Download - Presentation-2 TEP CPP Final Rule-11-18-15
November 2015
EPA’s Clean Power Plan (CPP)
Pima Association of GovernmentEnvironmental Planning Advisory Committee
Air Quality Subcommittee
Jeff YockeyManager, Environmental and Long-Term Planning
Three Rules Issued August 3, 2015
Final Standards of Performance for New Power Plants; 768 pages
– CO2 emission rates (lbs/MWh) for new, modified, and reconstructed Electric Generating Units (EGUs)
Final Carbon Pollution Emission Guidelines for Existing Power Plants (“Clean Power Plan”); 1,560 pages
– Best System of Emission Reductions (“BSER”) for existing EGUs
– Separate limits for steam EGUs and NGCC
– State specific goals based on proportional share
Proposed Federal Plan; 755 pages
– Model trading rules
– Rate-based (lbs CO2/MWh) and Mass-based (tons CO2/year)
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Technical Support Documents
Regulatory Impact Assessments
Response to Comments
Final Standards for New Power Plants
Combustion Turbines – Likely TEP future resources– “Base load” 1,000 lbs/MWh-gross; 1,030 lbs/MWh-net (NGCC)
– Peaking units 120 lbs CO2/MMBtu; “clean fuel standard”
Modified Steam EGUs – Need to pay attention– “large modifications” – unit specific based on historical performance
– Ceiling consistent with “Reconstructed” limits
New Steam EGUs – Not in our future– 1,400 lbs/MWh-gross; Supercritical pulverized coal with 20% carbon
capture
Reconstructed Steam EGUs – Not in our past or future– 1,800 lbs/MWh for large units; 2,000 lbs/MWh for small units
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What Arizona asked for, What we got
Relief from 2020
Relief from 2030
Equity across states
? State flexibility
Reliability Safety Valve
Glide Path
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Relief from 2020
Relief from 2030
Equity across states
State flexibility
Reliability Safety Valve
40 year useful life
Other Major Revisions
Things we didn’t ask for, but can live with
– Building Block restructuring
– Uniform National Emission Rate
– Mass–Based Goals• Clean Energy Incentive Program (CEIP)
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Other Major Revisions
Things we didn’t ask for and don’t want
– Tribal Compliance Requirements
– Proposed Allowance Confiscation
– Proposed Leakage Provisions
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NavajoFour
Corners
Revised Building Blocks“best system of emission reductions”
Two Subcategories of Effected Sources
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Building Blocks
Plant Efficiency Improvement
Re-Dispatch to Natural Gas
Renewable Energy
Energy EfficiencyX
National Performance Rates (lbs CO2/MWh)
Subcategory Interim Final
Fossil-fired Steam Plants 1,534 1,305
Natural Gas Combined Cycle 832 771
Uniform National Emissions Rate
254
771
1,989
1,305
-
500
1,000
1,500
2,000
2,500Lb
s/M
Wh
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(Navajo Nation)
(Washington)
(5 states)
(3 states)
Narrower
band between
the highest
and lowest
State limits
Proposal
(State-specific Emission Rates)
Final
(Uniform National Emission Rates)
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Rate-Based Goals
Affected units create Emission Rate Credits (ERCs) with each MWhor generation
𝐸𝑅𝐶𝑠 =(𝐸𝐺𝑈 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 − 𝐸𝐺𝑈 𝑟𝑎𝑡𝑒)
𝐸𝐺𝑈 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑× 𝐸𝐺𝑈 𝑔𝑒𝑛𝑒𝑟𝑎𝑡𝑖𝑜𝑛
Renewable energy and energy efficiency are the primary compliance toolsExisting natural gas combines cycle can quality for gas shift ERCs (GS-ERCs)– For incremental increase in generation over 2012
Trading of ERCs may be an option– With use of subcategorized standards– Only with other Rate-Based states
Clean Energy Incentive Program
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Mass-Based Goals
EPA established mass-based goals for each state and tribal area
Proposed allocation of allowances based on 2010-2012 historical generation
Proposed set-asides to address leakage– Reduce the incentive to build new NGCC
– Output based set-aside
– Renewable energy set-aside
Facilitates trading of allowances in regional or national system
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Clean Energy Incentive Program
Eligible Projects– Located in or benefit a state implementing CEIP
– Commence construction (RE) or operation (EE) after submission of final plan
– During 2020-2021, either (a) generate metered MWh from any wind or solar resource or (b) result in quantified and verified electricity savings through demand side EE in low-income communities
Credits– EPA provides matching credits to state budget allocation
– RE: For every 2 MWh generated, 1 ERC from state and 1 ERC from EPA
– EE: For every 2 MWh generated, 2 ERCs from state and 2 ERCs from EPA
– For mass-based program, project receives ERC equivalent in allowances
UNS Energy Plants
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Valencia
Tucson
Four Corners
Phoenix
Flagstaff
Prescott
CALIFORNIA
Navajo
Springerville
Black
Mountain
Sundt
Gila & Merchants
Coronado
Cholla
Apache
Luna
San Juan
NEW
MEXICO
