What to Watch For in the Clean Power Plan

Inside the Fence: Keep an Eye on Cofiring under the Clean Power Plan

Jul 16, 2015 | Dallas Burtraw

Later this summer, the US Environmental Protection Agency (EPA) will release its final Clean Power Plan, setting carbon emissions goals for existing power plants. This is the second post of ten in a new series—What to Watch For in EPA’s Final Clean Power Plan—in which RFF experts address what they will be looking for when the final regulations are released.

The Clean Power Plan will set state-by-state emissions rate goals and alternative, roughly equivalent emissions (mass) budgets, which states must adopt. The new regulations will require states to submit plans to EPA describing how they will meet those goals. EPA’s formula for calculating the goals will be complex, based on findings in four technical areas, termed “building blocks.” States are given wide latitude in deciding how to meet their goals and are not required to implement specific technical measures. Nonetheless, the individual building blocks provide the basis for the overall stringency of the Clean Power Plan and they affect states differentially, so they have attracted considerable attention.

The first two building blocks propose emissions reductions “inside the fence line” of fossil-fired power plants. In the first building block, EPA proposes that emissions rate reductions of 6 percent are possible at low cost at existing coal-fired power plants. Many observers have questioned this because if such opportunities exist, companies should (in theory) already be exercising them. But previous engineering studies have found that emissions rate improvements of 2 to 5 percent were possible, and this has recently been supported in a reanalysis. Another study using an econometric approach found that improvements of 1 to 3 percent are possible at a marginal cost of $10 per ton, consistent with the engineering studies, though greater changes appear to be increasingly expensive.

It is noteworthy, however, that the Clean Power Plan does not require changes at individual plants. Companies might choose to operate more efficient plants more often, and thereby achieve efficiency improvements across the fleet. Two studies have incorporated engineering estimates expected to be available at individual plants within a model to identify opportunities for changes in system operations. Both the first and second found that, indeed, improvements across the coal fleet of 4 to 5 percent are possible, close to what EPA proposed, at a cost of $10 to $30 per ton.

However, EPA might look well past this type of flexibility in identifying opportunities to reduce emissions rates at existing plants by allowing not only for changes in utilization but also changes in fuel. In November 2014, EPA indicated that it would recognize the biogenic emissions benefits of waste-derived and certain forest-derived industrial byproduct feedstocks. In other words, it may allow coal plants to lower their emissions rates through the use of waste biomass. Combustion of this waste may be considered nonemitting because it would decompose, releasing carbon, anyway. Previous analysis, including EPA analysis, has suggested that sufficient waste biomass is available for cofiring to double the emissions rate improvements that are possible at coal plants. To address environmental critics of biomass, EPA might require states that allow cofiring to certify the sustainability of biomass that is used, essentially guaranteeing that it is waste product.

Another possibility is to cofire natural gas at these plants, which would have a lower emissions rate than firing with coal and could be extensively implemented. Plant managers would likely complain that this would be a waste of good natural gas, because an existing coal plant is not as efficient as a combined cycle unit in converting the gas to electricity. However, it is certainly possible as a way to achieve an emissions rate goal.

In sum, technical studies seem to support emissions rate improvements at coal-fired power plants while they burn coal if measures are implemented in a flexible way, although perhaps not quite as great as EPA initially proposed. However, if biomass or natural gas is used as a means to reduce emissions rates, then goals under the first building block that are substantially greater than identified in the proposed plan may be technically justified.

The outcome here has especially interesting ramifications if the courts were to decide that EPA authority is limited to regulating the operation of emitting facilities. In that case, EPA could not rely on the “outside the fence line” renewables or energy efficiency in its third and fourth building blocks to achieve emissions reductions under the rule. If this happens, EPA might double down on the changes that are required at coal-fired power plants in order to achieve overall emissions reduction goals, and it could likely justify these changes as technically feasible with biomass and/or natural gas cofiring even if they were not ideal or efficient.

Read the other posts in the series, What to Watch For in EPA’s Final Clean Power Plan: