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Press Release: Center For Climate and Energy Solutions Examines Illustrative Framework For Federal Clean Energy Standard

Press Release                                        
November 30, 2011
Contact: Rebecca Matulka, 703-516-4146

CENTER FOR CLIMATE AND ENERGY SOLUTIONS EXAMINES
ILLUSTRATIVE FRAMEWORK FOR FEDERAL CLEAN ENERGY STANDARD

WASHINGTON, D.C. – A new paper released today by the Center for Climate and Energy Solutions (C2ES) describes an illustrative framework for a federal clean energy standard (CES) for the electricity sector. A CES is a market-based standard that requires electric utilities to deliver a certain amount of electricity from clean energy sources.

The paper, An Illustrative Framework for a Federal Clean Energy Standard for the Power Sector, explains how policymakers can balance the various objectives and interests associated with a federal CES.

“An effective clean energy standard can help drive the changes necessary to advance innovative U.S. energy solutions that benefit our economy and environment,” said C2ES President Eileen Claussen. “Now is the time to make concrete progress on critical policy questions so we’re prepared when the window for action opens again.”

The illustrative framework builds on Clean Energy Standards: State and Federal Policy Options and Implications, a paper released earlier this month by C2ES and the Regulatory Assistance Project. The earlier paper takes a detailed look at issues and options in designing a CES. 

The new paper offers a specific illustration of how a CES could be designed to balance objectives such as maintaining diversity in the sources of electricity, advancing the next generation of energy technologies, and reducing emissions of greenhouse gases and other pollutants.  It examines key design issues such as the definition of “clean energy,” targets and timetables, and the use of cost off-ramps. The intention is not to recommend a specific policy approach, but to illustrate one set of design choices among the many combinations possible.

The paper also lists policies that can complement a federal CES in order to more effectively drive clean energy technology innovation and deployment. Such measures include tax credits, federal funding for energy research and development, and provisions to address institutional and regional barriers to clean energy.

Thirty-one states and the District of Columbia have already enacted some type of electricity portfolio standard, and members of Congress have several times proposed federal electricity portfolio standards. Republican-sponsored CES bills were introduced in the last Congress and President Obama called for a federal CES in his 2011 State of the Union address.

For more information about the climate and energy challenge and the activities of the C2ES, visit www.C2ES.org.

###

About C2ES
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
 

An Illustrative Framework for a Clean Energy Standard for the Power Sector

 

 

November 2011

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Introduction

This paper describes an illustrative framework for a federal clean energy standard (CES) for the electricity sector. A CES is a type of electricity portfolio standard. Electricity portfolio standards are flexible, market-based policies that typically set requirements for the percentage of electricity that must be supplied from qualified energy resources—requiring, for example, that by 2025, 25 percent of electricity sales must be met with electricity generated from renewable sources (e.g., wind, solar, geothermal). Thirty-one states and the District of Columbia have already enacted some type of electricity portfolio standard, and members of Congress have several times proposed federal electricity portfolio standards.[1] For background information on the concept of a CES, see "Clean Energy Standards: State and Federal Policy Options and Implications."[2]


A CES Framework

The CES framework described in this paper is intended to illustrate how policymakers could balance the various objectives and interests associated with a federal CES, whether in the way described in this paper or in any number of other ways.

An Illustrative CES Framework

Table 1 below presents the key CES policy design questions and considerations that policymakers face in choosing relevant CES policy parameters, as well as an illustrative framework that addresses these design choices, and the rationales that explain the approach illustrated. The various policy design choices in the illustrative CES framework should be considered together as a whole, as they are interrelated.

In addition to the CES policy outlined in Table 1 below, Discussion of Select Issues Related to the CES Framework describes some key CES design issues as well as policies that can complement a federal CES to more effectively drive clean energy technology innovation and deployment.

Note that certain numeric values are bracketed. These bracketed values are suggestions and can be refined based on additional analysis or deliberation. In addition, for the "Eligible Clean Energy Resources" policy design parameter, the proposal includes two alternatives.

Table 1 : Illustrative Federal CES Framework


Policy Design

Considerations

Illustrative CES Framework

Rationale

CES Point of Regulation

Administrative complexity and burden

Cost-effective incentives for clean energy deployment, energy efficiency, and GHG emission reduction

Ease of crediting both supply-and demand-side compliance

CES is an electricity portfolio standard with a point of regulation at (compliance obligation on) electric utilities[3]

The electricity portfolio standard approach is already demonstrated in a majority of states and well known among federal policymakers in light of multiple federal renewable and clean energy standard bills.

Putting the point of regulation on electricity generators, rather than on utilities, would ultimately leave certain generators with no compliance options but to buy credits or shut down.[4]

CES Coverage

Administrative complexity and burden

Dilution of the effective CES target by exempting certain utilities

Fairness with respect to impacts on different electricity consumers

Compliance options available to smaller utilities

All electric utilities regardless of size or ownership

The inherent compliance flexibility and cost-effectiveness of a market-based CES program and the inclusion of non-renewable energy sources and efficiency as compliance options mean that electric utilities of any size in any location have readily available compliance options.

Exempting certain electric utilities based on size or ownership unfairly shifts the cost of achieving a national clean energy goal onto a subset of electricity consumers.

Covering all electric utilities does increase the administrative complexity of a federal CES as a much larger number of entities must comply, but experience with similar programs indicates that this is manageable (see Appendix A.3 in "Clean Energy Standards: State and Federal Policy Options and Implications").[5]

Eligible Clean Energy Resources (Option A – Technology-focused definition of "clean energy")

Direct and lifecycle air emissions from different technologies

Trade-off between promoting near-term deployment of more cost-effective clean energy technologies and accelerating the deployment of less mature technologies

Improving the environmental and public health profile of electricity generation based on multiple criteria

Distribution of costs and benefits —e.g., the potential for wealth transfers and windfall profits

Full credits for renewables, as defined in Sec. 132 of the American Clean Energy Leadership Act of 2009 (S.1462) from the 111th Congress—e.g., with respect to crediting both existing and new renewables for the most part but only incremental hydropower, and with respect to the definition of biomass[6]

New and incremental nuclear power

Partial credits for fossil fuel use coupled with carbon capture and storage (CCS) as a function of net CO2 emissions rate

Partial credits for new and incremental natural gas generation that is below an emissions threshold of [800 lbs CO2/MWh] with the total credits available for such natural gas generation in any given year limited in order to spur coal-to-gas fuel switching without disadvantaging other clean energy technologies.

Where [800] lbs CO2/MWh is roughly the emission rate of a new natural gas combined cycle (NGCC) plant.

CES provides at least some financial incentive for all new generation that can lower power-sector GHG emissions below the "business-as-usual" trajectory.

Concerns about biomass and hydropower addressed by adopting definitions from 2009 Senate renewable electricity standard.

Incentive for NGCC generation limited to supporting the displacement of older, less efficient coal generation that would not otherwise have occurred.

No credits directly issued to non-incremental hydropower and nuclear generation to avoid rewarding activities that do not provide any additional clean energy generation.

