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An overview of EPA's new greenhouse gas proposal

On April 13, EPA officially published a 257-page proposed rule for the regulation of greenhouse gas emissions - specifically, carbon dioxide (CO2) - from power plants. There has been much controversy over the agency's proposal. Critics say that if the rule is finalized, it will effectively serve as a permanent ban on the construction of new coal-fired plants and is yet another attempt to eliminate coal as a viable future energy source; supporters, meanwhile, argue that the rule is necessary to C02 levels and continue the battle against global warming.

Regardless of where you fall on the political spectrum, it's clear that EPA's proposal has the potential to dramatically impact the many TAUC contractors who specialize in maintenance and refurbishing of coal-fired plants. TAUC is currently evaluating the proposed rule. In the meantime, we have put together this brief summary to help you better understand the issues at play.

1. The proposed rule, known as a New Source Performance Standard (NSPS), applies only to new fossil fuel-fired electric power plants. Natural gas plants will easily be able to meet the new standard, but it will be extremely difficult for new coal-fired plants to do so without expensive modifications.

2. EPA is not proposing standards for plants currently operating or proposed plants that have acquired a complete preconstruction permit by the time of this proposal and that commence construction within 12 months of this proposal. As a result, these "transitional sources" (EPA's term) would not be subject to the standards of performance proposed in the rule.

3. The proposed requirements would require new fossil fuel-fired plants greater than 25 megawatt electric (MWe) to meet an output-based standard of 1,000 pounds of CO2 per megawatt hour (CO2/MWh). Coal plants currently emit an average of 1,768 pounds of CO2/MWh, so the proposed new levels will require drastic reductions.

4. EPA says that new coal plants will be able to meet this standard by employing carbon capture and storage (CCS) technology. "While a coal unit with CCS may be more expensive to construct than NGCC generation…we expect the difference to decrease over time as CCS becomes more mature and less expensive," EPA stated. Industry critics say that CCS is so expensive that it will make any new coal-fired plant economically unfeasible, thus effectively eliminating any new coal plants from being built.

5. EPA is also offering a "30-year averaging compliance option" for new coal plants to achieve the required emission limits. Under this scheme, new coal plants could comply with the 1,000-lb CO2/MWh on a 30-year average basis. The plants would need to meet an immediate standard of 1,800 lb of CO2/MWh on a 12-month annual average basis during the period before installation of CCS. By no later than the beginning of the 11th year, the facility would be required to meet a reduced limit of no more than 600 lbs CO2/MWh for the remaining 20 years, such that the weighted average CO2 emissions rate over the 30-year time period would be equivalent to the proposed standard of 1,000 lbs CO2/MWh.

Another potential approach would be to require the plant owner to specify the emission rate for each year during a 30-year period consistent with meeting the 30-year average emission rate of 1,000 lb. CO2/MWh - in short, a customized compliance plan. "Such an option would provide coal-fired sources that intend to use [CCS] significant flexibility in how that reduction technology is implemented. They could install the technology as part of the original project but use some or all of the initial ten-year period to optimize the system…Alternatively, they could delay installation of the technology for a period of up to 10 years to take advantage of advancements in the technology that could reduce costs and enhance performance."

6. EPA concedes that CCS will dramatically increase the cost of building a new coal plant. But it argues that "there are sources of funding available to support the deployment of CCS, including a limited number of government demonstration programs. Even if companies decide to construct a few new coal-fired power plants under any circumstances, those few may well have access to those government programs."

7. EPA explicitly states that the proposed standard "reflects the ongoing trend in the power sector to build cleaner plants, including new, clean-burning, efficient natural gas generation, which is already the technology of choice for new and planned power plants." Elsewhere in the rule, EPA states it even more clearly: natural gas plants "are currently in wide use throughout the country, and are likely to be the predominant fossil fuel-fired technology for new generation in the future." EPA also goes on to state: "We recognize that, in light of a number of economic factors, including the increased availability and significantly lower price of natural gas, energy industry modeling forecasts uniformly predict that few, if any, new coal-fired power plants will be built in the foreseeable future. For these economic reasons, and independent of this proposed standard, the fossil fuel-fired electricity generating industry has been trending towards increased use of natural gas and decreased use of coal for new generating capacity. Today's proposed action is consistent with that trend; but, at the same time, today's proposal is not intended to affect that apparent trend."

TAUC will keep members updated on the progress of the proposed rule as it moves through the regulatory process. Comments on the proposal are due by June 12.

05/08/2012