Since the unveiling of President Obama’s Clean Power Plan on June 2, 2014, a great deal of ink has been spilled explaining and debating the Plan and its implications. Notwithstanding the arguments for and against the Plan, some have now moved on to a necessary next phase—preparation. In a recently-released joint Discussion Paper by the West Virginia University Law Center for Energy & Sustainable Development, Downstream Strategies, and the Appalachian Stewardship Foundation, the groups examine the Clean Power Plan’s assumptions as they apply to West Virginia and propose one possible “Compliance Scenario” based on those assumptions.
I. Clean Power Plan Overview
The Clean Power Plan is described by EPA as a “common sense plan to cut carbon pollution from power plants.” EPA projects that under the Plan, the carbon dioxide emissions from existing power plants will be reduced an average of 30% from 2005 levels by the year 2030. EPA created individualized reduction goals based on each state’s 2012 emissions. Each state will be required to devise its own program to comply with its emissions budget.
EPA calculated these individual targets and interim benchmarks by applying the “best system of emission reduction” (BSER), which examined the cost of achieving such reductions, health and environmental impacts, and energy requirements for state. EPA also took into account four “building blocks” when computing the state goals. While the Building Blocks outline possible compliance scenarios, EPA maintains they are flexible guidelines rather than rigid rules.
The Building Blocks make the following assumptions:
- Block 1: Efficiency at current coal-fired plants can be increased by 6%;
- Block 2: Less carbon-intensive energy like natural gas can be used in place of more carbon-intensive energy like coal;
- Block 3: Carbon-intensive power can be replaced with nuclear and other renewables;
- Block 4: The demand for energy can be reduced by improving demand-side efficiency.
The Plan sets out an interim compliance period and a final compliance deadline. The interim compliance period requires states to meet an average emission limit from 2020 to 2029. The final compliance period requires states to meet a final limit by 2030. The Plan sets out each state’s emission limit in the form of an emission rate of pounds of CO2 per megawatt hour of net electricity produced (lbs/MWh). The Plan also gives states the option of converting this rate-based limit into a mass-based limit of total emissions in tons. The Discussion Paper calculates that West Virginia would be required to reduce its CO2 emission intensity from 2,019 lbs/MWh to 1,620 lbs/MWh by 2030.
II. Discussion Paper Overview
The Discussion Paper is intended to be the first in series that will outline emissions compliance options available in West Virginia, and is intended to “generate feedback” and “stimulate dialogue” throughout the state. Its aim is to present “policy recommendations on steps West Virginia could take to comply with [the Clean Power Plan] while also capturing the economic, social, and environmental benefits of expanding the state’s energy economy.”
The Discussion Paper delves into the four Building Block assumptions as they apply to coal-dependent state like West Virginia. The conclusion the researchers come to is that, while compliance with the Clean Power Plan is possible, West Virginia will have to work harder to achieve smaller goals because it has fewer options to diversify. The Discussion Paper notes that West Virginia is the second-largest coal-producing state in the country, and almost three-fifths of the electricity generated in West Virginia is exported to surrounding states. A significant reduction in coal, whether statewide or across the nation, will obviously have important implications for the state. Still, the Discussion Paper concludes that if West Virginia embraces the flexible approach allowed by the Plan, it “can develop a state plan that puts the state on track to meet its emission limits while at the same time enhancing the social, economic, and environmental benefits of further integrating its energy efficiency, renewable energy, and natural gas resources into the state’s electricity sector.”
The Discussion Paper asserts that the best approach is to leverage the state’s strengths. The Discussion Paper says one such strength is the fact that non-coal energy resources are “relatively untapped,” such as natural gas and renewable energy like wind, solar, hydropower. Another strength would be to use the state’s coal resources in new ways, such as through co-firing natural gas with coal. Finally, a key element to any compliance plan will be to boost energy efficiency, which would include stimulating investments in energy efficiency and reducing CO2 emissions. Overall, the Discussion Paper stresses the need for cooperation between the state Legislature, the DEP, and the West Virginia Public Service Commission.
III. Particulars of Discussion Paper
The Discussion Paper details a “Compliance Scenario,” which gives specific suggestions on how to reach compliance by going through the Plan’s four Building Blocks as they relate to West Virginia.
