Clean Air Act Section 111(d) Collaborative Discussions Steve Ellenbecker & Richard McAllister Western Interstate Energy Board WESTAR Spring Meeting May 28, 2014 Boise, ID
Regulation of Greenhouse Gases (GHGs) under the Clean Air Act Section 111, Standard of Performance, Best System of Emission Reduction, Timeline
Statutory Authority for GHG Regulation • Clean Air Act, Section 111 for New Source Performance Standards (NSPSs); not for pollutants regulated under Sections 108-110 (criteria pollutants), Section 112 (hazardous air pollutants) • EPA’s authority established in Mass v. EPA (2007) case • Section 111(b): for new and modified power plants; EPA has already published proposed rule (late 2013) • Section 111(d): for existing power plants • For Section 111-authorized rules, EPA must: • designate categories (& possibly sub-categories) of sources of GHGs • establish standard(s) of performance
Best System of Emission Reduction (BSER) • Standard(s) of performance must reflect magnitude of reduction in emissions possible with BSER • Determination of BSER involves consideration of: • costs • energy requirements • remaining useful life of power plant • For existing power plants, states develop SIP-like plans to achieve standard(s) of performance • EPA reviews SIPs; can impose FIP if necessary
BSER Possibilities • Efficiency improvements at individual existing power plants (e.g., turbine efficiency) – so-called within-the-fence approach • So-called outside-the-fence approach: • averaging of GHG emissions (utility- or state-wide) • averaging with inclusion of low-carbon generation (e.g., renewable energy generation) • retirement and/or dispatch order changes • Market-type approaches: • emission charge (so-called carbon tax; unlikely) • emission cap (so-called cap-and-trade; more likely, e.g., SO 2 cap- and-trade program, Clean Air Mercury Rule cap-and-trade program)
Timeline for Existing Power Plant Rule • June 2, 2014 – proposed rule due to be issued • June-September, 2014 – likely comment period for proposed rule; states begin to develop SIP-like plans • June, 2015 – final rule issued • June, 2015-June, 2016 – states complete SIP-like plans • June, 2016-December, 2016 – EPA reviews state plans
WIEB’s Potential Role in 111(d) Compliance WIEB, Activities to Date, Regulatory Assistance Project Support, Key Questions, Inter-Agency Collaboration, State Line Impacts 7
Who Are We? • Western Interstate Energy Board (WIEB): • 11 western states and three western Canadian provinces • Members appointed by Governors/Premiers • We address a broad range of energy issues as directed by our Board of Directors - including 111(d) • Committee on Regional Electric Power Cooperation (CREPC): • Created in 1984 - consists of the public utility commissions and energy agencies in the western states and Canadian provinces in the western electricity grid • Mission is to improve the efficiency of the western electric power system • State-Provincial Steering Committee (SPSC): • States and provinces in the Western Interconnection 8 • Provide input into WECC’s regional transmission planning
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What are WIEB, CREPC, and SPSC doing on 111(d)? • Fostering education and communication among Western States: • March 5 WIEB/SPSC/CREPC webinar: o Representatives from the Environmental Defense Fund and Xcel Energy presented their views on the legal framework within which EPA must promulgate its Section 111(d) regulation o The Regulatory Assistance Project (RAP) discussed the potential regional implications of the forthcoming EPA rule March 25 panel at the SPSC/CREPC meeting in Tempe: o The Administrator of EPA Region 8 provided an overview of 111(d) o RAP identified major issues associated with the forthcoming regulation o Discussion involving diverse panel of experts from PacifiCorp, Arizona 10 Public Service Company, Xcel Energy, Natural Resources Defense Council and the Western States Air Resources Council (WESTAR) • RAP briefing at the WIEB Board of Directors’ Meeting April 24
Technical Support From The Regulatory Assistance Project (RAP) • Helped frame discussions for the March 5 webinar and March 25 meeting in Tempe • Led 111(d) discussion at the WIEB Board meeting April 24 • Work products in May: • List of “outside the fence” compliance options EPA may allow in state compliance filings • List of public policy approaches that can achieve “outside the fence” emission reductions • Summary of actions Western states have taken to reduce GHGs • Work products in June and beyond: • Synopsis of the proposed rule 15 days following release • Tech support in developing a $75,000 RFP for consulting services • Will facilitate further discussions among air agencies, utility 11 commissions, energy offices, and utilities
Key Questions Awaiting Guidance in the Draft Regulation • How will the standard be expressed and what will be the target reduction? • Rate based: lb/MWh, or Mass Based: tons/year? • Will states be allowed to choose a different form and show equivalency? • Will early actions be recognized? • Several utilities can already demonstrate significant reductions in power sector GHG emissions • What will be the baseline year(s)? • This has critical implications for “early actions” • Will the age of facilities be explicitly recognized? • Exempting facilities near the end of useful life? 12 • Will the draft rule provide too much flexibility to be clear?
