Laying the Groundwork: What Are the New EPA Rules and How Will They Affect Your State?

Transcription

1 Laying the Groundwork: What Are the New EPA Rules and How Will They Affect Your State? NARUC Wisconsin PSC Workshop Madison, WI August 23, 2012 Presented by Ken Colburn August 23, 2012 The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone: web:

2 Today s Agenda Overview of new EPA regulations: - Cross-State Air Pollution Rule (CSAPR) - Mercury and Air Toxics Standard (MATS) - New Source Performance Standards (NSPS) for GHGs - Cooling Cooling Water Intake Structures - 316(b) - Coal Combustion Residuals (CCR) Discussion: What does all this mean? Caveat: Public health and welfare benefits not discussed 2

3 Cross-State Air Pollution Rule Timing is everything. 3

4 Cross-State Air Pollution Rule (CSAPR) Designed to replace the CAIR rule, limits interstate transport of emissions of NO x and SO 2 from fossil-fuel plants in 28 States in the Eastern US Would set pollution limits through allowance budgets - EPA to adopt Federal Implementation Plan (FIP) for States in States can adopt State Implementation Plans (SIPs) starting in 2013 Would place stricter limits on interstate trading of emissions allowances and other safeguards to ensure downwind states can maintain NAAQS compliance Compliance was to begin January 1, 2012, but was stayed by the D.C. Circuit on December 30,

5 States Covered By CSAPR 5

6 CSAPR SO 2 and NO x Reductions 6

7 CSAPR Remanded by DC Circuit Court CSAPR vacated August 21, 2012 (2-1 vote) Two primary reasons: 1. Significant contribution issue 2. FIP, then SIP issue 1. Significant contribution: - Who determines? Majority: EPA must; Minority: CAA doesn t say so - EPA s apportionment methodology flawed? - Based on (1) >1% contribution; and (2) cost-to-control - So presumably a state with lower costs could face a greater share of reductions - Rhetorical question: Should EPA NOT consider costs? 2. FIP, then SIP: - CAA: FIP authorized if good neighbor SIP not approved within 3 years. - Key point: What s the appropriate context, CSAPR rule or NAAQS? 7

8 CSAPR: Now What? (1) Not just continued uncertainty, but regulatory chaos - In jeopardy: - Better-Than-BART - SIPs - Haze SIP disapprovals & FIPs - Redesignations to attainment (St. Louis, Chicago) - Cap-and-trade itself? - NO 2 and SO 2 NAAQS back in play? - Nonattainment bump-ups due to lapses? - Impact of upcoming ozone and PM NAAQS revisions? CAIR (vacated in 2008) is back in effect temporarily 8

9 CSAPR: Now What? (2) EPA reviewing decision; considering its options: 1. En banc request? 2. Appeal to US Supreme Court? (Dissent may lay groundwork) - Claims no petitioner raised significant contribution argument - Says EPA shouldn t be ambushed by the Court with new issues when remand of CAIR was to fix trading deficiencies 3. Or, of course, suck it up and act on Court s decision If latter, 2 extended sequential delays likely: years for standards to be re-issued and undergo final court review (CAIR was reversed in 2008, CSAPR in 2012, ); then year for states to develop SIPs, undergo state and federal rulemaking, and state and federal court challenges 9

10 CSAPR: Now What? (3) Expect Section 126 petitions from downwind states? In any case, would be wise to remember as one wag said: A stay of execution is not an acquittal. 10

11 Mercury and Air Toxics Standards (MATS) EPA issued final MACT standards on mercury and other toxic air pollutants from new and existing coal- and oil-fired power plants >25 MW (Dec. 2011) Applies to emissions of: - Metals (mercury, arsenic, chromium, nickel) - Acid gases (hydrogen chloride, hydrogen fluoride) - Particulate matter Existing sources must achieve the average of the top 12% performing facilities ~40% of plants need additional pollution controls 11

12 MACT Emission Reductions 12

13 What are the compliance options? RETIRE REPOWER RETROFIT Long term PPAs Market capacity purchase Natural gas, biomass, other Switch to low sulfur coal Partial or full plant replacement EPA estimates 310 GW impacted by MATS Upgrade ESP or Baghouse Scrubber/DSI ACI 13

14 Control Technologies for MATS Likely technologies to comply include: Mercury Selective Catalytic Reduction, Scrubbers (FGD), Activated Carbon Injection (ACI) Non-Hg Metals Fabric Filters (FF), Electrostatic Precipitators (ESP) Acid Gases Scrubbers (FGD), Dry Sorbent Injection (DSI), DSI with fabric filter baghouse or ESP Dioxins and Furans Work Practice Standards Sulfur Dioxide Scrubbers, Dry Sorbent Injection Retirements & Replacements 14

15 What s the Best Configuration? ACI + Baghouse? Baghouse + FGD? ESP + FGD? The most appropriate configuration to control MATS pollutants depends on type of coal used (bituminous, sub-bituminous, lignite), existing plant infrastructure and controls, and will vary plant by plant. 15

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17 Duration and Cost Examples Similar project durations span ~24-52 months Southern Company: - 54 months to build scrubbers (Tom Fanning) Wisconsin Power & Light - Columbia Energy Center (dry FGD, baghouse, ACI) - 1 year from approval date to begin construction (3.5 months for DNR to approve construction permits) - 2 years construction schedule by Black & Veatch (550 jobs during peak construction); $627m Georgia Power Plant Scherer - Estimates 3 years construction schedule for each scrubber; $107m Xcel (CO) - 2 year construction timeline; $239m for SCR 17

