Overview of EPA s Clean Power Plan for Existing Power Plants. Iowa Association of Municipal Utilities 3 rd Annual Energy Conference November 4, 2015

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1 Overview of EPA s Clean Power Plan for Existing Power Plants Iowa Association of Municipal Utilities 3 rd Annual Energy Conference November 4, 2015

2 EPA s Final Clean Power Plan for Existing Power Plants Federal requirements for state plans Who is directly affected in Iowa? What are the carbon dioxide (CO 2 ) emission reduction goals? Implementation issues specific to municipal utilities How will Iowa develop a state plan? 2

3 Emission Guidelines for Existing Power Plants - Clean Air Act section 111(d) Why are these standards being developed? Power plants are the largest source of carbon emissions in the United States: about one-third of all greenhouse gas pollution in the U.S. is from the generation of electricity by power plants. These standards are part of President Obama s Climate Action Plan to reduce man-made greenhouse gas emissions. Existing sources of air pollution can be regulated under the Clean Air Act Section 111(d). Past 111(d) Rules Municipal Solid Waste Landfills Municipal Waste Combustors Sulfuric Acid Plants Primary Aluminum Reduction Plants Phosphate Fertilizer Manufacturing Plants 3

4 Timeline Interim compliance period starts in States must reach their final goal in State Plan Development and Approval Interim Compliance ( ) Final Goal (2030) State Plan or Initial Submittal 9/6/16 Progress Update for states with extensions 9/6/17 Final Plan submittal for states with extensions 9/6/18 EPA has 12 months to approve/disapprove Must meet interim goal on-average over 8-year period, plus interim steps: Step 1 ( ) Step 2 ( ) Step 3 ( ) Compliance begins 1/1/30 Ongoing 2-year compliance periods: Period 1 ( ) Period 2 ( ) Period 3 ( ) etc. 4

5 Affected Units Affected units are any steam generating unit, IGCC, or stationary combustion turbine that commenced construction on or before 01/08/2014 and: 1. Serves as a generator connected to a utility power distribution system with a nameplate capacity of 25 MW-net or greater; 2. Has a base load rating greater than 250 MMBtu/hour heat input fossil fuel; and 3. Stationary combustion turbines that meet the definition of either a combined cycle or combined heat and power combustion turbine. 5

6 21 Affected Facilities 4 are Municipal Utilities 37 Affected Units (down from 42 in Proposed Rule) 5 Affected Coal Units Retired Since Affected Coal Units Converted to Natural Gas Since Affected Units with Planned Retirements or Fuel Conversions 6

7 37 Affected Units 7 Source: EPA Data File - Goal Computation Appendix 1-5

8 Challenges Specific to Municipal Utilities Municipal utilities do not have large fleets of electrical generating units to spread compliance burdens across. Municipal utilities may have limited resources to make large investments in renewable energy projects. While most Iowa municipal utilities do not have electrical generating units that are 111(d) affected units, they may purchase power from other companies that do have affected units, or co-own affected units operated by other utilities. 8

9 9 Iowa Goals

10 Iowa and Surrounding States Goals State RATE (pounds CO 2 per net MWh net generated) Interim Goal ( ) Final Goal (2030) Interim Goal ( ) MASS (tons CO 2 ) Final Goal ( ) Final Goal with New Source Complement ( ) Iowa 1,505 1,283 28,254,411 25,018,136 25,281,881 Minnesota 1,414 1,213 25,433,592 22,678,368 22,931,173 Missouri 1,490 1,272 62,569,433 55,462,884 56,052,813 Montana 1,534 1,305 12,791,330 11,303,107 11,956,908 North Dakota 1,534 1,305 23,632,821 20,883,232 21,099,677 South Dakota 1,352 1,167 3,948,950 3,539,481 3,580,518 Wisconsin 1,364 1,176 31,258,356 27,986,988 28,308,882 Wyoming 1,526 1,299 35,780,052 31,634,412 33,472,602 10

11 11 Iowa Rate Goals

12 12 Iowa Mass Goals

13 Best System of Emission Reduction (BSER) The CO 2 emission reduction goals were calculated using the Best System of Emission Reduction (BSER). EPA determines the BSER for a particular pollutant and particular group of sources by examining technologies and measures already being used. EPA determined that BSER consists of 3 building blocks: Building Block 1 improving the heat rate of existing coal-fired power plants Building Block 2 shifting generation from higher-emitting coal-fired power plants to lower-emitting existing natural gas plants Building Block 3 increasing generation from new zero-emitting renewable energy sources (like wind and solar) Demand-side energy efficiency was not determined to be part of BSER, but can help states meet their emission reduction goals. 13

14 Best System of Emission Reduction (BSER) State-level data is aggregated to the regional level 3 interconnections The building blocks are then applied at the regional level, not the state level. Heat Rate Improvement 4.3% East 2.3% West 2.1% Texas Add New Utility-Scale Renewables (technical/economic potential after 2012) Increase Dispatch of Existing NGCC (75% Net Summer Capacity) EPA then determined individual subcategory performance rates for fossil steam and natural gas combined cycle (NGCC) for each region, and selected the least stringent as BSER. EPA s BSER Performance Rate for 111(d) Units (lbs CO2/Net-MWh) Region Existing Coal Existing NGCC Eastern 1, Western Texas

