rule, the state is still developing a plan, Profeta said.

"They are doing something that's vastly different than North Carolina," he said. "That's where you might have a problem in the inefficiency of two systems that just don't align with each other."

For more information on North Carolina and the Clean Power Plan, visit E&E's Power Plan Hub.

Twitter: @BizWriterKristiEmail: kswartz@eenews.net

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