18 Compliance Timeframes The Clean Air Act provides 3 years to comply with the MATS rule For sources needing more time: - State and local agencies may issue permits providing one more year - A reliability-critical source may also be granted an additional (5th) year to comply if it qualifies for an Administrative Order (AO) under Section 113 MATS for new sources self-stayed by EPA on July 20, 2012 for reconsideration re measurement issues 18

19 Proposed NSPS for GHGs EPA proposed New Source Performance Standards (NSPS) for GHGs (CO2) on April 13, 2012 Section 111(b) of the CAA requires EPA to regulate new and modified sources. - New fossil power plants must meet an output-based standard of 1,000 pounds of CO2/MWh - Most NGCC units built since 1995 will meet this standard - Coal or pet-coke units targeting Carbon Capture and Storage (CCS) can do a glide path to comply No effect now, says EPA, but will make new coal EGUs more difficult Section 111(d) requires EPA to regulate existing sources; EPA not likely to propose these standards anytime soon 19

20 CWA 316(b) - Cooling Water Intake Structures Requires that NPDES permits for facilities with cooling water intake structures ensure the location, design, construction, and capacity of the structures reflects the best technology available to minimize harmful impacts on the environment. Seeks to limit damage to aquatic organisms from impingement and entrainment due to cooling water withdrawals from rivers, lakes & oceans > 2 MGD 2006 rule remanded; comment period on NODAs just closed (July 2012) EPA hopes to finalize by July

21 Coal Combustion Residuals (CCR) First-time regulation of coal ash, proposed June 21, 2010 EPA is considering two options under the Resource Conservation and Recovery Act (RCRA): - Subtitle C: EPA would list CCR as special wastes when destined for disposal in landfills or surface impoundments (essentially, hazardous wastes ) - Subtitle D: EPA would regulate coal ash as non-hazardous wastes.

22 Other Possible Electricity Sector Environmental Regulations PM2.5 NAAQS Revisions NO2 NAAQS Revisions SO2 NAAQS Revisions Ozone NAAQS Revisions Reference EPA s Ozone Advance Program 22

23 Demand-Side Resources: A Hedge? Not strictly a compliance option, but Underexplored as companion control strategy Can be utilized to: - Assist in outage periods while installing controls - Assist with reliability - Reduce cost of implementation Benefits include: - Short lead time (~1 year) - Delays cost outlays - Helps address demand growth - Many more 23

24 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Multiple Benefits of EE Vermont Energy Efficiency Savings Value Updated Externality and NEB Values Risk DTQ NEB Other Fuel O&M Other Resources Externalities Avoided Reserves Line Losses Distribution Capacity Transmission Capacity Capacity Energy Most analyses of EE are incomplete: Some look only at avoided energy costs. Many include production capacity costs, but not transmission or distribution capacity or line losses. Few include other resource savings (water, gas, oil). Very few try to quantity non-energy benefits. 24

25 EPA Working to Recognize EE in Recent Rules Utility MATS: Sensitivity analysis reflects that compliance costs are reduced through EE CSAPR: Opportunity for EE set-asides Trying to improve ability to incorporate EE/RE/CHP into state SIPs Roadmap guidance with 4 pathways for SIP credit In the baseline ( on the books ) As a control strategy (federally enforceable) As an emerging / voluntary measure (6% limit) In the weight of evidence for attainment (but doesn t get specific SIP credit) Available at: 25

26 ISO-NE Demand Growth Scenarios

27 Annual U.S. Electricity Growth Rate

28 What About Risk? 28

29 Consolidated Risk Ranking for New Supply Categories include: - Construction cost risk - Fuel and operating cost risk - New regulation risk - Carbon price risk - Water constraint risk - Capital shock risk - Planning risk 29

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31 About RAP The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power and natural gas sectors. RAP has deep expertise in regulatory and market policies that: Promote economic efficiency Protect the environment Ensure system reliability Allocate system benefits fairly among all consumers Learn more about RAP at Ken Colburn kcolburn@raponline.org

32 Additional Slides 32

33 EPA s RIA for the MATS Rule Reflects Reduced Compliance Costs Through EE 33

34 Controls Pollutant/Issue Acid Gases + Sulfur Dioxide (SO 2 ) Control Technologies Wet scrubber; or dry scrubber + Particulate Controls or Dry Sorbent Injection (DSI) + Particulate Controls Metallic toxics/particulate Matter (PM) Baghouse/Fabric Filter or ESP Mercury Activated Carbon Injection (ACI) + Particulate Controls or wet scrubber + SCR NO X Selective Catalytic Reduction (SCR) or SNCR, low-no x burners, etc Coal ash Cooling Water Intake Dry ash handling + ash pond liners, etc Screens, barrier nets, low velocity caps, etc or Cooling Tower 34

35 Relative Capital Cost Relative Costs of Control Retrofit Capital Costs * Dry scrubber cost 10-20% less 300 MW 500 MW 700 MW Wet scrubber DSI Baghouse ACI SCR Ash Cooling Tower Alternate Water MATS Controls 35