Overview of EPA’s Final Clean Air Act Section 111(d) Emissions Guidelines for Greenhouse Gas Emissions from Existing Electric Generating Units

Air Quality Committee Special Information Session

September 9, 2015

Sushma Masemore, PEPlanning Section Chief

Division of Air Quality

Department of Environment and Natural Resources

Topics Covered

North Carolina’s Historical EmissionsAuthorityApproach Interim and Final GoalsTimelineState Plan ComponentsEmissions TradingReliability AssuranceCommunity Involvement

2

Key Terms Carbon Dioxide (CO2) mass emissions = ton of CO2

emitted from Electric Generating Units (EGUs) Net Electric Output = gross electric generation minus

electricity used to operate plant equipment and includes transformer losses at the point of sale

CO2 Rate = CO2 mass emissions ÷ Net Electric Output Heat Rate = energy input to the boiler ÷ Net Electric

Output Heat Rate Improvement = any measures taken inside the

footprint of the EGU facility to decrease the heat rate of the affected unit Equipment repairs, modifications, replacements, or upgrades Changes to processes or control systems Changes to management practices such as maintenance procedures

and load management Utilization of thermal energy produced from combined heat and power

system Others

3

Key Terms NGCC = natural gas combined cycle power plants RE = renewable energy generation from zero to no carbon

emitting sources such as solar and wind EE = energy efficiency achieved through actions by end-

users such as lighting improvements and the use of more efficient appliances

BSER = Best System of Emissions Reductions available to an affected source to achieve emissions reductions after considering cost, technical feasibility, useful life, etc.

4

Historical Trends in NC’s CO2 Rate and Emissions

5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -

500

1,000

1,500

2,000

2,500

CO2 Rate

Foss

il Fu

el C

O2 R

ate

(l

b/M

Wh)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

CO2 Mass

Foss

il Fu

el C

O2 E

mis

sions

(1000 m

etr

ic t

ons)

Reductions Already Achieved:

Relative to 2005 Rate: 18.8% Mass: 25.8%

Relative to 2012 Rate: 7.8% Mass: 1.6%

Source: Energy Information Administration

CLEAN POWER PLAN: AUTHORITY

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Authority Cited in EPA’s Clean Power PlanClean Air Act section 111(d)40 Code of Federal Regulations (CFR) Part 60 Applies to fossil fuel-fired electric generating

units (EGUs) that began construction on or before January 8, 2014

Signed August 3, 2015http://www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

Requires reductions in CO2 rate or mass emissions by 2030 relative to 2012 levels

EPA applied BSER (considering cost, size of reductions, technology, feasibility) to develop guidelines for states to achieve

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Affected Sources in North Carolina

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Rule Content and Supporting DocumentsFinal Rule (1,560 pgs)Regulatory Impact Analysis (343 pgs)Technical Documents

Power Sector Modeling (322 pgs + many spreadsheets) Legal Memorandum for Certain Issues (152 pgs) Emission Performance Rate and Goal Computation (50 pgs +

spreadsheet) New Source Compliments to Mass Goals (10 pgs +

spreadsheet) GHG Mitigation measures (274 pgs + spreadsheet) Resource Adequacy and Reliability Analysis (57 pgs) Incorporating Renewable Energy and Energy Efficiency into

State Plans (20 pgs) Demand-Side Energy Efficiency (105 pgs + spreadsheets)

Fact sheets9

CLEAN POWER PLAN: EPA’S APPROACH

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Determination of Best System of Emissions Reductions (BSER)

System = network of electrical grid connecting power sources

BSER based on three building blocks

BSER applied to three interconnections to create:

11

1

2

3

Uniform emission performance rate for:Fossil Steam (Coal + Oil) units Natural gas combined cycle (NGCC) units

State rate goal

State mass goal

Goal Setting Method

12

2012 Baseline

Emissions for Each State

(coal, oil, NGCC)

Adjusted 2012

Baseline Emissions for

Each State(coal, oil, NGCC)

Under constructionunits added

Regional 2012

Baseline Emission Rate

(fossil steam, NGCC)

Building Block 1 Heat Rate Improvement

Building Block 2

75% NGCC capacity

further shifts fossil steam

Building Block 3 Renewable Energy shifts fossil steam and NGCC

Regional Rates

For Three Interconnecti

ons(fossil steam,

NGCC)

Emission Performance

Rates (fossil steam,

NGCC)

State Rate Goal

(aggregate)

Excess Building Block generation not needed to meet performance rate goalState Mass Goal

(aggregate)