Eligible Clean Energy Resources (Option B – Emissions-focused definition of "clean energy")

Credits available for all generation save for non-incremental generation from nuclear, hydropower, and fossil fueled units.

Credits awarded based on the following formula for a generator with an emissions rate of X lbs CO2/MWh:

(Credits / MWh) = 1 – (X lbs CO2/MWh)/([1,700] lbs CO2/MWh)

Where [1,700] lbs CO2/MWh is roughly the emission rate of a new supercritical coal-fired power plant.

CES provides financial incentive for any new generator that can lower power-sector GHG emissions below the "business-as-usual" trajectory, and for some existing generators, and the financial incentive is proportional to the degree of CO2-intensity reduction.

A CO2-intensity metric for eligibility and partial crediting puts all lower-carbon resources on a level playing field.

Credits for Electricity Savings from Energy Efficiency

Energy efficiency is often the lowest-cost option for clean energy (counting avoided use, or "negawatts")

Challenges in measuring and verifying electricity savings

Trade-off between promoting cost-effective GHG emission reductions and accelerating the deployment of less mature technologies

Credits issued for demonstrated electricity savings from utility energy efficiency programs (i.e., customer end-use electricity savings), and industrial efficiency, including new combined heat and power systems. 1 MWh of electricity savings earns (1- (CES % requirement)) credits.

Credits for electricity savings are neither tradable outside the state where the electricity savings occurred nor bankable.

Credits for electricity savings can be used to meet up to [25%] of an electric utility's compliance obligation.

Energy efficiency is included in a CES in recognition of its status as a low-cost clean energy option.

The ability to directly comply via electricity savings is limited owing to concerns over measurement and verification and the policy goal of spurring new clean energy technology deployment.

Demonstrated electricity savings earn less than 1 credit per MWh in order to correctly account for the differential impact of electricity savings versus non-emitting generation.

Base Quantity of Electricity Sales

Minimization of regional disparities

The base quantity of electricity sales to which the CES percentage requirement applies is equal to total annual electricity sales to end-use customers excluding non-incremental nuclear and hydropower generation.

Excluding existing nuclear and hydropower from the base quantity provides credit indirectly for these clean energy sources without risking windfall profits.

Targets and Timetable

Increase in clean energy compared to "business as usual"

Achievability and cost

Minimization of regional disparities

Year

Total Clean Energy Goal

CES Requirement as % of base quantity

2013

43%

11%

2015

47%

15%

2020

55%

28%

2025

63%

41%

2030

72%

52%

2035

80%

64%

The CES program administrator shall periodically (every [5] years) adjust future CES percentage requirements in light of any unanticipated reductions in generation from existing clean energy facilities to ensure that the total clean energy goals are met.

Clean energy targets are generally consistent with expected power-sector generation mix under recent proposals for comprehensive climate and energy legislation.

Actual CES percentage requirement is a function of the total clean energy goal, the definition of the base quantity of electricity sales, and the treatment of existing clean energy facilities.

Linear ramp up of CES targets is achievable in light of historical clean energy deployment rates and compliance flexibility from trading, banking/borrowing, and alternative compliance payment (ACP).

Banking and Borrowing

Compliance flexibility and cost containment

Achievement of clean energy deployment beyond "business as usual"

Risks associated with excessive credit borrowing

Unlimited banking

Limited borrowing ([3] years into the future) with "interest" against future clean energy credit streams from facilities that are under construction.

Banking provides temporal compliance flexibility and lower compliance costs without sacrificing policy goals.

Borrowing similarly provides compliance flexibility and improves cost-effectiveness but should be limited to avoid excessive borrowing that puts pressure on policymakers to forgive debts.

Alternative Compliance Payment (ACP)

Trade-offs between cost containment and clean energy deployment and emission reductions

In lieu of clean energy credits, electric utilities can comply by making alternative compliance payments in an amount equal to [$35/MWh] in 2012 and rising at the rate of inflation plus [5%].

ACP revenues shall be made available to the states whose ratepayers provided them for use in furtherance of the goals of the CES—e.g., clean energy research, development, demonstration, and deployment – as well as offsetting electricity costs for ratepayers – e.g., energy intensive, trade exposed (EITE) industries and low-income households.

ACP that increases in real terms provides protection against excessive costs but allows credit prices to increase over time as the CES target becomes more ambitious.

ACP revenues are used for the benefit of the states whose ratepayers paid them.

Treatment of Existing State Programs

States' ability to set state clean energy requirements

States' ability to affect national clean energy requirements (i.e., additionality of state clean energy requirements)

States' ability to define qualified clean energy under federal program

Avoidance of "double-counting" of clean MWhs

Administrative complexity and burden

Federal CES is a separate and distinct program from state electricity portfolio standards.

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

Appropriate compliance credit granted to electric utilities for payments made to state programs (i.e., state RPS ACP payments and central procurement state RPSs (e.g., NY)).[7]

Federal CES does not preempt any state programs.

Federal CES sets the goal and requirement for aggregate national clean energy generation, and Congress defines what counts as clean energy for the purposes of this goal.

States retain authority to operate and implement their own programs that can change the share of national clean energy generation and associated benefits achieved within their own borders.

Double-counting of MWhs toward compliance with the federal requirement is avoided.


Discussion of Select Issues Related to the CES Framework

Certain CES policy design issues related to the CES framework above warrant particular mention, and these are explored in more detail in this section. Note that the issues below highlight the need for more sophisticated modeling analyses of potential CES policies to inform policymakers and other stakeholders about the implications of and trade-offs among various CES design options as they develop the details of a CES policy.[8]

Quantifying Base Quantity

The assumption underpinning the framework described in this paper is that, if a CES sets uniform percentage requirements for all electric utilities, policymakers should provide CECs only to qualified clean energy generation while excluding non-incremental nuclear and hydropower generation from the base quantity of electricity sales. This approach can minimize the risk of windfall profits, though for some technologies, it may risk encouraging the reduction of generation from existing clean energy facilities.

Natural Gas

Highly efficient natural gas combined cycle (NGCC) power plants emit much lower levels of air pollutants (including CO2, the primary GHG) compared both to the average existing coal-fired power plant and even compared to new coal-fired power plants with modern pollution controls.[9] Moreover, developments over the past few years related to shale gas have led to the realization that the United States has a much larger supply of affordable domestic natural gas than previously thought.[10] As a result of these and other factors, natural gas is, absent new policies, projected by the U.S. Energy Information Administration (EIA) to dominate new electricity generating capacity additions in coming decades.[11]

While natural gas is a highly competitive choice for new electricity generating capacity required to meet electricity demand growth, there remains a significant opportunity to displace existing older, less efficient, and more highly polluting coal-fired generation with incremental natural gas-fired generation—a displacement unlikely to be fully realized under "business as usual" but one that a CES can facilitate by providing at least some credit to incremental natural gas-fired electricity generation. Incremental natural gas-fired generation could come from both new capacity additions and greater utilization of existing NGCC power plants.

