Clean Air Act: A “Game-Changer” in Electric Power Industry

Section 111, 42 U.S.C. 7411, of the Clean Air Act authorizes the US Environmental Protection Agency (EPA) to develop regulations for categories of pollutant emissions that cause or significantly contribute to air pollution. The regulations apply to new sources without regard to location or existing state or local air quality. Section 111(d) of the Act requires states to develop plans for existing sources of non-criteria pollutants (i.e., pollutants for which there is no national ambient air quality standard) whenever EPA promulgates a standard for a new source (which it did in September 2013 under Section 111(b) for CO2). The Section 111(d) plans or “State Implementation Plans” are subject to EPA review and approval.

Applying Section 111(d) to now include CO2 is a “game-changer” in the electric power industry.

In July 2014, the United States Supreme Court issued a decision (in Utility Air Regulatory Group v. EPA) that found EPA has the authority to regulate GHG emissions under the Prevention of Significant Deterioration and Title V programs, if a facility is otherwise subject to major source permitting requirements.

The same day EPA published its proposed power plant rule, Murray Energy Corp. filed a petition with the D.C. Circuit, seeking to block EPA’s proposed standards. This was followed shortly thereafter by nine states and the attorney general of West Virginia, filing an amicus brief with the D.C. Circuit in support of Murray.

Several big industry groups have also come out against the proposed rule characterizing it as a “war on coal” and many states and regions across a wide swath of industries and businesses are concerned about the negative impact on their economies. But many clean energy and energy efficiency companies see opportunity in the proposed rule.

Improving energy efficiency and introducing new and cleaner energy supply technologies closer to load (distributed generation) can be a boom for smaller and still growing businesses in the US. Some businesses will win and some will lose – it is all part of the transformative nature of moving toward a new cleaner electricity system. Another transformation is the need to collect data/monitor load of more sources of generation on the customer side of meter. Managing bi-directional flow (via smart meters and grid modernization architecture) is another key element in the transformation, as is the buying of electricity from customers and selling them ancillary services at marginal (vs. average) prices.

Elected officials in Washington DC are also split on the rule. Rep. Lamar Smith, R-Texas, argues that EPA did not provide the public a clear understanding of its methods and is calling for more study. Senator Bernie Sanders, I-VT and Senator Barbara Boxer, D-CA, prefer a carbon tax over the proposed rule. Clearly much has yet to happen before the rule is final. Ed Gillespie, a Republican challenger to Senator Mark Warner, D-VA claims that the EPA regulations would kill jobs and significantly increase costs to families and businesses.

As I have written before, the EPA proposed rule establishes a different carbon reduction goal for each state based on feasibility, cost, and current levels of carbon emissions to help achieve the 30 percent reduction nationally by 2030. Each state can choose from a variety of options, including regional cap and trade programs, like the Regional Greenhouse Gas Initiative (RGGI) in New York and New England, or greater investments in renewable energy, energy efficiency, and demand-side management and smart-grid technologies.

The comment period for the proposed existing power plant rule closes after a 120-day period after its publication in the Federal Register on June 18th 2014. Final rules are expected to be promulgated in June 2015. The proposed compliance timeline for existing plant regulations between the final rule and state implementation plan submittals is very short – as early as June 2016, unless an extension is granted.

The rule once final, could significantly change the mix and type, scale, location, and ownership of electricity generation in the US. There will be new costs associated with developing and implementing compliance plans, and new opportunities for progressive and innovative companies to develop new technologies and business services. The future is wide-open. It’s time to decide which side of the fence you will fall on – if you are going to wait and see what happens with the proposed rule (be reactive) or be opportunistic (proactive), since the market is already moving toward smaller, cleaner, distributed technologies and greater efficiency in energy use.

If you would like more information on the Clean Power Plan, please sign up for our webinar on September 24th, “The Clean Power Plan and What it Means for You.” We hope you will join us!

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