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7 Things to Know about the Proposed Affordable Clean Energy Rule

August 31, 2018

by Jennifer Seinfeld
Senior Project Manager, Environmental Division

On August 31, 2018, EPA proposed the “Affordable Clean Energy Rule” (the “ACE” Rule) to replace the 2015 Clean Power Plan (the “CPP” Rule). (The CPP Rule was stayed by the Supreme Court in February of 2016 and has never gone into effect.)

Both the ACE and the CPP Rules are intended to regulate greenhouse gas (GHG) emissions of fossil fuel-fired electric generating units (EGUs).

EPA’s August 31 notice includes three distinct proposals:

  1. Guidelines (the ACE Rule) to lower CO2 intensity (CO2 emissions per unit of electricity produced) from existing coal-fired EGUs. This is achieved through heat-rate improvement (HRI) measures, referred to as the “best system of emissions reductions” (BSER);
  2. New regulations to provide direction to states on the implementation of the ACE rule; and
  3. Revisions to EPA’s New Source Review (NSR) permitting program to help prevent NSR from being a barrier to implementation of efficiency improvements.

Here are seven common questions and answers stakeholders should know about the rule.

1. What is being regulated?

Existing coal-fired EGUs.

The goal is to reduce CO2 emissions through implementation of HRI measures (aimed at improving electric production efficiency, and thus reducing CO2 intensity).

How the ACE Rule is different from the CPP Rule

Like ACE, the CPP Rule included requirements to improve heat rate at coal-fired EGUs, but CPP also included provisions to reduce the total industry emissions by shifting generation away from coal to lower-emitting natural gas and renewables.

One of the focal points in the litigation opposing the CPP Rule was whether the Clean Air Act could allow the CPP Rule to reach “beyond the fence line” and require different fuels and renewable sources.

The ACE rule focuses solely on HRI measures that can be taken by existing generating sources, considered by EPA to be BSER.

2. What is BSER?

A list of the most impactful heat-rate improvements for coal-fired plants.

Based on a range of “candidate technologies,” BSER includes HRI measures, such as steam turbine blade path upgrades, neural network/intelligent sootblowers, and redesign/replace economizers, as well as improved operating and maintenance.

3. Who determines the requirements?

Individual states will be setting standards of performance, achievable using BSER, for existing plants under their jurisdiction (as opposed to the Federal Government, as was the case with the CPP Rule).

The standard of performance will be a specific allowable emission rate expressed on a pound CO2 per megawatt-hour-gross rate for each affected unit.

Broad flexibility

The ACE rule gives the states broad flexibility to identify the site-specific factors, such as the remaining useful life of a power plant when developing standards of performance.  States can also consider emissions averaging and trading among different coal-fired plants, but not including EGUs using gas or renewables.

The proposal also provides greater flexibility to states to adopt plans that include variances from the EPA guidelines in establishing performance standards.

4. How does the EPA review and approve the state standards?

The August 31 proposal provides individual states three years to develop their proposed standards of performance.

The states then submit these plans to the EPA for approval, which has one year to act.

5. Would HRI measures trigger NSR permitting?

EPA is proposing revisions to the NSR permitting program to make it less likely that EGUs trigger NSR pre-construction permitting requirements.

Currently, for a modification to a specific emissions source (including an HRI measure), NSR applicability is based on significant increases in pollutants calculated on an annual basis only.

EPA is proposing to add an hourly test, so that NSR would only be triggered if a proposed change results in a significant increase in annual emissions AND an increase in hourly emissions.

EPA’s rationale

EPA states that an EGU implementing an HRI measure may result in increased annual emissions because the unit would tend to move up in the dispatch order.  EPA believes that EGU owners have been reluctant to undertake HRI measures because of the possibility of triggering NSR permitting requirements and the associated schedule, uncertainties, and costs of emission control and air quality impact assessments.

By adding the hourly increase test for NSR applicability, EPA provides a way for the EGU implementing the HRI improvements possibly to avoid NSR, and as such, be more likely to implement the HRI measure.

(It should be noted that the proposed change in NSR applicability criteria could also apply to non-coal EGUs, such as natural gas-fired combined cycle units.)

6. What are the differences in the expected emission reductions between ACE and CPP?

The proposal’s estimated GHG impacts are likely to be limited.

Because of the flexibility states have in setting standards of performance, the exact GHG reductions under the ACE Rule are unknown.  EPA’s estimate is that the ACE Rule will lead to about a 34 percent reduction in CO2 emissions by 2030 from 2005 levels, whereas the CPP Rule would have provided about a 35 percent reduction in CO2 emissions over this same period.

Other drivers for reductions

Because of the low price and abundance of natural gas, the growth in renewables, stakeholder demands, and other environmental concerns and requirements pertaining to coal-fired generation, many generation portfolios have already shifted away from coal.  Based on these trends, even without any GHG regulations, 2030 CO2 emissions are expected to be about 32 percent lower than 2005 levels.

7. What are EPA’s next steps?

EPA will take comment on the proposal for 60 days after publication in the Federal Register and will hold at least one public hearing.

For more information, including how to submit comments, please visit the EPA website. Significant comments are expected, and the schedule and final form of the rule to be implemented (if at all) are uncertain.

Industry importance of ACE

As mentioned earlier, there has been a steady shift away from coal-fired generation. While there is doubt that the ACE rule alone will have a significant impact on this trend, it may force some coal-fired EGUs to implement some HRI measures they would not have otherwise.

Perhaps more importantly for the industry, however, are the proposed changes to the NSR rules. Avoiding some of the onerous obligations under the NSR permitting program could result in more EGUs implementing needed/overdue HRI measures and continuing to operate.

In addition, the rule may allow existing gas-fired combined cycle EGUs to undertake HRI projects without triggering NSR.

About the Author:

Jennifer is a degreed chemical engineer with more than 30 years of environmental experience, with a particular emphasis in the air quality field.  Ms. Seinfeld has experience in all technical and managerial phases of complex environmental projects, including conduct of due diligence, site selection and environmental constraints analyses for greenfield and brownfield projects.  Within the air quality environmental arena, she has substantial experience with the New Source Review (NSR) program, including both Prevention of Significant Deterioration (PSD) and Nonattainment NSR permitting programs. In addition to managing efforts to acquire the requisite environmental permits and approvals, Jennifer has also managed and provided technical input into many National Environmental Policy Act (NEPA) projects, including developing Resource Reports, as well as drafting Environmental Assessments (EAs) and Environmental Impact Statements (EISs). Do you have questions for Jennifer? You can email her at jennifer.seinfeld@powereng.com

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