15 EPA s BSER Goal Calculation EPA used 2012 emissions and generation data and the 3 building blocks to calculate national subcategory emissions rates: 1,305 lbs./mwh net for fossil fuel-fired steam units 771 lbs./mwh net for NGCC units The national subcategory performance rates were applied to each state based on 2012 generation mix. Iowa s 2012 mix was 96% coal and 4% natural gas = (1,305 Fossil Steam national rate * 96%) +(771 NGCC national rate * 4%) = 1,283 lbs. CO 2 /MWh National Subcategory Emission Performance Rates (lbs./mwh) X 2012 State Generation Mix (% of baseline) = Unique State CO 2 Goal Rates (lbs./mwh) State CO 2 Mass Budget (tons) The goals were also translated into mass CO2 emissions goals. 15

16 Goal Calculations (continued) Recommend looking at the Clean Power Plan State Goal Visualizer Tool located in EPA s Clean Power Plan Toolbox 16

17 17 17

18 18 State Plan Development

19 Iowa Plan Objectives Maintain Reliability Minimize Costs Utilize Flexible Options Maximize Investments in Renewable Energy Achieve Measurable Emission Reductions Develop Long Term/Sustainable Plans Minimize Administrative Burden 19

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21 Stakeholder Engagement Ag Processing Corn Belt Power Cooperative Iowa Interfaith Power & Light Midwest Energy Efficiency Alliance Alcoa Dairyland Power Cooperative Iowa Public Health Association Missouri River Energy Services Alliant Energy EDF Renewable Energy Iowa Utility Association Muscatine Power & Water American Coalition for Clean Coal Electricity Associated Electric Cooperative Inc. Environmental Law & Policy Center Iowa Wind Energy Association Natural Resources Defense Council Gerdau ITC NextEra Energy Resources Basin Electric Power Cooperative Great River Energy John Deere Berkshire Hathaway Energy GWA International League of Conservation Voters Black Hills Corporation Cedar Falls Utilities Center for Rural Affairs Central Iowa Power Cooperative Ideal Energy Solar Iowa Association of Business & Industry Iowa Association of Electric Cooperatives Iowa Association of Municipal Utilities Linn County Public Health Air Quality Division Luther College M.J. Bradley & Associates Meskwaki Nation North Iowa Municipal Electric Cooperative Association Polk County Public Works Air Quality Division Sierra Club Solar Energy Industries Association Southwest Power Pool Vermeer City of Ames Iowa Energy Foundation MidAmerican Energy Company Winneshiek Energy District Coon Rapids Municipal Utilities Iowa Environmental Council Midcontinent Independent System Operator (MISO) WPPI Energy 21

22 Next Stakeholder Meetings All meetings are 10:00 am 3:30 pm. Agendas will be posted at Monday, November 16 th, 2015 DNR Air Quality Bureau, Windsor Heights Thursday, January 14 th, 2016 Cedar Falls Location to be Announced Monday, February 22 nd, 2016 Public Library, Council Bluffs Tuesday, March 22 nd, 2016 Lime Creek Nature Center, Mason City 22

23 State Plan Pathways 23 23

24 Two Goal Types: Mass & Rate MASS State Emissions Budget = Total # of tons that can be emitted Allowances are Distributed Track Allowances & Emissions CO2 & Allowances CO2 & Allowances CO2 & Allowances Rate Choose Option: Existing Coal: 1,305 lbs. CO2/Net- MWh Existing Natural Gas Combined Cycle: 771 lbs. CO2/Net-MWh Or; State Goal: 1,283 lbs. CO2/Net-MWh Track Net Generation, Emissions, and Emission Rate Credits (ERC s) CO2 MWh ERC s CO2 MWh ERC s CO2 MWh ERC s 24

25 State Plan Pathway Options 26 25

26 Rate-based Plans Overview Sources must meet emission standard set by the final rule. If sources emit above the emission standard, they must acquire a sufficient number of emission rate credits (ERCs) to bring them into compliance. Emission Rate Credits (ERCs) Unit of trade for a rate-based program, produced in MWh for: Low or no-emissions resources installed in 2013 or thereafter, or Affected unit generation below subcategory rate, or Incremental NGCC generation (gas-shift ERCs) ERCs only accrue after 2022 (Earlier if participating in CEIP) ERCs can be banked indefinitely Gas-shift ERCs can only be used by coal units in a plan using subcategory rate goals 26

27 Rate-based Plans (continued) ERCs may be issued to: Measures that are installed after 2012 Only the quantified and verified MWh of electricity generation or electricity savings they produce in 2022 and future years can be used to adjust a CO 2 emission rate. Examples: Renewables (wind, solar, geothermal, hydro, wave, tidal), New or uprated nuclear, Qualified biomass, Waste-to-energy, Combined heat and power, Energy efficiency, Transmission & distribution improvements Cannot be issued to energy storage or new stationary sources. 27