In providing an incentive under a CES for displacing existing coal-fired generation with incremental natural gas-fired generation, policymakers may want to avoid an outcome in which a CES provides an incentive for natural gas at the expense of other lower-emitting energy technologies—e.g., renewables, nuclear power, and fossil fuel use coupled with CCS. Whether providing partial credit under a CES for incremental natural gas-fired generation leads to this outcome likely depends on the CES program's targets and the value of any alternative compliance payment (ACP). For example, providing credit for incremental natural gas-fired generation under a CES that has very modest targets and a low ACP value is more likely to create an incentive for natural gas-fired electricity generation at the expense of lower-emitting technologies.

Both "Eligible Clean Energy Resources" policy design parameter options in the CES framework would tie incentives for natural gas under a CES to the displacement of existing traditional coal-fired electricity generation. This approach, however, could benefit from additional analysis and deliberation – particularly regarding how best to implement it.

Other issues related to crediting natural gas under a CES are how the treatment of natural gas may affect CES cost impacts differently across utilities, states, and regions and how policymakers can provide incentives for new NGCC plants without creating competition between new and existing NGCC units.[12]

Equitable Impacts

Since electricity prices already vary dramatically across utilities, states, and regions, electricity price impacts under a CES can vary across utilities, states, and regions. This variation results from factors such as the different levels of existing clean power generation, differences in renewable resource endowments, differences in wholesale power markets, and different retail electricity market structures (i.e., competitive vs. traditionally regulated). These factors and CES policy design choices can interact in complex and nuanced ways, so the best way to gauge the likely electricity price impacts of particular CES policy formulations is through sophisticated power sector modeling.

The CES framework in Table 1 is intended to provide for equitable electricity price impacts across utilities, states, and regions. Stakeholders, however, may reasonably have different points of view regarding what constitutes "equitable price impacts." For example, some might argue that roughly equal percentage changes in electricity rates across utilities, states, and regions are fair while others might support price changes of similar absolute magnitude (e.g., in cents per kilowatt-hour). Additionally, some might argue that it is only fair for utilities, states, and regions that currently have higher than average electricity prices because of a greater current reliance on cleaner energy sources to see smaller price increases under a national CES than utilities, states, and regions that enjoy lower than average electricity prices in part due to less investment in clean power generation.

Cost Containment

In designing a CES, policymakers will likely seek to balance the benefits associated with increasing clean power generation against the costs (e.g., electricity rate impacts) associated with transitioning to an electricity generation mix that relies more heavily on clean energy sources. In recent congressional electricity portfolio standards, one of the key provisions for cost containment has been the alternative compliance payment (ACP).[13]

A few points regarding the inclusion of and value chosen for an ACP warrant mention. First, congressional electricity portfolio standard proposals in the 111th Congress have included relatively low ACP values that remained constant in real terms (i.e., they increased only to keep pace with inflation).[14] However, putting the power sector on a clean energy trajectory that diverges more and more over time from "business as usual" is likely to require an ACP that may start off at a relatively low level but that increases in real terms over time.
Second, while an ACP acts as a price ceiling for the price of tradable clean energy credits, the relationship between credit prices and electricity rate impacts under a CES is not as straightforward as one might imagine. As such, policymakers should think carefully about what ACP value is truly appropriate for balancing benefits and costs under a CES.

Third, if policymakers want to use a CES to focus specifically on spurring the deployment of less commercially mature, very low-emitting technologies, policymakers might consider a CES formulation that has a high ACP value but a lower percentage target coupled with a narrower definition of clean energy. This formulation might satisfy the desire for cost containment while still providing a substantial financial incentive for less commercially mature clean energy technologies.

 


Complementary Policies

A policy—like a CES—that lowers the cost of clean electricity technologies relative to competing technologies can be the federal government's central, overarching policy for spurring widespread deployment of clean electricity technologies. However, combining a CES with technology-specific complementary policies like those summarized in Table 2 can help deploy clean energy technology more cost-effectively and advance a broader portfolio of clean energy technologies by addressing market failures, and market and institutional barriers that a CES alone cannot address.[15]

Table 2 includes examples of existing policies and programs that could complement a CES. Policymakers could continue these policies and programs, expand them, or create new similar ones to complement a federal CES.

Table 2 : Clean Power Complementary Policies


Type of Complementary Policy

Description

Policy Examples

Clean Energy R&D

On their own, private firms tend to under-invest in clean energy R&D in light of the spillover benefits from such investments.

The Federal government can directly fund clean energy R&D and provide incentives for private sector investment as well.

Advanced Research Projects Agency-Energy (ARPA-E)

DOE Energy Innovation Hubs

R&D tax credits

Demonstration and "First-Mover" Clean Energy Projects

First-of-a-kind demonstration projects and "first mover" clean energy projects provide real world cost and performance data, thus mitigating uncertainty and market risk for clean energy technologies. Such projects also move clean energy technologies along their "learning curve," thus making them more cost-competitive.

FutureGen 2.0

Loan Guarantee Program

Targeted tax credits

Policies to Address Institutional and Regulatory Barriers

These issues vary among clean technologies and include, for example: transmission siting for wind and solar power, interconnection standards for distributed generation, uncertainty over long-term handling of spent nuclear fuel, and electric utility regulation that discourages electricity savings from energy efficiency programs.

Policies specific to institutional and regulatory barriers

Given the limited options with a CES policy for addressing costs borne by particular households and businesses of concern to policymakers (e.g., low-income households and energy-intensive, trade-exposed [EITE] industries), policymakers might seek to ameliorate any negative cost impacts felt by such households and businesses via complementary policies outside of the CES. Tax credits to defray the cost of energy efficiency investments by EITE industries and additional funding for the Low Income Home Energy Assistance Program (LIHEAP), are examples of such complementary policies.

 

EndNotes


[1] "Renewable & Alternative Energy Portfolio Standards," Center for Climate and Energy Solutions, last modified August 25, 2011.

[2] Regulatory Assistance Project and the Center for Climate and Energy Solutions. Clean Energy Standards: State and Federal Policy Options and Implications, September 2011, Appendix A.3.

[3] Here, as in congressional electricity portfolio standard proposals, the definition of "electricity utility" refers to any person, state agency, or federal agency, which sells electric energy (Public Utility Regulatory Policies Act of 1978, 16 U.S.C § 2602(4)).

[4] Clean Energy Standards: State and Federal Policy Options and Implications, Section 8.5. This section discusses the point of regulation.

[5] Ibid, Appendix A.3.

[6] American Clean Energy Leadership Act of 2009, S. 1462, 111th Congress, Sec. 132 (2009). Renewable energy is defined to mean electric energy generated at a facility (including distributed generation facility) from: solar, wind,  geothermal and incremental geothermal, qualified incremental hydropower, marine and hydrokinetic renewable energy, ocean (including tidal, wave, current, and thermal), biomass (as defined by the Energy Policy Act of 2005, 42 U.S.C. § 15852(b)), landfill gas; and coal-mined methane, or qualified waste-to-energy sources or other innovative sources as determined through rulemaking.

