Canadian hydropower can help states achieve carbon-cutting goals

About 10 percent of Canadian electricity, much of it generated from hydropower, is exported to the United States. With Canada expected to expand its hydropower capacity in coming years, could some states take advantage of this non-emitting resource to meet Clean Power Plan goals to reduce carbon emissions?

A new C2ES report, Canadian Hydropower and the Clean Power Plan, explores this question, including how the proposed plan would need to be adjusted, and how select states could benefit.

While U.S. hydropower is not expected to significantly expand in the near future, hydropower is growing in Canada, where it already supplies 60 percent of the country’s electricity. More than 5,500 megawatts (MW), enough to power about 2.4 million homes, have been added in the last decade. An additional 11,000 MW is either under construction, nearing the construction phase, or has been announced. To put this in perspective, Canada’s entire electricity generation system is about 128,000 MW.

Hydropower is not without challenges. Damming rivers and creating reservoirs causes environmental harm to ecosystems and migratory fish and displaces communities, although project developers have been working to reduce these impacts.

In their formal comments to the Environmental Protection Agency (EPA), several state environmental agencies, including Minnesota, Wisconsin and Michigan, cited the benefits of Canadian hydropower, including its near-zero emissions. Hydropower is cost competitive and can be quickly and reliably delivered. This last quality is especially valuable because it allows hydropower to complement intermittent renewable resources like solar and wind power.

Minnesota and Manitoba already complement each other this way. Canadian hydropower electricity flows south when Minnesota’s wind turbines are dormant, and Minnesota’s wind electricity flows north when supply exceeds local demand, allowing Manitoba’s reservoirs to replenish.

More than a dozen U.S. states import a significant amount of Canadian hydropower. Importing hydropower from even a modestly sized new Canadian project (250 MW) could help a state bridge the gap between its current and proposed 2030 carbon emission rate. A hypothetical project of this size could move Minnesota about 19 percent of the way toward its proposed 2030 goal, or Massachusetts about 32 percent of the way. Due to the availability of Renewable Energy Certificate (REC) trading across the United States and many provinces, a state does not even have to be physically connected to Canada’s grid to take advantage of the zero-emission quality of its hydropower.

For states to take advantage of this resource as they implement the Clean Power Plan, EPA must clarify how imported hydropower can be factored into the calculation of state emission rates. Clarifying whether imported hydropower can be treated similarly to domestic hydropower would reduce uncertainty. EPA would also have to work with states to ensure imported hydropower is not double counted for compliance purposes and that it displaces fossil electricity to receive full credit. As discussed in our report, the existing policy and market environment can already address these concerns.

Once the Clean Power Plan is finalized this summer, states would be responsible for ensuring their own plans clearly establish how imported hydropower would be used to help achieve their goals. One policy option that would facilitate Canadian hydropower imports is to convert rate-based targets (lbs. CO2 / MWh) to mass-based targets (tons CO2 / year). Under this approach, any measure that displaces fossil generation, including hydropower from both new and existing plants, would bring a state closer to its target.

As proposed, the Clean Power Plan already offers states a wealth of policy options to achieve emission reductions. Clarifying that imported hydropower can serve as another measure in states’ policy toolbox could further add to the plan’s flexibility.

States can learn from each other on carbon pricing

As discussed at our C2ES Solutions Forum on Carbon Pricing & Clean Power, both power companies and states see advantages to using carbon pricing, such as a cap-and-trade program, to reduce carbon emissions under the Clean Power Plan.

For companies, rather than being forced into specific measures to cut emissions, a carbon price harnesses market innovation to find the most cost-effective solutions. Meanwhile, states can draw on the experiences of existing cap-and-trade programs in California and the nine-state Regional Greenhouse Gas Initiative (RGGI).

While the advantages of market-based approaches are widely acknowledged, some stakeholders are concerned that the Environmental Protection Agency’s (EPA) timeline would make it challenging to develop a cap-and-trade program. EPA proposes giving states until summer 2016 to submit a plan. States could apply for a one-year extension or, if submitting a plan as part of a multistate collaboration, a two-year extension.

Don't toss out the good electricity with the bad

One way to reduce power plant carbon emissions is to reduce the demand for electricity. Encouraging customer energy efficiency is one of the building blocks underpinning the Environmental Protection Agency’s (EPA) Clean Power Plan. But the plan does not distinguish among uses of electricity. That means, without further options, the Clean Power Plan could inadvertently discourage states from deploying electric vehicles (EVs), electric mass transit, and other technologies that use electricity instead of a dirtier fuel.

In all but very coal-heavy regions, using electricity as a transportation fuel, especially in mass transit applications, results in the emission of far less carbon dioxide than burning gasoline. In industry, carbon emissions can be cut by using electric conveyance systems instead of diesel- or propane-fueled forklifts and electric arc furnaces instead of coal boilers.

Under the proposed power plant rules, new uses of electricity would be discouraged regardless of whether a state pursues a rate-based target (pounds of emissions per unit of electricity produced) or a mass-based target (tons of emissions per year).

EPA has a few options to make sure regulations for power plants would not discourage uses of electricity that result in less carbon emissions overall.

EPA’s proposed carbon standard for power plants is stringent and flexible

The Obama Administration today took a major step toward reducing the carbon dioxide emissions that are impacting our climate. The Environmental Protection Agency (EPA) released its “Clean Power Plan,” which leverages existing authority in the Clean Air Act to propose carbon pollution standards for existing power plants, the largest single source of U.S. carbon emissions. The proposal would cut emissions in the power sector by 30 percent by 2030, based on 2005 levels. We reviewed the basics of the Clean Power Plan with four critical questions in mind:

1. Is the standard based on emission reductions outside the power plant fence line?

The short answer is “yes.” EPA cannot require states or power plant operators to take any specific measures, but it can set the emissions target stringent enough so that it would be challenging to achieve unless certain measures are taken. EPA is proposing state-specific targets based on the capacity of each state to leverage four “building blocks.” They are:

  1. Make fossil fuel power plants more efficient.
  2. Use low-emitting natural gas combined cycle plants more where excess capacity is available.
  3. Use more zero- and low-emitting power sources such as renewables and nuclear.
  4. Reduce electricity demand by using electricity more efficiently.

Although “outside-the-fence-line” measures are not specifically required under the proposal, states would be hard-pressed to meet their targets without using programs to reduce the demand for fossil electricity, by, for example, increasing energy efficiency and encouraging renewable energy.

Looking to Figure 1, EPA has chosen the System-level Option.

Figure 1: Scope of reduction requirements

What to watch in EPA’s power plant carbon emissions proposal

On June 2, the Environmental Protection Agency (EPA) is expected to release its proposal to cut carbon dioxide (CO2) emissions from existing power plants. This proposal is a key element of President Obama’s Climate Action Plan, and will be critical to reducing U.S emissions of CO2, the most common greenhouse gas contributing to climate change.

The proposed rule, being developed under EPA’s authority under Section 111(d) of the Clean Air Act, could be groundbreaking for at least two reasons. First, it has the potential to drive major reductions in the highest emitting sector in the United States – the power sector – which is responsible for nearly 40 percent of U.S. carbon emissions.  Second, EPA has indicated that the proposal will include a number of novel policy provisions to advance low-emitting generation and energy efficiency.

At C2ES, we’ll be looking for answers to four key questions as we read through EPA’s proposal. These questions are expanded upon in our new brief, Carbon Pollution Standards for Existing Power Plants: Key Challenges.