How Regulation Can Drive Innovation

by Michael Corvese, Thermo Fisher Scientific

This article was ready to submit weeks before the Environmental Protection Agency (EPA) announced its June 2 Clean Power Plan. It will take some time to analyze the impact of the proposed carbon rules, but until we know more, our existing premise still holds: Extensive dialogue takes place before, during and after regulations are implemented, and it’s best to withhold judgment until we can see the long-term effects of implementation.

In other words, we’ll learn more about the Clean Power Plan in the coming months, so we’ll hold off on discussing these newest regulations for now.

The new 111(d) rules and other EPA regulations apply only to U.S. businesses, but remember: This is a global issue. Most governments worldwide place at least some restrictions on the emissions of utilities that operate within their borders, and regulations in these countries are at varying levels of maturity. What’s common, however, is that although regulations play an important role in protecting public health and the environment, they also challenge utilities that must operate under them. But these challenges are not the only story with environmental regulation.

On its website, the EPA outlines myriad ways that compliance with the Clean Air Act has benefitted society, from “fewer premature deaths” to “better worker productivity.”

It concludes, “The Act has created market opportunities that have helped to inspire innovation in cleaner technologies-technologies in which the U.S. has become a global market leader.”

Regulation burdens industry, especially in the short run, but it also challenges the status quo and provides an opportunity for long-term leaders to emerge. Yes, many benefits of regulation accrue outside the core industry to those who provide the new compliance services and technologies, but benefits do accrue to industry in the form of enhanced reputation and a prominent seat at the table to help design a future where their leadership can endure.

The implementation of new regulations, such as the EPA’s Clean Power Plan, can be an expensive burden for power plants when it comes to purchasing necessary equipment, but it also can spark technological advances.

A History of Regulation and Innovation

To argue that the Clean Air Act of 1970 disrupted the status quo in the U.S. utility market would be an understatement. The focus on the six criteria pollutants-sulfur dioxide (SO2), nitrogen oxides (NOX), ozone (O3), carbon monoxide (CO), particulate matter (PM) and lead (Pb)-gave the EPA purview over nearly every domestic power producer. It was sweeping and unprecedented.

Since 1970, many industries have been affected by the Clean Air Act, from new automobile standards to the removal of lead from gasoline. Changes in these industries addressed Pb and CO levels, but achieving reductions in SO2 and NOX fell to the power industry through regulations such as the Acid Rain Program in 1990, which led to one of the first cap-and-trade programs and an entirely new paradigm for energy economics.

Meanwhile, the power industry was busy developing new technologies for environmental monitoring, an effort that featured regular dialogue among regulators and industry that led to new compliance methods that were less onerous and costly. An early example of this involves measurement of particulate emissions, which originally involved taking readings of the opacity of the stack gas. The EPA recognized the need for a less quantitative solution, so it worked with private industry and academia to develop optical instruments that measured the transmittance of light to determine stack gas contents.

More recently, new EPA rules such as the Mercury and Air Toxics Standards (MATS), due to come into effect in 2015, drove the rapid development of particulate matter continuous emissions monitoring systems (PM CEMS), which use more modern technologies such as tapered element oscillating microbalance (TEOM). TEOM samplers operate continuously, and this innovation, produced in part through collaboration, provides significant savings over prior technologies.

What’s clear is the EPA hasn’t regulated from on high; it has worked closely with parties involved to drive innovation that would reduce the cost and impact of compliance.

Innovative power companies can use regulations and compliance requirements to their advantage and become industry leaders in the process.

Monitoring Expands Around the Globe

The EPA model can be seen in action outside the U.S. China, for example, has been attacking air pollution aggressively, and the EPA’s influence within the national Chinese Ministry of Environmental Protection (MEP) and provincial Chinese Environmental Monitoring Centers (EMC) is well-known. This has provided yet another opportunity for regulation to lead to innovation. When China adopted EPA-like standards for SO2 and NOX, for example, the requirements were far from a mystery to Chinese industry. They were prepared and could plan proactively for implementation, and this enabled a much more efficient and cost-effective rollout for utilities.

China also is working to address PM 2.5. This criteria pollutant, primarily made of heavy metals and released into the atmosphere in the form of fly ash, is associated with a wide range of adverse health effects. Because coal-fired power plants produce a significant amount of PM 2.5, the Chinese government announced a major measure in 2013 to cut coal’s percentage of the total energy mix to below 65 percent by 2017-down from 66.8 percent in 2012. PM and other pollutants from coal have created significant demand for pollution measurement and control technology, driving the development of alternative, lower-polluting energy sources.

Balancing Regulatory Challenge and Opportunity

Regardless of your position on regulation, there’s more to it than many realize. Extensive dialogue takes place before, during and after regulations are implemented that doesn’t become apparent until years later, much like the benefits. From our perspective over the years, regulators don’t trivialize the massive costs, business impacts are weighed and great care is taken to ensure that technology exists to help industry meet the advanced monitoring and control requirements. In other words, there appears to be an effort to strike a balance between the need to serve society and businesses’ ability to grow.

Power companies that actively participate in the industry dialogue gain an advantage over those that do not. Although they’re helping shape policy that is unquestionably onerous in the near term, they also are doing long-range planning. Regulation is more than just a burden; it’s also an impetus to test what’s coming and what’s possible. And by working together with all key stakeholders, public and private, today’s power industry leaders can ensure that, among other things, compliance requirements are barriers to entry that discriminate against less vigilant and innovative companies that are unlikely to be in this business for the long haul.



Michael Corvese is director of business development, environmental and process monitoring at Thermo Fisher Scientific.

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