28 Using ERCs to Achieve Compliance CO 2 Emission Rate = Measured CO2 emissions (pounds) Total net energy output (MWh) + ERC replacement generation for an EGU (MWh) Hypothetical Example: A coal-fired unit emits 230,000,000 pounds of CO 2 during the compliance period, generates 100,000 MWh of net electricity and owns ERCs from renewable sources equal to 100,000 MWh. The unit s adjusted CO 2 Emission Rate = 230,000,000 lbs. (100, ,000) MWh* = 1,150 lbs. CO 2 /MWh* Emission rate would otherwise be 2,300 lbs. CO 2 /MWh* without ERCs 28 *net generation

29 Mass-based Plans Overview States start with an emissions budget of how many tons of CO 2 can be emitted by affected EGUs. State can choose how to distribute the allowances. 1 allowance = 1 short ton of CO 2 emitted during compliance period. EGUs must have a sufficient number of allowances at the end of the given compliance to cover their actual emissions. Allowances may be traded and banked; a portion of allowances may be set-aside by the state. If not using the new source complement, leakage has to be addressed. Where shifts in generation to unaffected fossil fuel-fired sources result in increased emissions, relative to what would have happened had generation shifts consistent with the BSER occurred Results in higher emissions 29

30 Clean Energy Incentive Program (CEIP) A voluntary matching fund program that states can use to incentivize early investment in eligible renewable energy (RE) technologies, as well as demand-side energy efficiency (EE) projects that are implemented in lowincome communities. EPA will provide matching allowances or ERCs to states that participate in the CEIP, up to an amount equal to 300 million short tons of CO 2 emissions. Requirements for eligible projects: Located in or benefitting a state that has submitted a final plan establishing participation in the CEIP. Commences construction (RE) or commences operations (EE) following the date on which the state submits its final plan to EPA. For RE: generate metered MWh from wind or solar (1:1 match). For EE: Result in EE MWh savings in a low-income community (2:1 match). Generate or save MWh in 2020 and/or

31 Proposed Federal Plan and Model Rules On August 3, 2015 EPA also proposed a 111(d) federal plan and model trading rules for both mass and rate. EPA is accepting comments until January 21, The model trading rules could be adopted by states as is, partially adopted, or used as a template for state plans. EPA has indicated that they will finalize one model rule either rate or mass in the Summer of EPA will not finalize the federal plan until a state fails to submit a state plan. EPA will finalize the same type of federal plan (rate or mass) for each stat that fails to submit a federal plan. EPA is also accepting comments on several components of the CEIP that are included in the proposed federal plan. 31

32 Reliability The State Plan must include demonstration that the reliability of the electrical grid has been considered. Reliability Safety Valve Is triggered when there is conflict between the requirements of the state plan and maintaining electric system reliability due to catastrophic or unforeseen events When triggered, a source is exempted from the applicable emission standards for 90 days. During the 90 days, the source must meet an alternative emission standard that will not jeopardize grid reliability. If the reliability issue cannot be resolved, the state must revise their plan to address the reliability issue. 32

33 Midcontinent States Environmental & Energy Regulators (MSEER) A no-regrets effort by state environmental and utility regulators to explore and assess options to implement federal CO 2 emissions reduction requirements for existing power plants. Particularly, whether multistate coordination would reduce costs and bring other benefits to their states compared to a single-state approach. 33

34 Current Litigation As of 10/30/2015 Several lawsuits requesting a stay were filed in the U.S. Court of Appeals for the D.C. Circuit when the rule was published on October 23, 2015: Coalition of 26 states led by West Virginia and Texas (motion for stay) State of Oklahoma Coalition of business and industry groups lead by the U.S. Chamber of Commerce (motion for stay) Utility Air Regulatory Group National Mining Association The Court has set a briefing schedule. Additional stay motions must be filed by November 5, Basin Electric has asked the Court to reconsider the schedule and accept new motions for a stay until January 21,

35 Current Congressional Actions As of 10/30/2015 U.S. House and Senate members are invoking the Congressional Review Act (CRA) to repeal EPA s CO2 emission limits on both existing and new power plants. In order to take effect, the resolution must be passed by both chambers with a simple majority and either signed by the President, or if vetoed, over-ridden by 2/3 votes of both chambers. Senate: S.J Res 23 for new sources - 111(b) S.J. Res 24 for existing sources - 111(d) House: H.J. Res 71 for new sources - 111(b) H.J. Res 72 for existing sources- 111(d) 35

36 Recap Stakeholder outreach will continue to be an integral part of the planning process. Iowa is already on a trajectory towards its 111(d) emission goals. Renewable energy development has been and can continue to be an economic opportunity for Iowa. 36

37 For More Information Marnie Stein 111(d) Project Manager and Technical Lead DNR Website: EPA Clean Power Plan Website: EPA Toolbox (including Visualizer Tool) 37