[7] In most states with RPS programs, utilities are required to provide their customers a certain percentage of electricity from renewable sources. New York's RPS program uses a central procurement model, with New York State Energy Research and Development Authority (NYSERDA) as central procurement administrator. Under this model, utilities do not procure renewable electricity directly, but rather NYSERDA pays a production incentive to renewable electricity generators. In exchange for receiving the production incentive, the renewable generator transfers to NYSERDA all rights and/or claims to the RPS attributes associated with each MWh of renewable electricity generated, and guarantees delivery of the associated electricity to the customer.

[8] "Clean Energy Standards," Center for Climate and Energy Solutions, last accessed September 19, 2011. Existing CES modeling results from such groups as the Bipartisan Policy Center and Resources for the Future are accessible on this webpage.

[9] Clean Energy Standards: State and Federal Policy Options and Implications, Appendix A.3.

[10] "What is shale gas and why is it important?," United States Energy Information Administration's (EIA), Energy in Brief, last modified August 4, 2011.

[11] "Annual Energy Outlook 2011," United States Energy Information Administration (EIA), last modified April 26, 2011. In its AEO2011 Reference Case, EIA projects that natural gas will account for 60 percent of capacity additions for 2009-2035.

[12] Meghan McGuinness, The Administration's Clean Energy Standard Proposal: An Initial Analysis, Bipartisan Policy Center Staff Paper (Washington, DC: Bipartisan Policy Center, 2011). Such competition between new and existing NGCC units has little to no benefit in terms of increasing clean energy generation, but as the Bipartisan Policy Center's recent CES modeling suggests, it is a possible outcome if a CES policy is not carefully crafted to avoid it.

[13] Electric utilities demonstrate compliance with CES requirements by submitting clean energy credits equivalent to the required level of clean energy generation. An ACP provision under a CES allows an electric utility to make payments to the CES program administrator of a specified value in lieu of submitting tradable credits. An ACP acts as a cap on the cost of compliance with a CES. Electric utilities will increase the amount of clean energy that they deliver in keeping with the CES requirement until the incremental cost of such energy exceeds the ACP value. Policymakers may set a fixed ACP, one that increases at the rate of inflation, or one that increase in real terms over time as the CES targets become more ambitious.

[14] Clean Energy Standards: State and Federal Policy Options and Implications, Table 3 in Appendix A.3

[15] Ibid, Appendix A.2. This appendix section provides a broad overview of many of these challenges.

 

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Clean Energy Standard (CES) Proposal Comparison Chart

A clean energy standard (CES) is a policy requiring that a certain portion of electricity generated or sold by an electric utility come from “clean energy” sources.  A well-crafted CES can  spur the deployment of clean energy technology, diversify electricity supplies, and reduce greenhouse gas (GHG) emissions from the electric power sector. Market-based provisions such as tradable clean energy certificates can minimize the costs of implementing a CES.  Thirty-one U.S. states have enacted some form of electricity standard. This brief summarizes the major provisions of recent frameworks for a federal CES.

The following table compares: an illustrative CES framework developed by the Center for Climate and Energy Solutions; the Clean Energy Standard Act of 2012, as introduced by Sen. Jeff Bingaman (D-NM) on March 1, 2012; and a request from Rep. Ralph Hall (R-TX) for the Energy Information Agency (EIA) to analyze the impacts of a CES.[1]

The three CES frameworks are similar in some respects. For instance, all three place the point of regulation on electricity utilities, and keep a federal CES distinct and separate from state electricity portfolio standards. In addition, both C2ES’s illustrative framework and Sen. Bingaman’s proposal use an emissions-based definition of “clean energy,” using supercritical coal as a baseline. From there, the three frameworks differ significantly.

C2ES’s illustrative framework allows crediting of energy efficiency up to 25 percent of a utility’s clean energy obligation, borrowing clean energy credits up to three years into the future, and an alternative compliance payment (ACP) mechanism, with revenue helping to offset electricity costs for low-income households and energy-intensive, trade exposed industries.

Sen. Bingaman’s CES proposal credits clean energy facilities placed in service after 1991, exempts small utilities, and allows electric utilities to deduct the amount of electricity sold from nuclear or hydropower facilities placed in service before 1992 from their base quantity of electricity sales. Rep. Hall’s CES model does not include any form of safety valve or allow utilities to bank or borrow clean energy credits for future use.


Policy Design

Illustrative CES Framework[2]

Bingaman’s Clean Energy Standard Act of 2012

Hall’s “Best Estimate CES” Scenario

CES Point of Regulation

Electric utilities[3]

Electric utilities

 

Electric utilities

CES Coverage

All electric utilities regardless of size or ownership

Large electric utilities in the contiguous United States.

 

Starting in 2015, utilities that sell less than 2 million MWh in the previous calendar year are exempt.[4] The sales threshold for exemptions decreases by 100,000 MWh per year until it reaches 1 million MWh in 2025. The threshold remains 1 million MWh after 2025.

 

All electric utilities regardless of size or ownership

Eligible Clean Energy Resources (Option A – Technology-focused definition of “clean energy”)

Renewables as defined in S.1462 of the 111th Congress—e.g., with respect to incremental hydropower and biomass[5]

 

New and incremental nuclear power

 

Partial credits for fossil fuel use coupled with carbon capture and storage (CCS) as function of net CO2 emissions rate

 

Partial credits for new and incremental natural gas generation that is below an emissions threshold of [800 lbs CO2/MWh] with the total credits available for such natural gas generation in any given year limited in order to spur coal-to-gas fuel switching without disadvantaging other clean energy technologies.

 

Where [800] lbs CO2/MWh is roughly the emission rate of a new natural gas combined cycle (NGCC) plant.

 

N/A

 

Eligible resources include:

  • hydroelectric
  • wind
  • solar
  • geothermal
  • biomass power
  • municipal solid waste
  • landfill gas
  • nuclear
  • coal-fired plants with carbon capture and sequestration
  • natural gas-fired plants with either carbon capture and sequestration or utilizing combined cycle technology

 Crediting mechanism:

 

Electricity Generation Type

Number of CECs per MWh of Generation

NGCC

0.5

Coal with CCS

0.9

Natural gas with CCS

0.9

Other qualified resources

1.0

 

Generation using qualified resources from either new or existing plants in any economic sector can receive credits.

 

Eligible Clean Energy Resources (Option B – Emissions-focused definition of “clean energy”)

Credits available for all generation save for non-incremental generation from nuclear, hydropower, and fossil fueled units.

 

Credits awarded based on the following formula for a generator with an emissions rate of X lbs CO2/MWh:

 

(Credits / MWh) = 1 – (X lbs CO2/MWh)/([1,700] lbs CO2/MWh)

 

Where [1,700] lbs CO2/MWh is roughly the emission rate of a new supercritical coal-fired power plant.

