Universal Resistance May Have the EPA Rethinking the CPP

Facing what has been fairly consistent resistance to the draft Clean Power Plan (CPP), the Environmental Protection Agency (EPA) issued statements that could be interpreted as a partial retreat on some of the CPP’s objectives, or at least a willingness to make changes to the draft rule. In late October, the EPA announced that it would welcome additional comments, after an already-lengthy public comment period—from stakeholders on three topics:  (1) the 2020-2029 timetable for compliance, (2) the building blocks that states were originally suggested for states to use, and (3) method to calculate state-specific CO2 goals.

The apparent willingness to consider these issues further is good news for potentially impacted parties. This provides EPA with a list of shared concerns by many parties requesting a clarity on how utilities with significant coal-generating resources could realistically retire or/and replace power generation from coal-fired units as quickly as the draft CPP called for (i.e., as early as 2020) while continuing to maintain reliability and keep costs low for customers.  The EPA has now indicated that a “phased-in schedule” could be developed for increasing generation from existing natural gas facilities that would provide sufficient time to have the plants proposed, sited, and developed.

The EPA also indicated flexibility and potential room for revisions to the four “building blocks” that correspond to a way in which load-generating entities can seek to reduce their reliance on coal. In particular the EPA is responding to complaints raised by stakeholders related to building block 2 (the consideration of natural gas) and building block 3 (use of renewable energy). Numerous stakeholders raised concerns highlighted in the Notice of Data Availability (NODA) that “the proposed approach to building block 2 creates significant disparities in state goals between those states with little or no natural gas combined cycle generating capacity, and those with significant amounts of NGCC capacity not currently being fully dispatched. In terms of building block 3, which deals with renewable generation, stakeholders suggested that the EPA could forgo a state-by-state regulatory regime, and instead take a regional approach to regulating the implementation of renewables.

Lastly, the EPA acknowledged concerns from stakeholders about the method and approach to calculating carbon emission goals included in the draft CPP, namely that the calculations do not take into account changes in fuel mix that could result from incorporating the building block strategies suggested by the EPA and instead works from a baseline of CO2 emissions that does not take any of these changes into account. These changes can result in either added generation or avoided generation, but in either case, stakeholders have argued, the calculations that underpin the draft CPP do not provide an opportunity to incorporate these changes into the baseline.

The EPA has asked for more comments on different methods for determining emissions goals that would incorporate renewables and energy efficiency, as well as on changing the initial baseline year for carbon emissions targets. All of this may coalesce into a recognition by the EPA that a regional, rather than state-specific, approach is more appropriate and realistic, which has also been a common theme of stakeholder concerns. West Monroe Partners has offerings to help clients wade through this policy process and develop strategies to prepare and comply with rules once adopted. To learn more, contact Will McNamara at wmcnamara@westmonroepartners.com.

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