Least stringent regional rate used

12

3

13

Coal Steam

State

2012 CO2 Emission Rate

(lb/MWh) NC 2,054 WV 2,064 MA 2,070 MO 2,083 OH 2,124 DE 2,128 PA 2,133 TX 2,160 MD 2,161 SC 2,163 KY 2,166 IN 2,168 NE 2,181 NY 2,226 SD 2,240 TN 2,244 IA 2,250 MI 2,256 AL 2,263 FL 2,279 AR 2,287 GA 2,294 LA 2,297 IL 2,301 OK 2,309 MN 2,332 WI 2,363 KS 2,365 ND 2,368 NH 2,382 VA 2,419 NJ 2,441 MS 2,494 MT 2,633 CT 3,027

NC’s Coal Plants had the

lowest CO2 Emission Rate

in 2012

NGCC

State2012 CO2 Emission

Rate (lb/MWh) TN 771 CT 811 GA 840 MS 844 WI 846 ME 848 SC 848 NC 853 OH 866 FL 867 AL 877 MN 877 NH 878 LA 881 MA 889 MO 890 IA 891 OK 895 AR 896 NM 897 PA 902 VA 909 RI 918 IL 945 NJ 949 IN 953 NY 973 MD 975 DE 979 MI 998 NE 1,016 TX 1,056

2012 Regional Fossil Steam Rate range

2012 Regional NGCC Rate

range

2012 Baseline CO2 Rates

Summary of North Carolina’s Interim and Final Targets

14

Uniform Emission Performance Rate (lb/MWh)

NC’s 2012 Baseline Rate

Interim Performance Rate:

2022-2029

Final Performance Rate: 2030

Fossil Steam

2,054 1,534 1,305

NGCC 853 832 771

North Carolina Rate Goal (lb/MWh)

NC’s 2012 Baseline Rate

Interim Rate Goal: 2022-2029

Final Rate Goal: 2030

NC Aggregate

1,778 1,311 1,136

North Carolina Mass Goal (annual tons)

NC’s 2012 Baseline

Emissions

Interim Mass Goal: 2022-2029

Final Mass Goal: 2030

NC Aggregate

58,353,477 56,986,025 51,266,234

1

2

3

BUILDING BLOCKS

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Building Block 1: Heat Rate Improvements at Affected Coal UnitsRegionally derived heat improvement

used to reduce CO2 emissions from affected coal-fired EGUs in each interconnection region Eastern = 4.3% Western = 2.1% Texas = 2.3%

Goals cannot be met solely through heat rate improvement

16

Building Block 3: Renewable Energy (RE)Applied before Building Block 2RE = onshore wind, solar (utility

scale/concentrated, geothermal, hydroelectric)Existing RE not counted, only the incremental

amountRE Generation Potential calculated based on

economic modeling of each interconnection region Excess RE from Western and Texas interconnections

calculated using a model. Accounts for portion not needed to meet less stringent performance rates in the Eastern interconnection.

RE Generation replaces 64% of coal generation and 36% of NGCC generation in the Eastern Interconnection

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Building Block 2: NGCC Capacity Increased to 75%Used as a ceiling to further reduce fossil

steam generationNGCC generation at 75% capacity factor

reduces additional fossil steam generation beyond those already replaced through renewable energy in Building Block 3

States can specify their own glide paths to achieve 75% NGCC capacity by 2030

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Other BSER Options Outlined in EPA’s GuidelinesDemand side energy efficiencyNew or uprated nuclear generationOther types of renewables (distributed

solar, offshore wind)Sustainable biomassCombined heat & power, waste heat

powerTransmissions and distribution

improvementsInclusion of new NGCC for mass-based

goal19

COMPLIANCE TIMELINE UNDER EPA’S CLEAN POWER PLAN

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Key Dates Under EPA’s Clean Power Plan Sept. 6, 2016 – Final Plan or Initial Submittal (with

request for extension) Sept. 6, 2017 – Initial Submittal update due if extension

granted Sept. 6, 2018 – Final Plan due if extension granted

July 1, 2021 – Milestone status report due 2022-2029: Interim goal to be achieved

July 1, 2025: meet Interim Step 1 Goal for 2022-2024 July 1, 2028: meet Interim Step 2 Goal for 2025-2027 July 1, 2030: meet Interim Step 3 Goal for 2028-2029

2030: Final goal to be achieved July 1, 2032 and every 2 years beyond

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STATE PLAN COMPONENTS

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Initial Plan Components(If Final Plan is not submitted by Sept. 6, 2016)

1. Explanation why the state requires additional time

2. Final Plan approach under consideration, including progress made to date

3. Demonstration of public engagement (including vulnerable communities)

4. If interested, non-binding statement of interest in the Clean Energy Incentive Program (CEIP)

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Types of Final State PlansMust define whether the state will achieve

Federal emission performance rates or State rate-based goal or State mass-based goal

Choose between 2 types of Plans Emissions Standards Plan State Measures Plan

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Emissions Standards Plan & State Measures Plan