Clean energy means electricity generated:

  • At a facility placed in service after December 31, 1991 using –
    • renewable energy (solar, wind, ocean, current, wave, tidal, or geothermal);
    • qualified renewable biomass produced in an ecologically sustainable manner;
    • natural gas (includes coal mine methane), hydropower;
    • nuclear power;
    •  qualified waste-to-energy (energy produced from the combustion of post-recycled municipal solid waste, biogas, landfill methane, animal waste or animal byproducts, or other biomass that has been diverted from or separated from other waste out of a municipal waste stream);
  • At a facility placed in service after enactment of this Act that using –
    • qualified combined heat and power (CHP) system that uses the same energy source for the simultaneous or sequential generation for electricity energy and thermal energy; and generates at least 20% of its useful energy as electricity and 20% of its useful energy as heat[6];
    • a source of energy, other than biomass, with lower annual carbon intensity than 0.82 metric tons of CO2 equivalent per MWh;
  • Qualified efficiency improvements or quality additions means efficiency improvements or capacity additions made after December 31, 1991 to a nuclear or hydropower facility placed in service before December 31, 1991.
  • At a facility placed that captures and prevents the release of carbon dioxide (CO2) into the atmosphere.

 

Credits awarded based on the following formula for a generator with an annual carbon intensity rate of X metric tons CO2/MWh:

 

(Credits / MWh) = 1 – (X CO2/MWh)/(0.82 metric tons CO2/MWh)

 

Where 0.82 metric tons of CO2/MWh is equivalent emission rate of a new supercritical coal-fired power plant.

 

No generators are awarded negative credits.

 

N/A

Credits for Electricity Savings from Energy Efficiency

Credits issued for demonstrated electricity savings from utility energy efficiency programs (i.e., customer end-use electricity savings), and industrial efficiency, including new combined heat and power systems. 1 MWh of electricity savings earns (1- (CES % requirement)) credits.

 

Credits for electricity savings are neither tradable outside the state where the electricity savings occurred nor bankable.

 

Credits for electricity savings can be used to meet up to [25%] of an electric utility’s compliance obligation.

 

Qualified combined heat and power systems are awarded additional credits for greenhouse gas emissions avoided as a result of using a qualified combined heat and power system, rather than a separate thermal source, to meet onsite thermal needs.

Not specified.

Base Quantity of Electricity Sales

The base quantity of electricity sales to which the CES percentage requirement applies is equal to total annual electricity sales to end-use customers excluding non-incremental nuclear and hydropower generation.

 

The base quantity of electricity sales to which the CES percentage requirement applies is equal to the total annual electricity sales to end-use customers excluding nuclear and hydropower facilities placed in service before December 31, 1991.

 

The base quantity of electricity sales to which the CES percentage requirement applies is equal to total annual electricity sales.

 

 

Targets and Timetable

 

Year

Total Clean Energy Goal

2013

43%

2015

47%

2020

55%

2025

63%

2030

72%

2035

80%

 

The CES program administrator shall periodically (every [5] years) adjust future CES percentage requirements in light of any unanticipated reductions in generation from existing clean energy facilities to ensure that the total clean energy goals are met.

 

Year

Minimum Clean Energy Goal

2015

24%

2020

39%

2025

54%

2030

69%

2035

84%

 

Percentage requirement rises linearly at 3% per year, starting at 24% in 2015 and raising to 84% in 2035.

 

 

Year

Total Clean Energy Goal

2013

44.8%

2015

47.9%

2020

55.5%

2025

63.2%

2030

70.8%

2035

80.0%

 

Percentage requirement rises linearly at 1.6% per year, starting at 44.8% in 2013 and rising to 80% in 2035. Target held constant after 2035.

Banking and Borrowing

Unlimited banking

 

Limited borrowing ([3] years into the future) with “interest” against future clean energy credit streams from facilities that are under construction.

 

Unlimited banking

 

Borrowing not specified.

 

No banking.

 

No borrowing; no option to purchase compliance credits from the government. All credits are backed by physical generation.

Alternative Compliance Payment (ACP)

In lieu of clean energy credits, electric utilities can comply by making alternative compliance payments in an amount equal to [$35/MWh] in 2012 and rising at the rate of inflation plus [5%].

 

ACP revenues shall be made available to the states whose ratepayers provided them for use in furtherance of the goals of the CES—e.g., clean energy research, development, demonstration, and deployment – as well as offsetting electricity costs for ratepayers – e.g., energy intensive, trade exposed (EITE) industries and low-income households.

 

In lieu of clean energy credits, electric utilities can comply by making alternative compliance payments in an amount equal to $30/MWh (3.0 cents/KWh).

 

Starting annually by 2017, the Secretary of Energy shall increase the ACP by 5%, and adjust that for the rate of inflation as deemed necessary.

 

Any ACP revenues and civil penalties collected shall be made available to the states to fund State energy efficiency plans under Sec. 362 of the Energy Policy and Conservation Act (42 USC 6322).

 

 

Not specified.

Treatment of Existing State Programs

Federal CES is a separate and distinct program from state electricity portfolio standards.

 

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

 

Appropriate compliance credit granted to electric utilities for payments made to state programs (i.e., state RPS ACP payments and central procurement state RPSs (e.g., NY)).

 

Federal CES is a separate and distinct program from state electricity portfolio standards.

 

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

 

Federal CES is a separate and distinct program from state electricity portfolio standards.

 

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

 


Endnotes


[1]      Sen. Bingaman’s introduced CES proposal differs from his requested EIA modeling analysis, as seen in letters to EIA, see August 16, 2011 and September 30, 2011. For Rep. Hall’s letter to EIA requesting modeling of a CES, see July 22, 2011.

[2]      Certain numeric values are bracketed. These bracketed values are suggestions and can be refined based on additional analysis or deliberation.

[3]      Here, as in congressional electricity portfolio standard proposals, the definition of “electricity utility” refers to any person, state agency, or federal agency, which sells electric energy (Public Utility Regulatory Policies Act of 1978, 16 U.S.C  2602(4)).

[4]      Clean Energy Standard Act of 2012, 112th Congress, Sec. 610(k)(3)(B) (2012). For purposes of calculating electricity sold in determining exemption, an affiliate of the electric utility or an associate company (as defined in Sec. 1262 of the Energy Policy Act of 2005 (42 U.S.C. 16451)) shall be treated as sold by the electric utility

[5]      American Clean Energy Leadership Act of 2009, S. 1462, 111th Congress, Sec. 132 (2009). Renewable energy is defined to mean electric energy generated at a facility (including distributed generation facility) from: solar, wind,  geothermal and incremental geothermal, qualified incremental hydropower, marine and hydrokinetic renewable energy, ocean (including tidal, wave, current, and thermal), biomass (as defined by the Energy Policy Act of 2005, 42 U.S.C.  15852(b)), landfill gas; and coal-mined methane, or qualified waste-to-energy sources or other innovative sources as determined through rulemaking.

[6]      The energy efficiency of a combined heat and power system shall be determined in according with Sec. 48(c)(3)(C)(i) of the Internal Revenue Code of 1986.

