Major Shift in What Qualifies as “Avoided Emissions” in Final Rule

In the draft Clean Power Plan (CPP) rule, energy efficiency (EE) was included in Building Block 4 as a Best System of Emission Reduction (BSER), as defined in the Clean Air Act.  While nuclear power was also included (Building Block 3), any plant that was either under construction or proposed was explicitly reflected in the state emission rate formula and thus negatively impacted compliance plan requirements.  Both of these BSER options were modified in the final rule due to industry comments.

Energy efficiency was removed from Building Block 4 as a BSER since a large number of comments indicated: (1) the difficulty in measuring and verifying energy efficiency actions for compliance, and (2) that EE was “beyond the fence line” and thus outside EPA’s regulatory authority.  The verification and persistence of reductions (assuming no rebound effect) in electric load by EE measures is more critical in CPP compliance than typical utility EE programs.  An affected utility would be subject to penalties and could confront higher compliance costs in the future if the EE measures were not maintained at the stipulated level over the compliance period.

The other avoided emissions BSER was nuclear power.  Nuclear power was included in the draft CPP as a compliance option in Building Block 3: (1) new/proposed nuclear plants were built into the emission rate algorithm; and (2) existing nuclear plants were given credit for 6% of their in-place capacity, to reflect nuclear capacity at risk. Both of these conditions negatively impacted state compliance by increasing their required emission rate.

The final CPP rule reflects several major changes in how nuclear power is credited for its zero carbon emissions:

  • New/proposed nuclear power was removed from the baseline level of emissions for each state.  In the revised CPP rule new or currently proposed nuclear plants are “defined as events that are occurring to reach” the state target.  In those states with new/proposed nuclear capacity this modification in how emission targets are calculated makes the 2030 goal less stringent than previously proposed.
  • Existing nuclear capacity is not given any credit for its carbon-free generation.  The CPP rule states that while EPA, “…accepts that existing nuclear plants make the level of CO2 emissions lower than it would otherwise be…” it concludes that …”plants that are already running do not further reduce CO2 below current levels.”  According to the Nuclear Energy Institute (NEI) this conclusion dismisses the value of nuclear as a non-emitting source of generation, and “…fails to recognize [is] that CO2 emissions will be significantly higher if existing nuclear power plants shut down prematurely.”  Further, it fails to recognize that the carbon value of nuclear will not be considered in the economics of relicensing decisions and their life extension beyond 40 years.  Thus, states will need to consider how to replace these zero-carbon sources of generation when they reach their regulatory lifetime (40), in addition to achieving the carbon reduction targets specified in the CPP.
  • Nuclear capacity uprates—modifications to existing reactors that increase their generating capacity—now count as new carbon-free generation and a CPP compliance mechanism.  While this recognition provides credit for additional nuclear plant capacity its significance is contingent on the fact that CPP does not recognize credit for life extension (relicensing beyond 40 years to 60 years).

The impact of these three revisions on solar, coal and nuclear capacity is illustrated in the following graphic.

CPP

While removing EE as a BSER was done to avoid litigation of EPA’s authority to control energy demand, its ultimate impact on state compliance plans is unknown due to expressed concerns about the ability to verify the persistence of avoided emissions.  Alternatively, inclusion of avoided emissions from nuclear power plants, both new and uprates, will have a more significant positive impact  on the ability of states with nuclear plants to meet their CPP targets, while simultaneously achieving other Clean Air Act requirements.

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