Understanding the Clean Power Plan

Understanding the Clean Power Plan

August 3, 2015—UPDATE: Today, the Obama Administration will unveil its much anticipated Clean Power Plan, which is designed to reduce nationwide carbon dioxide emissions from the power sector by 32% from 2005 levels by 2030. (Read more on today’s White House press release). The final Clean Power Plan requires deeper emissions cuts (from 30 to 32%) from the draft plan, and it also increases the renewable energy target for states and utilities from 22% to 28% by 2030. Furthermore, according to Utility Dive, “The revised plan keeps its original structure — setting out three “building blocks” for states to follow in reducing emissions — but jettisons the fourth building block, which pushed states to reduce electricity consumption through energy efficiency.” According to the White House, the final rule provides more flexibility in how state efficiency plans can be designed and implemented. It should be noted that the plan is certain to face legal hurdles, and Senator Mitch McConnell of Kentucky has been urging governors to ignore the EPA rule.

We have updated our original post on the Clean Power Plan below to include the Administration’s updates to the Plan. 


 

The largest contributor to greenhouse gas pollution in this country is electric power generation. According to the Environmental Protection Agency, in 2013, electric power plans contributed 31% of all greenhouse gas emissions, followed by transportation at 27% and industry at 21%. Currently, there are no national limits on carbon emissions from existing power plants. This may change in soon with the Obama administration’s Clean Power Plan.

In June 2014, the EPA released its proposed Carbon Pollution Standards for Existing Power Plants, commonly referred to as the Clean Power Plan. The objective of the regulation is to reduce nationwide carbon dioxide emissions from the power sector by 30% 32% from 2005 levels by 2030. Significant reductions are proposed to begin by 2020 2022. The Plan sets different target emission rates (i.e. pounds of carbon dioxide per megawatt –hour) for each state due to regional variations in consumption and generation capability. However, the means to get to the end is up to each state to decide.

The Clean Power Plan identifies four three building blocks to emissions reductions:

  • Make fossil fuel power plants more efficient
  • Use low-emitting power sources more frequently
  • Use more zero- and low-emitting power sources
  • Reduce demand on power plants by decreasing electricity use

The Clean Power Plan sets a goal of an average heat rate and performance improvement of 6% for coal steam electric generating units (EGUs) and incentivizes retirements and efficiency conversions.

The third bullet above suggests that states will need to increase use of renewable energy, and that is true, but that is only a “moderate” part of the plan. The plan does assume increased use of nuclear power. According to an EPA fact sheet, the Plan’s formula has set a goal of increasing “demand-side energy efficiency to 1.5% annually.”

Most states already have funded programs that create incentives for reducing energy use. The EPA notes, “47 states have utilities that run demand-side energy efficiency programs, 38 states have renewable portfolio standards or goals, and 10 states have market-based greenhouse gas programs.” States can develop independent plans or collaborate to develop plans on a multi-state basis to meet goals.

The formula to determine goals for each state is complex. For example, according to one source, Texas emits more carbon dioxide from electric power plants than any other state, and the state of Washington emits the least. However, Texas is targeted for a smaller reduction in emissions under the Clean Power Plan than Washington. Why? Perhaps because Texas produces more wind power than any other state, and its main source of fuel for electricity is natural gas.

There is some debate as to how the EPA has the authority to regulate the Plan, but the EPA argues that the agency has authority under Section 111(d) of the Clean Air Act to identify the “best system of emission reduction.” The U.S. Court of Appeals for the District of Columbia Circuit has already heard arguments regarding the Plan—even before the final version of the regulation is released this summer.

The Clean Power Plan will present a number of questions for power producers and users. Woodard & Curran’s environmental and energy experts can help navigate future requirements, whether that is natural gas conversion, stricter emission controls, implementing renewable sources of energy production, or reducing energy use.

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