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EPA Proposes CO2 Regulations for Existing and Modified Units (6/2/14)

On June 2, 2014, EPA released the “Clean Power Plan,” which represents the much anticipated CO2 emission guidelines for existing power plants. At the same time, EPA also released proposed CO2 requirements for modified and reconstructed units. Both rules follow the proposed rule for new units that was published in the Federal Register on January 8, 2014.

Clean Power Plan for Existing Units

The Clean Power Plan represents the first-ever CO2 emissions standards for existing units in the power generation industry. Although the proposed rule primarily affects reductions in coal-fired emissions and generating capacity, the implementation of the rule will significantly impact the entire industry (i.e. natural gas, renewables, nuclear).

The rule includes two sets of output-based CO2 standards (lb-CO2/MWh net) for each state, representing a state-wide average of all power generating sources. The first is an interim set of standards for the period 2020 – 2029; compliance will be based on the 10-year period 2020 – 2029. The second set of emission standards represents long-term reduction goals (beyond 2030). EPA estimates that the proposed rule will reduce carbon emissions from the power generation sector in 2030 by 30% from 2005 levels.

The two proposals were developed under the authority of Section 111(d) of the Clean Air Act (CAA). Accordingly, all regulations that flow from EPA’s proposed guidelines must be implemented at the state level based on EPA-approved state implementation plans (SIPs). State must submit implementation plans no later than April 16, 2016 although this deadline may be extended up to three years if the implementation plan involves a multi-state program. Section 111(d) is an infrequently used section of the CAA. As described in more detail below, EPA’s compliance approach extends well beyond the power plant source category. This unprecedented use of Section 111(d) authority may well be challenged in court by every affected facility in the U.S.

The proposed target CO2 emission rates are based on the 2012 baseline emissions rates which are then reduced using a combination of strategies EPA refers to as “building blocks”. These building blocks include energy efficient improvements for existing coal-fired units (Block 1), shifting capacity from coal-fired units to existing natural gas combined cycle units (NGCC) based on available capacity (Block 2), increasing renewable generation sources and delaying retirement of existing nuclear sources (Block 3) and demand size reduction measures (Block 4). EPA applies the net effect of each building block to the 2012 emissions rate and generating data to determine a new weighted average representing the emissions target for each state. EPA’s assumptions used for the renewal capacity shifting (Block 3) and implementation of demand-side reductions (Block 4) appear incredibly optimistic. Although the assumptions are consistent between states for each building block, the effect on the target emission rate vary according to the distribution of generation and the other state-specific factors.

Modified/Reconstructed Units

The proposed rule includes separate numeric CO2 emission standards for modified and reconstructed fossil-fuel fired electric utility steam generating units (including integrated gasification combined cycle (IGCC) units) and natural gas-fired combustion turbines.

For modified steam generating units, EPA is proposing two alternative standards. The first alternative is based on unit-specific numeric output-based emission standard ( lb-CO2/MW net) that is two percent lower than the unit’s best demonstrated annual performance during the years from 2002 to the year the modification occurs, which EPA claims can be achieved through a combination of best operating practices and equipment upgrades. These emissions limits would be limited 1,900 lb CO2/MWh net for units with a heat input rating greater than mmBtu/hr and 2,100 lb CO2/MWh net for units with a heat input rating of 2,000 mmBtu/hr or less. The second alternative is based on the timing of the modification. Sources that are modified prior to the effective date of the SIP would follow the procedure for establishing a unit-specific standard outlined in the first alternative. Sources that are modified after this date would be subject to a unit-specific standard determined by the delegated authority.

For modified natural-gas fired combustion turbines, the proposed standard is based on natural gas combined cycle (NGCC) technology. The emission limits proposed for these sources are 1,000 lb CO2/MWh gross for facilities with heat input ratings greater than 850 mmBtu/hr, and 1,100 lb CO2/MWh gross for facilities with heat input ratings of 850 mmBtu/hr or less. EPA is also proposing an optional unit-specific standard based on energy efficiency improvements.

For reconstructed units, the proposed standards are based on the most efficient generating technology for each type of unit. For fossil fuel-fired boilers and IGCC units the emissions standard is 1,900 lb CO2/MWh net for units with a heat input rating greater than 2,000 mmBtu/hr and 2,100 lb CO2/MWh net for units with a heat input rating that is less than or equal to 2,000 mmBtu/hr. Reconstructed natural gas-fired stationary combustion turbines with a heat input rating greater than 850 mmBtu/hr would be required to meet a standard of 1,000 lb CO2/MWh gross. EPA is also taking comments on a range of potential emissions standards and whether the standards should be based on a gross or net output.

Pursuant to President Obama’s June 25, 2013 Memorandum, EPA is directed to finalize these proposed rules by June 1, 2015. The comment period will be at least 120 days, and will begin following publication in the Federal Register. EPA will hold four public hearings during the week of July 28 in Denver, Atlanta, Washington D.C., and Pittsburgh. Additional information can be found in our FTP library and the EPA's website.  

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Last Revised: February 16, 2016