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Central Texas Chapter's Workshop on EPA's Proposed Clean Power Plan Rules

EPA’s Proposed Clean Power Plan Rules: Economic Modeling and Effects On the Electric Reliability of Texas Region

 

On April 8, 2015, the Central Texas Chapter of the USAEE (CTAEE) co-sponsored with the Energy Institute at the University of Texas at Austin a Workshop entitled "EPA’s Proposed Clean Power Plan Rules: Economic Modeling and Effects on the Electric Reliability of Texas Region". The proposed new rules will limit greenhouse gas emissions from existing fossil fuel power plants under Section 111(d) of the Clean Air Act. If enacted, the proposed rules will have significant implications for the economy and the environment, both in Texas and across the country. The Workshop provided a forum for understanding the impact of, and options for, implementing the proposed rules that would be useful to policy makers. It attracted more than 100 registered attendees, representing a broad range of industry stakeholders.

The Workshop opened with introductory remarks by Dr. Mina Dioun (Dioun Energy Consulting), President of the CTAEE, and Professor Thomas Edgar, Director of the Energy Institute. The program then highlighted five distinguished speakers, beginning with an overview of the proposed rule and followed by presentations of four experts on the results of their modeling work on the rule.

Professor David Spence (The University of Texas at Austin McCombs School of Business and Law School) provided an overview of the proposed EPA rule and its legal aspects. He highlighted the four “building blocks” for compliance, including 1) heat rate improvements at coal-fired power plants, 2) increased dispatch of gas-fired generation, 3) greater use of zero-carbon sources such as renewables and nuclear, and 4) demand reduction programs. Professor Spence also outlined some of the key legal vulnerabilities, including 1) how the proposed rule might be perceived as “commandeering” state institutions for federal purposes, 2) possible inequities among the states in its impacts, 3) the proposed rule’s consistency with the statute, and 4) consistency with other EPA rules.  The merits and likely success in the courts of some of these arguments in opposition to the proposed rule were discussed.

The first session was moderated by Dr. Jay Zarnikau (Frontier Associates). The speakers included Mr. Jack Moore (Energy + Environmental Economics Consulting (E3)) and Mr. Trevor Houser (Rhodium Consulting) who presented the results of Rhodium’s joint research with the Center for Strategic and International Studies (CSIS).

Mr. Moore concluded that it was technically feasible for the U.S. to achieve an 80% reduction in greenhouse gas emissions from 1990 levels by the year 2050.  He presented four scenarios which would take us there, relying on various combinations of renewables, nuclear energy, and carbon capture and storage, supplemented with energy efficiency and fuel switching.  There is considerable uncertainty of the cost, with a mid-range of 1% of GDP.  The net cost to the average household to achieve this level of emissions would rise to about $25 per month. To achieve these reductions, some of the attractive short-term measures such as fuel switching or converting electric space heating to natural gas may make it more challenging to meet deep reductions in the long-term.  And new infrastructure such as power plants that have a 30+ year life may have a different role in the generation mix in later years. Alternatively, the integration of hydrogen fuel would be a sustainable approach to de-carbonization.

Mr. Houser described how Rhodium and CSIS used the US DOE’s National Energy Modeling System (NEMS) to analyze the proposed Clean Power Plan.  The natural gas industry could be among the winners, and the coal industry among the losers.  And this, in turn, suggests very disparate regional impacts from the Plan.  Wyoming, a major coal producer, would get hit hard.  Texas and neighboring states – large producers of natural gas – would realize net benefits.  The more that other states relied upon fuel switching to meet the targets (as opposed to energy efficiency or renewables), the greater the demand for natural gas, and the greater the net benefits to Texas. The modeling also found that cooperation between states in meeting the goals dramatically lowers consumer costs.

The second session was moderated by Mr. Neil McAndrews (Neil McAndrews & Associates). The speakers included Mr. Warren Lasher (ERCOT), and Dr. Yingxia Yang (The Brattle Group).

Mr. Lasher noted that the Clean Power Plan was one among many federal air quality actions affecting the Texas electricity market.  Coal represented over 22% of the generation capacity in 2014 and the Cross State Air Pollution Rule (CSAPR), Mercury and Air Toxics Standards (MATS), Ash Disposal Rule, regional Haze Federal Plan, Clean Water Act Section 316(b), and now the Clean Power Plan could all reduce the state’s future reliance on coal generation, potentially affecting resource adequacy, transmission reliability, and renewable integration efforts. Because many of the coal plants within ERCOT are old and lack some form of environmental controls, a number of coal units will be retired because it will not be cost effective to retrofit and bring them into compliance. Natural gas, wind, and solar will be added instead.

Dr. Yang explained how Brattle was retained by the Texas Clean Energy Coalition to model future expansion of the ERCOT system under expanded roles for natural gas, renewables, and demand side resources, including demand response, energy efficiency, and combined heat & power (CHP) opportunities. The model was developed and results issued prior to EPA’s proposed CPP rule and therefore do not reflect the EPA’s four “building blocks” approach. However, the results include scenarios that are similar to the mass-based targets provided for under the rule. The results show moderate fuel switching to natural gas, but just 3.8 GW reduction in coal-fired capacity due to derates for carbon capture and sequestration (CCS). The results also show moderate increases for renewables, and significant increases in energy efficiency. Finally, the results suggest a large technical potential for CHP in Texas.

The Workshop presentations are available on the Central Texas Chapter page of the USAEE website: https://usaee.org/chapters/centraltexas.aspx

Contributors: Karl J. Nalepa (ReSolved Energy Consulting), CTAEE Vice President; Jay Zarnikau; and Neil McAndrews

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