Abby L. Harvey
GHG Monitor
2/13/2015
The Environmental Protection Agency’s proposed carbon emissions standards for existing coal fired power plants is flawed and ineffective as drafted, but can be fixed by making changes to the glide path of reduction, adding a few years to the compliance schedule, adjusting the compliance formula for the rule and adopting interim reporting requirements, according to a white paper put out this week by Warner Baxter, CEO of St. Louis-based utility Ameren Corp. The proposed rule, dubbed the Clean Power Plan, requires states to develop action plans to meet EPA-set state-specific emissions reduction goals. “Ameren believes the EPA can greatly enhance its CPP proposal with some constructive and common-sense modifications. Specifically, EPA should replace its interim target goals beginning in 2020 with a more flexible approach that provides states greater leeway in determining the proper glide path to achieve EPA’s final goals in 2030; offer states the flexibility to extend the 2030 deadline if a clear path to meaningful reductions is evident in a reasonable time frame; and revise its compliance formula to provide proper credit under EPA’s rate-based method for retiring and not replacing existing coal-fired power plants with fossil generation,” according to the white paper.
The most pressing of the four suggested changes is the 2020 interim goal included in the proposal which would require states to meet a portion of their total reduction goal prior to the 2030 final deadline. This section of the rule has drawn much criticism from the states and was the focus of a Notice of Data Availability released by the EPA in October 2014. “The interim targets impede the flexibility of states to carry out EPA’s objectives in a cost-effective manner while jeopardizing the reliability of the electricity supply and risking economic disruption,” the paper says. “Rather than create an unsustainable situation, EPA can ensure that similar reductions occur in the 2020-2029 timeframe by eliminating the rigid interim targets and allowing states to develop individually tailored glide paths to the 2030 targets.”
To ensure that goals are still met within a more flexible timeframe, new reporting requirements would have to be put in place, the paper says. “Progress toward the 2030 targets can be ensured by requiring state plans to include enhanced reporting requirements demonstrating adherence to the state plan, as well as corrective action contingency plans designed to remedy deviations should they occur. EPA’s desired outcome should be to achieve significant reductions in CO2 emissions, at the lowest possible cost while maintaining reliable system operations, and states are best positioned to deliver this outcome,” the paper says.
The paper also suggests that if states can develop a reasonable and justifiable plan which would meet the EPA’s reduction goals, but at a slightly later date, EPA should allow the flexibility to extend the final deadline. “By providing states with flexibility to extend the compliance date, EPA would be acting consistent with the underlying statute that requires EPA to consider the remaining useful life of utility assets when establishing environmental regulations,” the paper says, further noting that this would allow for the delicate planning needed to shift a state’s energy system to a lower-carbon structure. “EPA would, in effect, acknowledge the far-reaching planning process undertaken in states across the country. A target date of 2030, however useful as a regulatory stick, simply does not allow for the orderly retirement of coal plants to coincide with the planned construction of lower-emitting sources and renewables.”
Yet another issue addressed in the paper is the formula used in the proposed rule to determine rate-based compliance. “EPA should reevaluate its rate-based methodology in order to give proper credit for coal plant retirements when a retired plant is not replaced with fossil generation. Under the EPA’s proposed rate-based rule, coal plant retirements in coal-heavy states get very little credit for the emission reductions achieved when they are retired. The shortfall in recognition relates directly to the workings of EPA’s underlying formula, which rests on a lbs./MWh ratio. When a plant is retired, the lbs. of CO2 with which it was associated are removed from the numerator of the formula, as are the MWh from the denominator. However, the improved emissions dynamic that follows when a coal plant is retired without replacement by other fossil generation does not emerge when the MWh in the denominator are eliminated from the revised ratio, thus eluding well-deserved regulatory consideration,” the paper says.
