By Annalee Grant, SNL Energy
Some states have a long, hard road to comply with the Environmental Protection Agency’s (EPA) Clean Power Plan (CPP) regulations — specifically the 2030 carbon emissions goal — while others should be able to coast into the finish line. Under a revised set of emissions reduction goals, which include significant changes to some of the 2012 state baseline targets to address commenter concerns, coal-heavy states in the Midwest and Rocky Mountain regions appear to have the most difficult paths to compliance with EPA’s final rule, based on an SNL Energy analysis of each state’s 2030 goals and the agency’s business-as-usual projections.
The EPA developed each state’s goal based on how many coal- or oil-fired power plants it has, as well as how many natural gas plants. All states must fall within an average rate of 771 lb/MWh for those with only natural gas plants, and 1,305 lb/MWh for states that only have coal plants. Each specific state goal is balanced within these two benchmarks.
The state with the most difficult row to hoe appears to be Montana, home to a large swath of the Powder River Basin (PRB), the nation’s largest coal-producing region. The EPA established a final rate-based average CO2 goal for 2030 and beyond of 1,305 lb/MWh for Montana, well below the state’s 2012 baseline rate of 2,481 lb/MWh, and also far under where the agency projected Montana would be without the CPP in place. This business-as-usual case estimates that Montana would have a CO2 rate of 2,314 lb/MWh in 2020, necessitating a reduction of 44% to meet the 2030 final goal.
Another state with a challenging path forward is Wyoming, which, according to a recent SNL Energy analysis, relies heavily on coal-fired generation. As much as 88% of the state’s power supply came from coal in April. Wyoming is one of the states that launched legal action against the CPP before it was even released.
West Virginia, Wisconsin, North Dakota, Missouri and Nebraska will all need to significantly alter their emissions plans to comply with the CPP. Wyoming’s 2030 and beyond goal of 1,299 lb/MWh is one of the least stringent goals, much like Montana, but those states with the highest CO2 targets will have to do the most work to reach them because of their heavy reliance on coal.
While coal-reliant states like Montana, Wyoming, North Dakota and West Virginia have significant emissions reductions to make based on their current paths, other states that have traditionally been heavy coal burners are better positioned to meet their CPP targets thanks to recent and planned coal unit retirements.
Take Tennessee, for example, where the Tennessee Valley Authority (TVA) has been very active in recent years in shutting down its older coal plants. The EPA’s final carbon plan requires the state to reduce its CO2 emissions by 40% from 2012 levels, but based on the agency’s business-as-usual projections, Tennessee would already be halfway to meeting that goal by 2020 even without the CPP.
Compare Tennessee’s situation with Oklahoma, where very few coal-fired generating units have been retired during the wave of coal plant shutdowns this decade. Oklahoma appears to have an easier path with a 32% reduction goal from 2012 levels, but based on EPA’s business-as-usual projections, the state’s CO2 emissions would increase between now and 2020, giving it more of an uphill climb than Tennessee.
States that do not rely on coal or that have seen their older coal-fired power plants close will obviously have a much easier route to compliance. In fact, some states, particularly in the Northwest, would meet their targets without much work at all, based on their current path as projected by the EPA.
The EPA said in the final rule that coal and natural gas will “remain the two leading sources of electricity generation in the U.S.” Under the plan’s rate-based emissions reduction model, coal is expected to generate 33% of power production in 2020, falling to 27% in 2030. Natural gas, meanwhile, is predicted to generate 30% of electricity in 2020, growing to 33% in 2030, according to the EPA’s regulatory impact analysis for the final rule.
States will be required to submit a state implementation plan, or SIP, which will detail to the EPA how they plan to comply. Specifically, each state must demonstrate how the power plants within its borders will combine to meet that state’s targets, using either a rate- or mass-based approach.
States can leverage the three building blocks to meet the targets, or determine other means of compliance. Energy efficiency was removed as a building block from the final rule, which leaves increasing efficiency at existing coal plants, shifting coal generation to lower emitting resources such as natural gas-fired generation, and increasing renewable generation. None of the building blocks are mandatory, and the EPA suggests demand-side energy efficiency programs or increased nuclear generation as other ways to meet state targets.
The rule only requires power plants within a state to meet the targets “on average” over the eight-year period during the interim compliance years of 2022 to 2029. The averaging was the same in the proposed rule, but the compliance deadline was eased by two years.
States will be required to demonstrate that they have considered reliability of the grid when developing their SIPs, and the rule offers additional trading opportunities between the states to support reliability. Additionally, states can adjust their SIPs should a new reliability concerns emerge, and the EPA included a reliability safety valve to be used for a “catastrophic event.”
Esther Whieldon and Molly Christian contributed to this article.