THE ROLE OF RENEWABLES IN THE NEW EPA EMISSIONS RULE The role of renewables in the new EPA emissions rule; It all comes down to what “best system of emissions reduction” means.

Herman K. Trabish: June 11, 2014 (Utility Dive)

Energy industry leaders are focusing on five words among the nearly two thousand pages of documents in the just-released EPA emissions reduction proposal: “best system of emissions reduction.”

"Best system of emissions reduction" is not just about cost but includes a range of environmental and health concerns, Solar Electric Power Association President/CEO Julia Hamm told Utility Dive. By including these externalities,the new regulations could “accomplish the same objective as a national clean energy standard.”

To control greenhouse gas emissions under the Clean Air Act, according to the Solar Energy Industries Association’s (SEIA) Cutting Carbon Emissions Under Section 111(d) white paper, the EPA first determined that emissions from large fossil facilities cause harm to health and the environment and then proposed standards for new power plants under Section 111(b). Finally, it released proposed guidelines by which states should regulate emissions from existing plants under §111(d).

“Each state will then create a §111(d) compliance plan,” the SEIA paper explained, though the EPA retains the authority to approve the state’s plan or impose its own.

Credit: SEIA, Cutting Carbon Emissions Under §111(d)

The document

“It’s not a readily understandable document,” acknowledged American Wind Energy Association Federal Regulatory Affairs VP Tom Vinson. But because the EPA “recognized the contribution of renewables in the compliance option,” he added, “this rule is behind only the production tax credit and state renewables mandates as a potential market driver for wind energy.”

It provides four building blocks to emissions reductions, Vinson explained, (1) efficiency improvements at combined cycle coal plants, (2) re-dispatch away from coal-burning energy generating units (EGUs) and to combined cycle natural gas EGUs, (3) increased renewables and nuclear, and (4) increased demand-side efficiency.

“The way they did the renewables piece, providing recognition for what has been done as well as an incentive to keep building renewables, is a really good outcome,” Vinson said. Including wind’s 60-plus gigawatts of existing capacity means including the 126.8 million metric tons of emissions reductions produced in 2013 by wind's 167.7 million megawatt-hours, “the equivalent of reducing power sector emissions by more than 5%,” according to calculations in AWEA’s Clean Air Benefits of Wind white paper.

Credit: AWEA, Clean Air Benefits of Wind

Flexibility

The state level flexibility offered to utilities by the four building blocks is important, Hamm said, because it will encourage their support. “It offers the policy certainty they often say they care more about than policy specifics. They just want clarity.”

The EPA’s Carbon Pollution Emission Guidelines for Existing Stationary Sources also finds, noted SEPA Communications Manager K Kaufmann, that the cost of emissions reductions achievable through “policies that encourage development of renewable energy capacity and discourage premature retirement of nuclear capacity” is a highly competitive $10 to $40 per metric ton. The cost of reductions through “policies that encourage demand-side energy efficiency,” the proposal added, is an even more competitive $16 to $24 per metric ton.

And because of the cost and potential impact on electricity supply of unproven carbon capture and storage (CCS) technologies, Kaufmann pointed out, the EPA “is not proposing and does not expect to finalize CCS as a component of the 'best system of emissions reduction' for existing energy generating units.”

Everything from utility-scale renewables plants to smaller-scale distributed generation sited at residential, commercial, or industrial facilities is included in the EPA’s Alternative RE Approach Technical Support Document, which covers technologies “fueled by the sun, wind, water, organic matter, and other resources regularly replenished by physical and biological cycles.”

Credit: Bloomberg New Energy Finance

The calculations

The EPA used “the technical and market potential of new renewable energy to determine how the rapidly increasing and evolving portfolio of renewable energy can be integrated into the 'best system of emissions reduction.'” The average development rate of the top 16 states was the benchmark for each technology. “The benchmark rate is then applied to each state’s technical potential to calculate the benchmark generation.”

The document acknowledged limitations due to grid costs, development costs, resource quality, and uncertainties of production potential.

For solar, the integrated planning model (IPM) “produced a total solar generation target across all affected states of 8,477 gigawatt-hours in 2020, 8,493 gigawatt-hours in 2025, and 8,722 gigawatt-hours in 2030. For onshore wind, the “total wind generation target” was 189,687 gigawatt-hours in 2020, 259,534 gigawatt-hours in 2025, and 384,826 gigawatt-hours in 2030.

Distributed generation was, however, omitted because its “market potentialcannot be tested in the current IPM framework” and offshore wind, another potential source of emissions reductions, was also not considered because, according to the document, without operational U.S. offshore facilities there can be no “benchmark development rate.”

For geothermal, the IPM total generation target across all affected states was 16,516 gigawatt-hours in all years.

Much of this draft proposal will change as states “true up” their renewables mandates, noted Geothermal Energy Association Executive Director Karl Gawell, but adoption will open “significant new potential for renewables.” Because the EPA analysis does not recognize the value of geothermal as a base load technology to displace coal, Gawell noted, “we think geothermal will have a better chance to gain market share than they analyze……[and] could mean as much as 4,000 megawatts of new geothermal.”

The new rule will remove other obstacles to renewables, Hamm said. “Utilities have been reluctant because renewables weren’t the least cost option and there was no other compelling reason. This gives them a very compelling reason.”

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