 

Regional Haze

What is the regional haze program?

The Clean Air Act sets a national goal of reducing pollution that causes lowered visibility in national parks. Sec. 169 of the Act requires the Environmental Protection Agency (EPA) and land management Federal agencies to monitor air pollution-affected visibility in 156 national parks, wilderness areas, and wildlife refuges, known as "class I areas." These class I areas are affected by a variety of pollution sources, including natural sources like dust and wildfire smoke and manmade sources like motor vehicles, power plants, refineries, and manufacturing facilities. Pollution, especially particulate matter can be transported over a wide geographic area, affecting class I areas far from the source, even in nearby states. Haze develops when light bounces off this pollution, degrading air quality in national parks and obstructing views.

As part of the regional haze program, every state must submit a plan to reduce haze to EPA in coordination with the National Park Service, U.S. Fish and Wildlife Service, and U.S. Forest Service. These plans are submitted individually, though usually coordinated by regional, multi-state efforts. The long-term goal is to achieve natural visibility levels in class I areas by 2064.

Who are the covered entities?

These plans require emission sources to add control technologies, including retrofitting certain large facilities that have been operating since 1962 with the Best Available Retrofit Technology. If the plans fail to adequately clean the air quality in national parks, EPA may reject them and implement a federal haze plan.

What is the status of regulation?

The regional haze program was first mandated in the 1977 amendments to the Clean Air Act. The initial program required air quality monitoring in class I areas. Regulations implementing the program were promulgated in 1980, and monitoring began in 1988.

In the 1990 amendments to the Act, additional requirements were added to the program to reduce haze and increase visibility, leading to significant new regulations in 1999 that required the creation of state implementation plans. These plans were to have been filed by 2007; however, filing was delayed as states waited for finalization of the air transport rule. The air transport rule (the Clean Air Interstate Rule and its replacement Cross-State Air Pollution Rule) added more stringent requirements on many of the same pollutants effected by the regional haze program, therefore states waited to consider the implications of that rule before adjusting their regional haze plans. Currently, only California and Delaware have EPA-approved plans in place, while 45 other states and territories have submitted a plan and are awaiting EPA action.

A 2011 lawsuit challenged the delay and asked EPA to begin accepting or rejecting the state plans. In November 2011, EPA reached a settlement agreement with plaintiffs and agreed to finalize acceptance of 37 state plans or implementation of a federal plan by November 2012. The result was a proposed rule released on December 23, 2011 that allows Eastern U.S. states covered by the Cross-State Air Pollution Rule to comply with regional haze requirements by implementing that rule, while consideration continues of Western U.S. state plans.

Also in November, HR 3379, the Regional Haze Federalism Act, was introduced. This legislation would eliminate the role of EPA in accepting or rejecting state regional haze plans or the institution of federal implementation plans, leaving planning implementation entirely to the states.

 

Read more from EPA on regional haze.

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Eileen Claussen Highlights C2ES's Goals, Energy Policy on E&E TV

Watch the Interview

November 16, 2011

On E&E TV's OnPoint, Eileen Claussen discusses goals of the newly-launched Center for Climate and Energy Solutions (C2ES) and assesses the current state of energy policy talks in Washington. Claussen also gives her views on the Obama administration's handling of energy policy. Click here to watch the interview.

Click here for additional details on C2ES.

Press Release: New Paper Details Options for Clean Energy Standards

Press Release                                        
November 17, 2011
Contact: Tom Steinfeldt, 703-516-4146

NEW PAPER DETAILS OPTIONS FOR CLEAN ENERGY STANDARDS
Center for Climate and Energy Solutions and the Regulatory Assistance Project
Explore State & Federal Policy Alternatives

WASHINGTON, D.C. – A well-designed clean energy standard (CES) can create new industries, diversify U.S. electricity supplies, and reduce air pollution, according to a new paper released today by the Center for Climate and Energy Solutions (C2ES) and the Regulatory Assistance Project (RAP).

The paper, Clean Energy Standards: State and Federal Policy Options and Implications, examines issues and options in designing a clean energy standard – a policy that requires electric utilities to deliver a certain amount of electricity from clean energy sources. The paper’s aim is to help policymakers, utility regulators, and other stakeholders better understand how a CES works, its potential benefits, and the implications of different national- and state-level policy options. 

“We stand at a crossroads in America’s energy landscape,” said Eileen Claussen, President of the Center for Climate and Energy Solutions. “Transitioning to a cleaner, more diverse energy supply is necessary to grow new energy industries at home, limit our exposure to fuel-price volatility and regulatory risk, and reduce the greenhouse gases contributing to global climate change.  A well-designed clean energy standard can help drive a major shift toward innovative U.S. energy solutions.”

Thirty-one states now have some form of renewable or alternative energy portfolio standard. Yet in the absence of significant new policies, according to the paper, the share of U.S. electricity coming from clean energy sources is unlikely to increase more than a few percentage points in the next 25 years. At the national level, Republican-sponsored CES bills were introduced in the last Congress and President Obama called for a federal CES in his 2011 State of the Union address. 

“The CES idea is relatively new, and this paper will facilitate a broader and better-informed discussion of a CES at the state and federal levels,” said Richard Sedano, Director of U.S. Programs for the Regulatory Assistance Project. “Cleaning up the electric power sector is a challenge of monumental proportions, but we’ve already seen the power of renewable portfolio standards and CES policies in many states and feel certain that even more progress can be made.”

Among the key issues for policymakers is defining “clean energy.”  Options include renewables; highly efficient natural gas combined cycle generation; fossil fuel generation with carbon capture and storage (CCS); nuclear power; and electricity savings from efficiency and conservation. By allowing utilities flexibility to choose among energy sources, the paper notes, a CES can minimize cost impacts on electricity consumers. A CES can also limit utilities’ and consumers’ exposure to fuel-price volatility by diversifying electricity supplies, and spur growth and jobs in clean energy industries.

For more information about the climate and energy challenge and the activities of the C2ES, visit www.C2ES.org.

 

###

About C2ES
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

About the Regulatory Assistance Project
The Regulatory Assistance Project (RAP) is a global, non-profit team of experts focused on the long-term economic and environmental sustainability of the power and natural gas sectors. We provide technical and policy assistance on regulatory and market policies that promote economic efficiency, environmental protection, system reliability and the fair allocation of system benefits among consumers. We have worked extensively in the US since 1992 and in China since 1999. We added programs and offices in the European Union in 2009 and plan to offer similar services in India in the near future.

Clean Energy Standards: State and Federal Policy Options and Implications

November 2011

Download this paper (pdf)

Press Release

CES Resources

An Illustrative Framework for a Federal Clean Energy Standard for the Power Sector, November 2011

 

Written in conjunction with the Regulatory Assistance Project, this discussion paper examines the policy options and implications for a clean energy standard (CES).

 

Executive Summary:

A transition from conventional fossil fueled electricity generation to clean energy offers several benefits—particularly the growth of new clean energy industries and associated jobs, diversification of energy supply, and reductions in the public health and environmental damages (especially from air pollution) associated with conventional electricity generation.

The current status of clean energy generation depends on how one defines clean energy. While there is no universally agreed upon definition of clean energy in the power sector, various stakeholders endorse some or all of the following as at least partially clean energy options: highly efficient natural gas combined cycle generation; fossil fuel use coupled with carbon capture and storage (CCS); nuclear power; renewables; and electricity savings from energy efficiency and conservation. These generation sources provide about half of U.S. electricity today. While market dynamics and current state and federal policies have led to recent growth in clean energy generation—such as the growth in renewable generation driven in part by state renewable electricity portfolio standards—projections for the power sector indicate that, absent significant new policies to promote clean energy, the status quo in terms of power generation will continue largely unchanged for at least the next quarter century.

Given the benefits of clean energy and the dependence of substantial growth in clean energy generation on new policies, policymakers have lately turned their attention to the idea of a clean energy standard (CES). A CES is a type of electricity portfolio standard that would set aggregate targets for the level of clean energy that electric utilities would need to sell while giving electric utilities flexibility by: (1) defining clean energy more broadly than just renewables, and (2) allowing for market-based credit trading to facilitate lower-cost compliance. As a concept, a CES builds on the successful experience of the majority of states that have implemented renewable and alternative energy portfolio standards and draws on a history of federal policy deliberation regarding national electricity portfolio standards.

States could pursue new CES policies singly or jointly to create multi-state programs. State CES programs could complement existing state renewable portfolio standards, and a CES may be a promising option in states where more narrowly defined renewable electricity policies have had less appeal. A handful of states have already enacted electricity portfolio standards that have many of the attributes of a CES.

The federal government could also enact a national CES. A federal CES has recently received bipartisan support, with several Republican Senators sponsoring federal CES proposals in the last Congress and President Obama endorsing a federal CES in his 2011 State of the Union address. While the prospects for near-term enactment of a federal CES are uncertain, a federal CES has received substantial attention and warrants close consideration by stakeholders.

This paper introduces stakeholders to the concept of a CES, explains how a CES works, describes the benefits that a CES can deliver, and explores federal and subnational options for CES policies. This paper also explores some of the nuances of CES policy design and the implications of different design choices. This discussion can help both state and federal policymakers, utility regulators, and other stakeholders decide whether a CES is an appealing option and to help state stakeholders understand the potential impacts of a federal CES on their states so that they might formulate and communicate federal CES policy design preferences.

Several of the paper’s key points are summarized below.

  • Absent significant new policies to promote clean energy, the share of total U.S. electricity generation obtained from clean energy sources will likely not increase by more than a few percentage points over the next 25 years.
  • Substantial increases in clean energy generation can offer important benefits, including:
    • Growth of new clean energy industries and associated jobs—e.g., wind turbine manufacturing, solar panel installation, and nuclear power plant construction;
    • Diversification of energy supply to limit electric utilities’ and ratepayers’ exposure to fuel price volatility and regulatory risk associated with particular energy sources;
    • Mitigation of environmental and public health impacts from electricity generation—including criteria and hazardous air pollutants, greenhouse gases emissions that contribute to climate change, and other impacts.
  • A CES is a promising policy for spurring a transition to clean energy in the power sector.
    • As a type of electricity portfolio standard, a CES sets requirements for the percentage of electricity sales that must be supplied from qualified clean energy sources and allows electric utilities to demonstrate compliance via tradable credits that they earn themselves for their own generation or buy from other electric utilities or clean energy generators.
    • As a market-based policy, a CES can effectively increase clean energy generation and achieve associated benefits while offering substantial compliance flexibility for electric utilities thus minimizing impacts on electricity consumers.
    • By broadly defining clean energy, a CES provides opportunities for utilities, states, and regions to exploit their unique mix of clean energy options.
    • A CES program can build upon the success of existing electricity portfolio standards that a majority of states have already implemented, provided that the percentage targets are increased in proportion to the potential of newly eligible resources. If additional clean energy resources are allowed to qualify for an existing portfolio standard without increasing the targets, the mix of resources used to meet the standard and the resulting compliance costs may change, but the total amount of clean energy generation will not increase and the goals of the policy may not be furthered.
    • At the state and federal levels, CES policies have attracted bipartisan support, including CES proposals from President Obama and Republicans in Congress.
  • CES programs enacted by the federal government or by states singly or in coordination could spur incremental clean energy generation and deliver associated benefits.
    • Federal CES proposals have attracted bipartisan support in previous years, but it is not clear if or when legislation to create a federal CES will move forward.
    • States have already proven themselves to be policy innovators with respect to renewable electricity portfolio standards, and states may seek to reap the benefits of clean energy for themselves by implementing new CES policies—either singly or as part of multi-state programs.
    • At least four states (Michigan, Ohio, Pennsylvania, and West Virginia) already have electricity portfolio standards that credit cleaner, non-renewable energy sources, and Indiana has a similar but voluntary program. These states offer several lessons for future state or federal CES programs, including:
      • Utilities tend to comply with electricity portfolio standards by deploying the lowest-cost qualified resources, so policymakers may need to include special provisions in a CES if they hope to provide a meaningful incentive for less commercially mature and higher-cost technologies.
      • Policymakers can design CES programs that have very modest impacts on electricity rates.
      • A combination of factors—including the policy’s target and the types of energy sources that qualify—determine how much incremental clean energy generation a CES program will deliver beyond “business as usual,” and policymakers should consider the interaction of such factors in developing a CES to ensure the program can meet their goals for additional clean energy generation.
  • The net effects of a CES policy are a function of interrelated policy design decisions. Policymakers and stakeholders should understand CES policy design options and their interactions and implications. Policymakers and stakeholders might usefully evaluate a CES in terms of key criteria and think about implications of different policy design decisions in light of these criteria.
    • Effectiveness – What is the magnitude of the policy’s desired impacts?
      • CES targets set the requirements for overall clean energy generation.
      • The degree to which a CES delivers the benefits associated with clean energy depends on how policymakers define qualified clean energy under the program.
      • Certain policy design options (e.g., exemptions for certain utilities and alternative compliance payments) can have the effect of reducing a CES program’s effective target for incremental clean energy deployment.
      • Policymakers may include provisions in a CES to provide particular incentives to certain technologies—e.g., less commercially mature or higher cost ones—in order to reap particular clean energy-related benefits.
    • Cost-effectiveness – how efficiently does the policy achieve its intended aims?
      • As a market-oriented policy, a CES is an inherently cost-effective program.
      • Policymakers have several options for providing electric utilities with compliance flexibility under a CES (e.g., banking and borrowing of credits).
      • In general, the more flexibility that utilities have for meeting clean energy targets (e.g., the more broadly clean energy is defined), the more cost-effective a CES program will be.
    • Fairness – does the policy lead to any undue burdens or unearned windfalls for particular utilities, power generators, or regions and customers?
      • Owing to a variety of factors, different electric utilities supply their customers with electricity from widely varying existing generation mixes. In addition, utilities, states, and regions have different cost-effective options for increasing clean energy generation (e.g., because of different renewable resource endowments).
      • How policymakers set CES targets, treat new vs. existing clean energy generators, and define qualified clean energy sources determine how the effects of a CES program vary among different utilities, power generators, or customers.
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Yes, You’ve Come to the Right Place

For those of you who came to our website today expecting to find information and resources from the Pew Center on Global Climate Change, please don’t click away. Today we announced an exciting transition. We are now C2ES — the Center for Climate and Energy Solutions. In addition to changing our name, we’ve refreshed our mission and strategic approach, updated our website, and made other changes to ensure that we can continue to craft real solutions to the energy and climate challenges we face today.

Yes, a great deal has changed in the last 24 hours. But what hasn’t changed is the need for straight talk, common sense and common ground. Today’s climate and energy issues present us with real challenges — and real opportunities as well. This is about protecting the environment, our communities and our economy. And it is about building the foundation for a prosperous and sustainable future.

Cooling Water Intake Structures

What are the cooling water intake structure rules?

Many power plants and manufacturing facilities use water from nearby sources, such as lakes and rivers, to produce steam to generate electricity, or to cool high-temperature machinery. Cooling water intake may take the form of a once-through system, in which water enters a facility, is used for cooling, and then is sent directly back into the water body. Another form is closed-cycle cooling, often in the form of cooling towers, where water is recirculated several times in the facility, thereby using only two to five percent the amount of water required for once-through cooling.

Large amounts of water many used for these cooling purposes, and the intake structures for water may have adverse environmental impacts. One significant problem is impingement, where fish or other animals are trapped against and mortally wounded by intake structures. Another environmental problem is entrapment, where animals, especially small organisms, eggs, and larvae, are sucked into the facility and killed by high pressures and temperatures.

Sec. 316(b)  of the Clean Water Act (CWA) requires that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing these adverse environmental impacts.

EPA has proposed a new rule complying with these mandates of the CWA for existing facilities. New facilities are not covered by this rule and remain subject to applicable 2001 cooling water intake regulations. The new rule has three main components. The first component is to establish a limit to the number of fish that can be killed by impingement at a facility and allow the facility to determine what technology to use to meet that standard. The second component applies only to the largest consumers of water (more than 125 million gallons per day), and they must undertake an evaluation, with public comment, on if reductions in the entrapment rate need to be made. The third component requires all new construction of intake structures that are part of increased electric generating capacity to meet the low rates of entrapment achieved by closed-closed cycle intake structures.

Who are the covered entities?

This new rule on cooling water intake structures would cover about 1,260 existing facilities that each withdraw at least 2 million gallons per day of cooling water (670 power plants and 590 manufacturing plants). EPA estimates that nearly 60 percent these facilities already employ technologies that are likely to comply with the impingement requirements of the rule. Manufacturers of aluminum, iron, steel, petroleum, paper, chemicals, and food processing are likely to be the most affected by this rule.

What is the status of regulation?

EPA first promulgated regulations to implement Sec. 316(b) in 1976 following mandates of the Clean Water Act, but the court remanded those regulations in 1977 after legal challenges from industry. Instead of issuing new rules, EPA undertook relevant studies and directed state permitting authorities to determine the best technology available to reduce impingement and entrapment on a case-by-case basis.

In 1995, EPA entered into a consent decree establishing a schedule for taking final action on regulations following litigation. In November 2001, EPA finalized regulations for new facilities, which it referred to as Phase I of the regulations. Phase II of the regulations, released in 2004, applied to certain power plants built before 2002 – those that withdrew more than 50 million gallons per day from waters of the United States, 25 percent of which was used for cooling purposes. In 2006 offshore oil and gas facilities were given a categorical exclusion from additional rules, which essentially subjected them to the same regulation as Phase I facilities.

This regulation is considered to be the last set following the consent decree, Phase III, and the proposed rule was issued in April 2011 with the public comment period lasting through August 2011. According to a modified settlement agreement, the final rules must be issued by April 17, 2014.

 

Read more from EPA on cooling water intake structures.

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Coal Ash Disposal

What are the coal ash disposal (coal combustion residuals disposal) rules?

The residuals of coal combustion in power plants that are captured by pollution control technology, such as scrubbers, are often referred to as coal ash. The waste includes fly ash, bottom ash, boiler slag, flue gas desulfurization gypsum, and other byproducts and contains low concentrations of arsenic, selenium, lead, and mercury. After collection at a power plant, coal ash is often impounded in a surface storage pond or in a landfill.

Like other waste products, coal ash is governed under the Resources Conservation and Recovery Act  (RCRA) and is currently considered to be a non-hazardous waste under that law. Through a rulemaking process, EPA is considering whether this designation should be changed.

Who are the covered entities?

Coal-fired power plants in the U.S. produced 136 million tons of coal ash in 2008. Fifty-five percent of that total was disposed of in 584 landfills or surface impoundments nationwide. However, coal ash has some useful purposes; 45 percent of the waste is now recycled into products like concrete and bricks and as filler for abandoned mines and highway berms. New coal ash disposal regulations would affect the 60 million tons of coal ash annual that is disposed of and not recycled, reused, or reclaimed.

What is the status of regulation?

EPA decisions in 1993 and 2000 determined that coal ash should be regulated as a non-hazardous waste under Subtitle D of RCRA, the same classification as household garbage and other nonhazardous industrial wastes. EPA develops guidelines to assist in planning, managing, and implementing disposal of these wastes, although state and local agencies take primary responsibility. 

The classification of coal ash as non-hazardous waste has been challenged by recent events. In December 2008, a dam holding a wet storage pond of coal ash from power plants broke in Kingston, Tennessee, spilling about one billion gallons of coal ash-polluted water over 300 acres into the nearby community and waterways. Another spill in October 2011 sent coal ash-polluted water into Lake Michigan. These accidents, along with long held concerns about leaching of pollutants from impoundments to ground water, have led to some advocates to call for a designation as a hazardous waste under RCRA, and EPA proposed rulemaking on the issue in June 2010.

The EPA proposed and sought comment on two options, neither of which would apply to coal ash that is recycled or reused into other products. The first option would classify coal ash as a "special waste" under Subtitle C of RCRA. Ultimately, this designation would require regulations for the generation; transportation; and treatment, storage or disposal of coal ash, along with related compliance and enforcement programs. The second option would be to continue the treatment of coal ash as a non-hazardous waste under Subtitle D of RCRA but also establish minimum requirements for storage. Under both proposals, EPA would establish dam safety requirements to address the structural integrity of surface impoundments to prevent major releases, like those seen recently in Tennessee and Wisconsin.

EPA offered five months of public comment and a year of data collection on these proposals and received over 450,000 comments, and announced that it would delay final decision-making until an unnamed future date.

In a consent decree following lawsuits by environmental organizations and industry, EPA has stated that it will issue a final rule by December 14, 2014. 

 

 

Read more from EPA on coal ash disposal.

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