Affordable Clean Energy Rule Finalized, Impacts Remain to be Seen

Forget everything you knew about the Clean Power Plan (CPP) because it has been repealed in favor of the Affordable Clean Energy (ACE) rule. What remains to be seen is whether or not this new approach to regulating greenhouse gas emissions from the power sector survives, and, if so, what impact it will have on greenhouse gas emissions.

The Clean Power Plan (CPP) was an Obama Administration rule intended to reduce greenhouse gas (GHG) emissions from existing fossil fuel-fired electric-generating units (EGUs).

What Led to the New Affordable Clean Energy (ACE) Rule?

2024 Compliance at the Earliest

Now we wait until September 9, 2019 to see if the rule will be litigated. If there is no litigation and the rule remains unchanged, then states will need to prepare their compliance plans by July 8, 2022. After that, there will be a two-year compliance deadline so facilities would need to comply sometime in 2024, unless extensions are granted.

Applies to Pre-2014 Coal-fired EGUs Only

Power industry readers will be interested to learn that the ACE rule only applies to coal-fired EGUs (meaning that coal produces more than 10% of its average heat input during the prior three calendar years) that commenced construction on or before January 8, 2014. Consistent with the CPP, affected EGUs must have a nameplate capacity > 25 MW and a base load rating > 250 MMBtu/hr. The ACE rule does not identify a Best System of Emission Reduction (BSER) for integrated gasification combined cycle (IGCC) units, oil- or natural gas-fired utility boilers, or fossil fuel-fired stationary combustion turbines, so they are exempt.

Standards of Performance Must be “Achievable at the Source”

According to the U.S. EPA’s current interpretation (see 84 FR 32523 and 32546), the plain meaning of a “standard of performance” is that it must apply to an individual facility. This is in contrast to the CPP approach that anticipated achieving GHG reductions through a combination of facility and grid-level shifts in energy generation mix, including renewable energy. In addition, the ACE rule disallows the co-firing of biomass as a BSER because the resulting net GHG reductions would include activities that are not under the control of the facility (such as growing the biomass). This interpretation will also prohibit the use of averaging and trading approaches to achieve GHG reductions through emission reduction credits or allowances between regulated sources since those mechanisms are also not under the control of the source itself. For example, a facility located in a state that participates in an existing trading program such as the Regional Greenhouse Gas Initiative (RGGI) may be prevented from using compliance with that trading program to comply with ACE, or may find that compliance approaches for one program conflict with the other.

New Efficiency-based BSER

Six candidate technologies have been identified as BSER for coal-fired EGUs (see Table 1 here). In contrast to the CPP, which considered increasing operational efficiency, shifting power generation away from coal, and increasing power generation from renewables, the ACE rule defines BSER as on-site heat rate improvement (HRI) also referred to as “efficiency improvements” as well as operation and maintenance (O&M) practices. The goal of HRI is to improve the efficiency of each affected unit (i.e., reducing the heat (or fuel) input needed to produce a unit of electricity).

Efficiency upgrades reduce the amount of coal needed to produce the same heat energy. By increasing the efficiency (i.e., increasing the kilowatt hours (kWh) produced with each British Thermal Unit (BTU) of heat input) an EGU will reduce the amount of coal consumed to produce the same amount of electricity, thereby reducing carbon dioxide (CO2) emissions. Those CO2 reductions enable the ACE rule to achieve the regulatory obligation imposed by the Endangerment Finding of reducing GHG emissions. At the same time, the ACE rule makes it possible for the coal-fired fleet to continue to operate in compliance with the Clean Air Act.

Impacts Remain to be Seen

Coal-fired electricity generation has already been on the decline in the U.S. since the recession, as shown below. These reductions are largely attributed to post-recession demand reductions and cheap natural gas, not the CPP (which never became enforceable anyway).

CO2 emissions from the U.S. power sector since 2005. Image courtesy of the U.S. Energy Information Administration
Image courtesy of the U.S. Energy Information Administration

Will the incremental improvements in efficiency achieved through the proposed ACE rule help reduce GHG emissions from the aging U.S. coal-fired EGU fleet? Yes, but “increased efficiency” also means “more economical,” so coal-fired EGUs may be deployed for more hours per year and for more years before they are retired. At the same time, the power sector market forces that have already driven GHG emissions down by 28% since 2005 will continue to compete for market share. The U.S. Energy Information Administration projects that 25% of the U.S. generation will come from coal this summer, down from 28% last summer. It remains to be seen what impact the combination of regulatory and market forces will have on GHG from coal-fired EGUs in the years to come.

If you have any questions about the ACE rule, please contact Kris Macoskey at 800-365-2324 or via email at kmacoskey@cecinc.com.

Comments (1)


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    Eric Perl

    Nice summary Kris, hope all well

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