Some states fear “Ëœ2020 cliff’ under EPA power plant regulations

While the Environmental Protection Agency (EPA) Clean Power Plan seeks to have states cut power sector CO2 emissions 30 percent by 2030, most reductions must be realized well before then, officials from Michigan and Kentucky said Oct. 14.

Michigan Air Quality Division Chief Vinson Hellwig and Kentucky Department for Environmental Protection Assistant Secretary for Climate Policy John Lyons both expect their states must attain the bulk of the required CO2 reductions by 2020.

The officials offered their assessment during a seminar sponsored by the Resources for the Future and the Electric Power Research Institute (EPRI). The event, held at RFF headquarters in Washington, D.C., was webcast.

Both Hellwig and Lyons told GenerationHub that it appears to them that the EPA CO2 interim compliance timetable is very front-loaded, at least as far as their states are concerned.

More than 70 percent of Michigan’s CO2 reductions have to be made by 2020, Hellwig said. The state is not sure how it would meet that timeline, he said. Michigan as a state would prefer to see a “glide path” toward the final goal. A lot of coal plants will be shut down by 2030 but not necessarily by 2020.

Such a compressed schedule will make compliance costs much higher, he said. It takes time to build natural gas pipelines.

Lyons said that the compliance target for Kentucky is probably 85 percent front-loaded by 2020.

Kentucky, like Michigan, wants some type of safety valve or safety net built into the EPA 111(d) rule proposal to help the state deal with likely infrastructure delays.

Kentucky has 19 GW of generating capacity split between coal and natural gas with a “smattering of hydro,” Lyons said. Most of the existing natural gas generation in Kentucky involves peaking units, he added. The state lacks any renewable portfolio standard, he said.

“It is the states that are the point of contact,” and responsible for compliance, said EPRI Technical Executive Vic Niemeyer. Lots of flexibility means states have lots of decisions to make, Niemeyer said.

Niemeyer questioned if some of the modeling analysis used by EPA effectively captures “real world” behavior. It does not seem to account for nasty surprises of long lead times, he said.

“Many of the problems that are raised in the conversations are addressed through a trading program,” said Massachusetts Department of Environmental Protection Commissioner David Cash.

Cash is a member of the board of directors for Regional Greenhouse Gas Initiative (RGGI), a carbon dioxide emissions trading program run by nine states in the Mid-Atlantic and Northeast.

“Putting a price on carbon through a tradable emissions program is the way to do it,” Cash said.

The trading program works best when integrated with other issues – such as decoupling, Cash said. Divorcing revenue from selling more electricity can make CO2 reduction simpler, Cash said.

Lyons, however, thinks a RGGI-style regional trading approach would be an easy fit for Kentucky. Kentucky generated more CO2 “than the entire RGGI region” during 2012, Lyons said. Kentucky also uses the bulk of its electric generation in-state for manufacturing, Lyons added.

Kentucky is also split between various transmission grid systems, including as the PJM Interconnection, the Midcontinent ISO (MISO) and the Tennessee Valley Authority (TVA).

Hellwig said Michigan is active in a Midwest power sector collaborative for planning purposes.

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Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 22 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants.

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