Coal
Gas Combined
CycleGas Combustion
Turbine
Wind
Solar
Coal – No UNS Ownership
Clean Power Plan (CPP) Final Arizona Reduction Requirements
“Arizona’s step 1 interim goal of 1,263 pounds per megawatt-hour reflects changes EPA made to provide a smoother glide path and less of a “cliff” at the
beginning of the program. The “cliff” had been particularly significant for Arizona.” - EPA
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Baseline Emissions
1,453 lb/MWh
Interim 2020 Requirement735 lb/MWh
2030 Requirement702 lb/MWh
52% reduction
Proposed
CPP
2030 Requirement963 lb/MWh
Arizona
Solution
Final CPP
EPA AdjustedBaseline Emissions
1,552 lb/MWh
2030 Requirement1,031 lb/MWh34% reduction
Interim 2022 Requirement
1,263 lb/MWh
0
500
1000
1500
2000
2500
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Clean Power Plan Navajo Nation CO2 Reduction Requirements
Baseline Emissions
2,121 lb/MWh Interim 2022 Requirement
1,671 lb/MWh
2030 Requirement1,305 lb/MWh38% reduction
Final CPP
2030 Requirement1,989 lb/MWh6% reduction
Proposed
CPP
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Clean Power Plan New Mexico CO2 Reduction Requirements
Baseline Emissions
1,586 lb/MWh
Interim 2020 Requirement
1,107 lb/MWh 2030 Requirement1,048 lb/MWh34% reduction
Final CPP
EPA AdjustedBaseline Emissions
1,798 lb/MWh
2030 Requirement1,146 lb/MWh36% reduction
Interim 2022 Requirement
1,453 lb/MWh
Proposed
CPP
Markets and Trading
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Emission Rate
Credits
(ERCs)
MWh with zero
emission
Allowances
short tons CO2
10 Principles of an Arizona Response to the Clean Power Plan
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1. Achieve meaningful emission reductions
2. Maintain grid reliability, with portfolio diversity
3. Maintain the affordability of electricity
4. Recognize and respect the roles and authorities of all branches of government
5. Respect current investments and try not to create stranded investments
6. Ensure that costs are equitably distributed
7. Create incentives for all consumer to positively change AND maintain their electricity usage behaviors
8. Take credit for existing programs that have resulted in measureable emission reductions
9. Phase-in the impacts of the Clean Power Plan over time to allow more precise and thoughtful implementation of its requirements
10. Work with other States or Tribes to make mutually beneficial emission reductions
Slide 19
Clean Power Plan Technical Work Group
Arizona Corporation Commission Arizona DOA Energy Office Arizona Electric Power Cooperative Arizona Public Service Arizona State University Environmental Defense Fund Freeport McMoRan Residential utility Consumer Office Salt River Project South Western Energy Efficiency Project (SWEEP) South Western Power Group Sun Devil Power Holdings The Ormand Group, LLC Tri State Generation and Transmission Cooperative Tucson Electric Power
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Emission Standards and Trading Overview
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Key Decisions
Final Federal Plan
– Allowance allocation
– Leakage Provisions
– Treatment of retired units
State Plan Decisions
– Rate vs Mass
– Allowance allocation
– Leakage Provisions
– Trading
– Treatment of retired units
– Submittal Timing
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► Carbon Markets
– Size and diversity (liquidity)
– Pricing
– Trading Partners
► Litigation
Legal Challenges
Legal Challenges on Multiple Fronts– Judicial Requests to Stay the Final Rule– Administrative Requests to EPA to Stay the Final Rule– 26 Challenges Filed (113 Petitioners)
• Consolidated under West Virginia vs. EPA• 25 State and City Interveners; Six Industry Interveners
Two-track approach to challenges– Core legal issues
• Federal Overreach - Energy policy (not purview of administrative agency)• Certain Constitutional Challenges• Duplicate Regulation (§111 vs. §112)• Intrudes on FERC Regulatory authority (markets)• Consideration of cost• Regulating outside the “fenceline”
– Programmatic legal issues• Calculation of the national uniform emission rate standards • Technical concerns with new Building Blocks
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Next Steps
Comments on Proposed Federal Plan– Published in the Federal Register October 23, 2015
– Comments due January 21, 2016
State Plan Development/ADEQ Stakeholder Process– Technical work group/Broader stakeholder meetings
– Initial State plan due September 6, 2016 (Final due September 6, 2018)
– Balancing coal, gas, renewables, efficiency
– Allowance trading options
Litigation is certain – outcome is not
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Clean Power Plan Timeline
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State Implementation Plans (SIPs) are due September 2016 but can be extended to
September 2018 if requested.Compliance begins January 1, 2022
Resource Diversification StrategyTEP 2014 Integrated Resource Plan
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2013 Portfolio Energy Mix Estimated 2020 Portfolio Energy Mix