EPA Proposes 30% Reduction on Existing Generation

On June 2, the EPA released its much anticipated proposed rule mandating a reduction in carbon emissions from existing power plants.[1]  The rule requires an overall national decrease in carbon emissions by 30% from existing plants by 2030.  The proposed rule instructs states to submit plans to achieve state specific goals for emission reductions.  Alternatively, states may collaborate with other states and submit a joint plan.  Plans must be submitted by 2017, or 2018 if collaborating with other states.[2]

For Pennsylvania, the EPA has proposed an interim reduction to 1,179 CO2 per MWh for 2020 through 2029 and a final reduction to 1,052 CO2 per MWh by 2030.  The EPA also lists “alternative goals” – lower standards to be achieved in a shorter time period.  For Pennsylvania the alternative goal is an interim reduction to 1316 CO2 per MWh for 2020-2024 with a final goal of 1,270 CO2 per MWh by 2025.[3]

While the EPA has provided states with flexibility in designing plans, it has promulgated “Best Practices” – policy guidelines for states to consider.  The Best Practices include several building blocks for reducing emissions.[4]  The EPA has proposed specific goals for increasing generation supply from renewable energy sources, which are low to no carbon emitting.  Under these policy guidelines, the EPA proposes that Pennsylvania’s overall generation supply could consist of 9% generation from renewable energy sources for the interim and 16% by 2030 compared to its current 2%, with an alternative proposal of 5% and 7% by 2025.[5]  The building blocks also propose improving efficiency of generation through upgrades to facilities, increasing demand side efficiency, and reducing emissions from the most carbon-intensive sources, like coal through greater utilization of sources such as natural gas.[6]

Public figures at both the federal and local level have given initial reactions to the proposed rule.  A large concern at the federal level is the reliability of the power grid due to the potential loss of generation sources, especially coal burning plants.  This is a particularly significant topic in light of recent reliability scares during the polar vortex.  In response to these concerns, the EPA has given assurances that reliability will not be affected because states have flexibility and time to achieve the proposed goals.[7]  Further, FERC’s Acting Chair Cheryl LeFleur has stated that the Commission will work with the EPA to ensure grids remain reliable.[8]

Considering the American Coalition for Clean Coal Electricity’s statement that 40% of the Pennsylvania’s energy currently comes from coal,[9] and in PJM coal plants account for approximately 49% of the overall annual energy generated,[10] reliability and price increases are especially relevant to the region.  However, the region’s wealth of Marcellus Shale gas may offset these concerns, depending on multiple factors including the price of natural gas and the time needed for generation facilities to upgrade their infrastructure in order to use this type of energy supply.

At the state level, Governor Corbett has characterized the proposed rule as an affront to the coal industry and an attack on Pennsylvania’s economy.  He discussed that the coal industry supports approximately 62,000 jobs in Pennsylvania.[11]

The EPA will hold four public meetings on the proposed rulemaking, one of which will be in Pittsburgh on July 31, 2014.  The rule was published in the federal register on Wednesday June 18, at 79 FR 34829.  Comments to the proposed rule are due by October 16, 2014.