On September 30th, the Congressional Research Service released a very interesting report titled "EPA Standards for Greenhouse Gas Emissions from Power Plants: Many Questions, Some Answers." The report was prepared as a review of the effect of recent new Clean Air Act regulations on existing and future coal fired power plants.
How New Source Performance Standards (NSPS) Were Triggered for Coal Plants
Since the Supreme Court’s decision in Massachusetts v. EPA, greenhouse gases have been considered a pollutant under the Clean Air Act. As a pollutant, EPA has regulatory authority to reduce emissions under the existing authority provided under the Act if it determined regulation was necessary.
In December 2009, EPA followed the Supreme Court decision with its "endangerment finding" with regard to emissions of GHGs. The finding was that GHGs "may reasonably be anticipated to endanger public health and welfare" as a result of climate change. This key finding triggered the requirement to regulated GHGs under the Clean Air Act.
According to EPA, coal fired power plants roughly account for one third of all man made GHGs emissions in the United States. Under Section 111 of the Clean Air Act, EPA must set air emission standards for categories of sources that cause or contribute significantly to air pollution. As the largest source of GHGs, EPA was legally required to move forward with establishing regulations under Section 111.
Once EPA establishes NSPS standards for new sources, under Section 111(d) it must then promulgate NSPS standards for existing sources.
EPA Establishes NSPS Regulations for New Coal Fired Powered Plants
In 2012, EPA initially proposed NSPS standards for new coal fired power plants. The EPA received a large number of comments and decided to re-propose NSPS standards in September 2013.
The re-proposed standard would set a limit of 1,100 pounds of carbon dioxide (CO2) per megawatt-hour (MWh) of electricity generated for coal fired electric generating units (EGUs). The EPA also set a standard of 1,000 or 1,100 lbs/MWh for new natural gas fired boilers. The effect of the rule is that new coal fired power plants would have to basically have equivalent emissions to a natural gas plant.
EPA stated in its proposal that a new coal fired power plant produces roughly 1,800 lbs. CO2/MWh. Therefore, new plants would need to achieve a 40% reduction in emissions to be equivalent to natural gas plants.
The only technology that could possibly achieve a 40% reduction is carbon capture and storage (CCS). However, CCS poses a number of unique challenges. First, it roughly uses 30% of the energy a plant would generate to transport and store the CO2 below ground. Second, industry argues that it is still not a proven technology.
The "War on Coal"
Industry believes the EPA’s NSPS proposal for new coal fired power plants effectively ensures no new plants will be constructed. Between the lost efficiency in having to transport and store C02 and the lack of reliability of CCS as a control technology, coal will no longer be competitive with natural gas for future electric generating units. For these reasons, the industry has argued that EPA is engaged in a "war on coal."
EPA argues that the technology has been proven and the rule is necessary in order to motivate industry to improve CCS technology. EPA cites to prior examples where the Clean Air Act spurred technological development at much less cost than anticipated.
While the fight over the NSPS standard for new plants is intense, the real issue is EPA’s future promulgation of an NSPS standard applicable to existing sources. The average coal-fired power plant is approximately 40 years old. Requiring CCS on plants that are close to retirement seems highly unlikely.
EPA seems to be suggesting that the NSPS for existing sources will push for efficiency improvements in order to reduce emissions rather than CCS. Even if the NSPS for existing sources is more flexible than for new plants, it will still increase compliance costs for existing coal plants.
Key Observations in the CSR Report
The Congressional Report regarding EPA’s NSPS standards concludes that the argument over the "war on coal" is largely symbolic. The report notes that the cheap cost of natural gas is really causing the shift away from coal power, not EPA regulations. The report notes:
"The debate over EPA’s proposed carbon pollution standard for new power plants is largely symbolic, and is characterized by exaggeration on both sides.
- It is symbolic because this rule by itself will have little impact. Its real significance is that without the promulgation of a rule for new sources, EPA cannot, under the Clean Air Act, proceed to regulate existing sources. It sis the standards for those existing plants that may actually reduce the nations’ GHG emissions, and in the process, could have significant impacts on coal-fired electricity.
- It is exaggerated because both EPA and the affected industries describe the rule itself as having far more impact than it will.
"Gas is projected by most experts to be cheap and abundant for the foreseeable future. Since the early 1990’s, new coal-fired plants have accounted for less than 10% of new power-generating capacity. In these conditions, the electric power industry is likely to continue what it has already been doing for two decades: building gas-fired plants (or relying on renewable sources) when it needs new capacity."
"The coal industry is unhappy with this, and has tended to place the blame for its current difficulties on EPA; but, actually, the market is the key factor in coal’s recent decline…The net result is that coal is simply not competitive with natural gas in most areas."
With so much intensity surrounding the debate regarding EPA’s NSPS standard for new coal fired power plants, the report serves as reality check.