September 20, 2013
EPA has now released its rule – technically, a new source performance standard for carbon emissions from new coal-fired power plants – by September 20, 2013. Thereafter, EPA is taking comments and when the rule is final, there will be litigation. In June 2014, EPA is expected to propose rules for modified and existing power plants by no later than June 1, 2014 and to finalize them by no later than June 1, 2015. As suspected, the rule will require new coal-fired power plants to control carbon emissions to 1,000 lbs/kwh - sixty percent less than the average of current advanced facilities. A standard is based on carbon capture, technology which has not been demonstrated taking cost into account as the Clean Air Act requires.
Here are some things to think about:
1. Coal remains a critical element of our base-load power picture in the United States. Coal is the largest source of electric power, representing almost 40 percent of power generation in the first half of this year. So, EPA regulations that hamper or stifle innovation in the coal-powered sector represent a profound threat to the future of energy security, electric reliability, and job creation in the United States.
2. Despite the significant cost of these rules, what about benefits? There are no real benefits to the environment. Carbon-emission rules are not designed to produce local air quality benefits. The fact that these rules are being advanced on a unilateral basis means that continued and expanding coal use from Asia to Europe will result in no real impact on global warming. Further, as energy costs increase in the US, and manufacturing assets move overseas to areas less sensitive to energy efficiency, carbon emissions might even go up as a result of the rules. Certainly, if we have to import more goods back to the United States as we lose manufacturing capacity, carbon emissions will increase.
3. Can carbon capture be the basis for a new source standard? No. We have not seen specific numbers in the EPA proposal but look forward to analyzing them. However, what we have seen implies that EPA will rely on carbon capture and sequestration (CCS) as the basis for establishing their limits. But the Clean Air Act requires that technologies be demonstrated and take into account costs. Basing standards on highly-subsidized, non-commercial scale and even non-built facilities is contrary to the spirit and plain language of the statute. Further, simply because EPA may set a carbon standard that requires CCS technology is insufficient to overcome the technical, legal, regulatory and financial hurdles facing CCS technology.
4. Are low gas prices really preventing new coal facility construction, not EPA regulations? However, low gas prices are a market condition which can change over time or rapidly, and the market can react if our portfolio is diverse and includes coal. The proposed carbon standard would make that current market trend permanent by government fiat. That is bad news for households, small businesses, and manufacturing.
5. Are new coal fired power plants are 'possible' under the proposed new-source standard? The truth is that if the standard is based on unrealistic assumptions about carbon capture, the EPA will essentially ban new plants. The Administration’s own interagency task force said that CCS technologies “… are not ready for widespread implementation ...” The capital cost of installing CCS on a typical new coal plant is $1 billion or more Worse yet, by making this initial regulatory bar too high, the EPA may even be discouraging investment in next-generation technology for coal and even for carbon capture itself! Far from being a path to sensible usage of the 250 plus year domestic coal resource, this regulation paints a bleak future for investments in energy security, reliability and job creation.
6. If not this rule, what should EPA do? Commenters objecting to the similarly inflexible first proposal of this rule included governors and attorneys general, utility commissioners, labor groups, environmental regulators and the regulated community and its customers. EPA can and must do better. As the Clean Air Act requires, EPA must take into account cost and energy impacts in determining demonstrated technology. It must set achievable standards consistent with its legal authority that based on what new, efficient power plants actually achieve - not based on what the Agency speculates regarding CCS.