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Emissions Standards Plan

• Performance Rate• State Rate-Based

State Measures Plan

• Mass-Based

Regulates only the owners/operators of covered EGUs

EGUs must meet their required performance rate or state-specific rate-based goal

Similar to other Clean Air Act programs Consists of federally enforceable or combination of

federally enforceable and state only enforceable requirements

Must result in EGUs meeting the EPA’s or state’s mass-based goal

Must be “quantifiable, verifiable, enforceable, non-duplicative and permanent”

States can impose requirements on non-EGUs through state law Examples: renewable energy, energy efficiency Not federally enforceable

If state measures don’t perform as planned, federally enforceable backstop (e.g., final model rule) kicks in

Final Plan Components

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Federally Enforceable (Codified)

40 CFR 60.5740Sections 1-5

Non-Enforceable (Not Codified)

40 CFR 60.5745Paragraphs (a)1-13

+

OTHER COMPONENTSEMISSIONS TRADING

RELIABILITY ASSURANCE

COMMUNITY INVOLVEMENT

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Key Summary Points

States must choose their approach: Federal emission performance rates or State rate-based goal or State mass-based goal

States must submit a Final Plan by Sept 6., 2016 or Sept. 6, 2018 (if extension is granted)

Final Plan must contain federally enforceable and state-only enforceable measures Demonstration of compliance for each component must

in be great detail to ensure interim and final goals will be met

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Visual Depiction of North Carolina’s Targets

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NC 2012 Actual

NC 2014 Actual

Interim Goal 2022-2029

Final Goal 2030

0

400

800

1,200

1,600

2,000

NC Rate Goal

Sta

te A

ggre

gate

CO

2 R

ate

(l

b/M

Wh)

NC 2012

Actual

NC 2014

Actual

Interim Goal 2022-2029

Final Goal 2030

46,000,000

50,000,000

54,000,000

58,000,000

62,000,000

NC Mass Goal

Sta

te A

ggre

gate

CO

2

Em

issio

ns

(million t

ons)

NC 2012

Actual

NC 2014

Actual

Interim 2022-2029

Final 2030

0

500

1,000

1,500

2,000

Emission Performance Rates

Fossil SteamNGCC

CO

2 R

ate

(lb

/MW

h)

1

2 3

Questions?

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ContactSushma Masemore, PEDivision of Air Quality919-707-8700sushma.masemore@ncdenr.gov

ADDITIONAL REFERENCE MATERIALS FROM EPA’S CLEAN POWER PLAN

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Emission Performance Rates

FOSSIL STEAM

Region2012 RegionalFossil Steam Rate(lb/MWh)

2030 Regional Fossil Steam Rate (lb/MWh)

Final 2030 Fossil Steam Performance Rate(lb/MWh)

Eastern 2,160 1,305 (least stringent)

1,305Western 2,198 360

Texas 2,192 237

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NGCC

Region2012 RegionalNGCC Rate(lb/MWh)

2030 Regional NGCC Rate (lb/MWh)

Final 2030 NGCC Performance Rate(lb/MWh)

Eastern 894 771 (least stringent)

771Western 899 690

Texas 951 697

1

33

North Carolina’s Rate Goal

North Carolina

2012 NC Rate (lb/MWh)

2012 NC Generation by Source Type

Final 2030 Performance Rate(lb/MWh)

Final 2030 NC Rate Goal (lb/MWh)

Fossil Steam 2,054 68% 1,305

771NGCC 853 32%

NC Aggregate

1,7781,136

Performance Rate

x

% State’s Generation from Fossil

Steam & NGCC in

2012

= State Rate Goal

2

Rate Goal Comparisons with Other States

34

ID ME N

JCA

NH D

E FL MS AL TX O

K LA NC SC M

IW

IOH

MN IL IA M

D NE

MT

WV

-

200

400

600

800

1,000

1,200

1,400

Final 2030 State Rate Goals

CO

2 R

ate

(lb

/MW

h)

ID NM M

SM

ANY

NH N

JLA O

K ALVA

NC

MO

MD

WV

OH N

EKY

MN IA CO KS IL M

T0%

10%

20%

30%

40%

50%

60%

% Reduction in State Rate Relative to 2012 Baseline

Fossil Steam Goal

NGCC Goal

1,136

36%

Note: Goals and % reductions are highly dependent on each State’s unique generation mix.

