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August 2014: U.S. EPA’s Proposed Clean Power Plan

August 2014: U.S. EPA’s Proposed Clean Power Plan

On June 2, the United States Environmental Protection Agency (U.S. EPA) released a proposed rule limiting carbon dioxide (CO2) emissions from existing power plants. Comments on the proposed rule are due by October 16. The rule is over 650 pages long, with thousands of pages of attachments.

This rule seeks to cut CO2 emissions by 30 percent from electric generating units across the United States compared to emissions from 2005. Each state is provided a proposed limit in pounds of CO2 per megawatt hour (MWh) that would have to be achieved by the year 2030. The limit for each state is tailored based on the fuels used by the current 2012 fleet of electric generating units in each state and the average CO2 emissions released from these units. The target for Indiana is a 20 percent decrease in the pounds of CO2 per megawatt hour from a 2012 baseline.

An analogy may help to understand this rule. Assume a small business has five cars that each drive 250 miles per week and get 20 miles per gallon. If one of the cars is permanently removed from the fleet a 20 percent reduction in emissions is achieved. However, if these miles must be made up by the remaining four vehicles, there will be no emission reduction. If the real goal is to achieve 25 miles per gallon, there are several ways to achieve this goal. However, simply not using the existing fleet will not get you any closer to the goal. You need to increase the efficiency of each vehicle up to 25 miles per gallon or replace one of the four remaining cars with one that gets 40 miles per gallon.

Indiana has seen a reduction in actual CO2 emissions of approximately 20 percent from 2005 through 2012. This was due to the closing of some coal fired units, switching of capacity to natural gas, and the use of renewable energy. Another 10 percent or more is expected in the next five years as utilities make adjustments to meet other regulations (Mercury and Air Toxics Standard and the 1-hour Sulfur Dioxide Standard). However, our projected fuel mix may still not meet U.S. EPA’s proposed target. We are still looking at options and do not have a definitive answer at this time.

If solutions can be found, there will be impacts on Indiana and its citizens. Some have projected that utility rates may increase as much as 30 percent. How will the poor and elderly pay for these increases? Higher electric rates may force some Indiana businesses to move out of state or to foreign countries that do not require CO2 reductions. This could increase global greenhouse gas emissions.

The goal of this rule is to decarbonize our energy supply. As such, the rule requires all states, including Indiana, to reduce the use of coal. While the “pounds of CO2 per megawatt hour of energy sent to the grid” form of the proposed standard does allow economic growth, it further discourages the use of coal. Coal fired units necessarily use large amounts of the power they generate to operate emission control devices to keep our air clean. These emission controls for particulate matter, sulfur dioxide and nitrogen oxides can use large amounts of power. While the proposed U.S. EPA rule requires these utilities to improve their energy efficiency to reduce the pounds of CO2 per megawatt hour of energy sent to the grid, several Indiana plants are actually being required to decrease their efficiencies because they must install emission control devices that will use additional energy. The need to also reduce CO2 emissions requires these utilities to balance control of criteria pollutants which are regulated to protect human health with the need to use less energy to reduce carbon dioxide emissions. For example, if a utility needed power on a hot day and could shut off its nitrogen dioxide controls and buy credits, there would be improved pounds of CO2 per megawatt-hour because less energy would be used to power controls. However this hypothetical action might lead to problems meeting the health based 1-hour Nitrogen Dioxide Standard or lead to increased ozone levels. In a choice between criteria pollutants regulated to protect human health and greenhouse gases, it is readily apparent which should take precedence. Coal fired utilities should not be penalized for meeting required national ambient air quality standards.

Ratepayers for coal fired utilities will also be penalized. If plants are converted to natural gas to meet this rule, the utilities will still need to recover the costs of the controls that were in place for the coal firing, even if they are no longer in use. This will keep electric rates artificially high for many years.

While the rule is long and complex, people need to read it and submit comments to U.S. EPA by the October 16 deadline.

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