The Reason Inter-Agency Collaboration Matters • It’s a matter of division of authority: • State DEQ will have authority to adopt and enforce emission reduction requirements • PUCs and PSCs will have authority to enforce RPSs and energy efficiency programs, and authorize cost recovery of emission reduction measures by regulated utilities • There needs to be a clear understanding among entities over who is deciding compliance plans and who is enforcing emission reductions within a state plan • Coordinated effort from the outset makes sense • Wild card – Taking into consideration the cost impact on electric utility customers 13
There will be Compliance Impacts Across State Lines • The Western Interconnection is a single integrated power grid • Power plants in one state often serve customers in another state – e.g. PacifiCorp’s six -state integrated system • Generation and “balancing areas” don’t conform with state boundaries • Compliance measures in one state’s plan will likely affect retail utility customers in another state • Interstate accounting is uncertain (e.g., who is credited for actions taken by one state that result in GHG emission reductions in another state?) These factors point to the value of cross-border communication and understanding, at a minimum 14
In a Nutshell • WIEB, SPSC and CREPC are making efforts to encourage ongoing dialogue among air agencies, utility commissions, energy offices, and utilities to better understand the implications of and most practical and economic compliance plans to address 111(d) • Informal, facilitated collaboration with the support of RAP is just one way to do this across western states • We plan to report out significant findings from our discussions at a joint SPSC/CREPC meeting Oct. 20-22 in San Diego • We invite WESTAR to partner with us in this dialogue 15
Questions? Steve Ellenbecker Western Interstate Energy Board 303-573-8910 sellenbecker@westgov.org
Proposed Compliance Plans for Existing Power Plant Rule Natural Resources Defense Council, Clean Air Task Force, Resources For the Future
Natural Resources Defense Council (NRDC; 2013) • Baseline: years 2008-2010 • ↓ in GHG emissions: • 18% in year 2020 vs. 2012 (NRDC plan) • 22% in year 2020 vs. 2020 (of Reference Case) • Costs: $4 billion • Benefits: $25-60 billion (health- & climate-related benefits) • Other considerations: • on energy efficiencyheavy emphasis • renewable generation accounted for, but only at current RPSs • 4% ↓ in prices
Clean Air Task Force (CATF; 2014) • Baseline: year 2005 • ↓ in GHG emissions: • 26-27% in year 2020 vs. 2005 (CATF plans, separate coal & gas and blended fossil standards) • 15% in year 2020 vs. 2020 (of Base Case) • Costs: $8.6-9.4 billion • Benefits: $34 billion (health- & climate-related benefits) • Other considerations: • mass- better than rate- based standards for GHG emission ↓ • short-term, separate standards less expensive than blended standard (prices, 7% vs. 28% ); long-term, blended standard better than separate standards for GHG emission ↓
Resources For the Future (RFF; 2013) • Baseline: year 2005 • ↓ in GHG emissions : • 4% ↓ in average CO 2 emission rate with flexibility (Coal-Only All Fossil All Generation) • 98 million tons of CO 2 in year 2020 for Coal-Only • 58, 71 million tons in year 2020 for All Fossil, All Generation • Costs: $0.5-1.4 billion • Benefits: $5.2-6.4 billion (health- & climate-related benefits) • Other considerations: • as flexibility , stringency varied • marginal abatement cost/All Generation (with high Costs) yielded highest stringency (379 million tons of CO 2 )
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