State Mass Goal Method

Excess RE Potential from Western & Texas Interconnections developed using optimization algorithm Excess RE is the portion not needed to meet the less stringent

performance rates in Eastern interconnection Apportion Excess RE Potential based on 2012 share of affected

EGU generation NC = 3%

New Source Compliment (not addressed today) – allows new sources subject to 111(b) standards to be moved under 111(d)

35

State Rate Goal

2012 State

Generation

+

2 X NC Excess RE =

State Mass Goalx

3

North Carolina’s Mass Goal

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North Carolina

NC’s 2012 Baseline Mass Emissions (annual tons CO2)

Final 2030 North Carolina’s Mass Goal (annual tons CO2)

NC Aggregate

58,353,477 51,266,234

Note 1: EPA’s 2015 Power Sector Modeling projects that NC’s CO2 emissions without the CPP will be 48,856,544 tons in 2020.

Note 2: The 2014 Power Sector Modeling projected much higher emissions at 64,658,776 tons CO2 for 2020.

3

Mass Goal Comparisons with Other States

37

ID RINH CT

WA

MA

NV N

JND

MN IA SC W

ICO AR

WY

OK M

INC

MO KY

OH PA TX

- 20,000,000 40,000,000 60,000,000 80,000,000

100,000,000 120,000,000 140,000,000 160,000,000 180,000,000 200,000,000

Final 2030 State Mass Goal

CO

2 M

ass E

mis

sio

ns

(million t

ons)

ME N

JOR CT

DE

MA FL N

V LA TX UT

OK AL

OH SC

NM

MD

WV KY N

E IA WY

ND

-20%

-10%

0%

10%

20%

30%

40%

50%

% Reduction in State Mass Relative to 2012 Baseline

51

12%

Note: Goals and % reductions are highly dependent on each State’s unique generation mix.

Federally Enforceable Components in the Final Plan Component 1 - Identify affected EGUs and their CO2 emissionsComponent 2 – Required for emission rate based goals Identify all emission standards Compliance periods for each emission standard Demonstrate how CO2 emission performance rate or rate

goal will be achieved Corrective measures

Multiple triggers at interim steps

Component 3 – Required for mass-based goals only Federally enforceable backstop - emission standards for

affected EGUs during interim & final periods Triggers for backstop

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Federally Enforceable Components in the Final Plan (Cont’d)

Component 4 - Required for all goal plansMonitoring, reporting and recordkeeping for each

affected EGUComponent 5 – Required for all goal plansProcess, contents and schedule for state

reportingReport to EPA by July 1, 2021 that NC is on track

to meet milestones defined in State Plan

39

Non-Federally Enforceable Components in the Final PlanComponent 1 – Define State Plan approach and geographic scopeComponent 2 – Identify emission performance rates or state rate goal or state mass goal for interim period, interim steps, and final periodComponent 3 – Demonstrate that affected EGUs are projected to achieve CO2 goalsComponent 4 – Demonstrate that affected EGU’s emission standard is quantifiable, non-duplicative, permanent, verifiable and enforceable

40

Non-Federally Enforceable Components in the Final Plan (Cont’d)Component 5 – Demonstrate achievement of rate-based or mass-based goalsComponent 6 –State Measures Information

Descriptions of all state measures, including applicable state laws or regulations

Projected impacts Parties implementing State Measures Schedule and milestones CO2 performance projection

Component 7 – Demonstrate that reliability of the electrical grid has been considered

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Non-Federally Enforceable Components in the Final Plan (Cont’d)Component 8 – timeline of all milestone stepsComponent 9 – demonstrate state’s legal authority and funding to implement and enforce each componentComponent 10 – demonstrate each interim step goal will be met, include analytic process, tools, methods and assumptionsComponent 11 – certification that a public hearing of the State Plan was heldComponent 12 – documentation of community outreach and involvement

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Emissions Trading

Market based policy that creates financial incentive to reduce emissions where the costs of doing so are the lowest

States can design “trading ready” rate-based or mass-based plans

Allows EGUs to use creditable out-of-state reductions to achieve required CO2 reductions

EGUs meet their emission standards via emission rate credits – ERCs (for a rate-based standard) or allowances (for a mass-based standard)

43

Reliability Safety ValveEPA’s approach to avoid threats to grid reliability

during implementationState must demonstrate that it has considered

reliability issues in developing its State PlanSafety valve triggered on EGU when there is

conflict between requirements of the State Plan and maintenance of electric system reliability due to unforeseen or catastrophic events Source emissions will be excluded from applicable

emissions standards for 90 days During the 90-day period, the source must meet an

alternative emission standard that will not jeopardize grid reliability

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Clean Energy Incentive Program

Optional for statesEarly credit program for RE and EE programs

started in 2020 and/or 2021 Credits may be banked or traded

RE Must generate electricity from wind or solar sources For every 2 MWh generated, project receives 1 credit

EE Must implement in low-income communities Electricity savings must be quantified and verified For every 2 MWh saved, project receives 2 credits

45

Community Involvement & Environmental JusticePlans must demonstrate engagement

with communities as part of public participation process in formulating state plans

Assessment of localized and community impacts

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