The Discussion Paper based its work off several key figures:
- 42% of West Virginia’s total 2012 energy generation was in-state retail electricity sales;
- 58% of West Virginia’s total 2012 electric generation was exported to surrounding states;
- 16 coal plants operated in West Virginia in 2012 and generated 96% of the state’s electricity;
- a majority of remaining 4% of West Virginia’s energy came from hydropower and wind;
- 6 of the coal plants operational in 2012 have been retired or are scheduled to retire by 2015, representing a loss of approximately 17% of the state’s total generating capacity;
- West Virginia has no NGCC plants and no nuclear plants.
A. Block 1: Improve Heat Rates at Coal-Fired Power Plants
Unlike EPA’s assumptions in Block 1, which state that coal-fired power plants can be made an average of 6% more heat-efficient, the Discussion Paper assesses West Virginia under a more conservative 3% efficiency increase. The Discussion Paper claims this is more realistic because it takes into account that some efficiencies being proposed by the Clean Power Plan have already been implemented in West Virginia. This echoes industry-wide concerns that coal plants have already implemented the most cost-effective efficiencies, leaving fewer ways in which to reach the 6% target.
Despite this more conservative number, there is little explanation as to what a 3%—or any percent—reduction would mean on a practical level for an individual plant.
B. Block 2: Re-Dispatch to NCGG
Block 2 is not addressed because it contemplates re-dispatch to existing NGCC plants, of which West Virginia has none.
C. Block 3: Increase Non-Hydropower Renewables and Preserve Nuclear
The Discussion Paper asserts that renewable energy resources accounted for 12.8% of total US electricity generation in 2013, with hydropower accounting for 56% of the renewable generation. In West Virginia, renewables account for only 4% of total electric generation.
The Compliance Scenario claimed there was a large market for growth in wind energy, and assumed West Virginia could reach a total wind generation capacity of 2106 MW by 2030, where it currently only has a wind generation capacity of 583 MW of wind capacity currently in operation. This would result in a 261% increase in wind capacity by 2030. This figure is on the low end of the National Renewable Energy Laboratory estimates, which estimated West Virginia’s wind energy potential to be between 1,883 and 2,772 MW.
The Compliance Scenario next assumes that West Virginia can integrate 410 MW of solar energy capacity by 2030, despite the fact that West Virginia’s total installed solar capacity is currently 1.9 MW. This would call for an increase in solar capacity of 21,479%—while this is not an insignificant number, the study cites to research showing that solar “is one of the fastest-growing energy sectors in the country,” and that West Virginia’s solar industry “has the potential for significant growth.”
These changes would result increase West Virginia’s total renewable output to 7%, which is still more conservative than EPA’s Building Block assumption, which states that West Virginia could grow its renewables to 14% of its total energy output.
D. Block 4: Improve End-Use Energy Efficiency
The Compliance Scenario concludes there could be big payoffs in Building Block 4. Where EPA estimates that West Virginia can reduce in-state electricity demand 10.71% by 2030, the Compliance Scenario assumes that West Virginia can achieve savings of 18% by 2030. The Discussion Paper claims that West Virginia utilities were ranked in the bottom five states for energy efficiency by the American Council for an Energy Efficient Economy (ACEEE) in its 2013 State Energy Efficiency Scorecard. The Compliance Scenario assumes energy savings could be achieved by adopting policies for binding energy efficiency resource standards. It touts energy efficiency as a “low-risk, low-cost energy resource that provides direct savings to consumers, encourages investment across other sectors of the economy, displaces the need for costly investments in new energy supply infrastructure, creates new employment opportunities, and reduces emissions of CO2 and other harmful pollutants.”
E. Other Considerations
The Discussion Paper also looks at additional sources of energy savings outside those contemplated by the Building Blocks. Some of these other considerations include:
- Hydropower: construction of new hydropower facilities, which could integrate 84 MW of new hydropower capacity into its electric generation profile by 2030;
- Natural Gas:
- construction of new NGCC plants, one of which could provide 525 MW of high-efficiency natural gas generation capacity;
- construction of co-firing existing coal plants with natural gas, and
- construction of new combined heat and power (“CHP”) facilities;
- Dispatch of Existing Coal Generating Units:
- rather than use EPA’s 2012 emissions numbers, re-dispatch existing coal-fired power plants such that the more efficient plants are dispatched first, thereby reducing the state’s overall emission rate, by either: (1) dispatching all non-retired coal plants at the same average capacity factor, regardless of emission rate, or; (2) assume coal plants operate at a 78% capacity factor and dispatch plants with lowest CO2 emission rates first and highest-emitting plants are not dispatched.
The Discussion Paper states that the Compliance Scenario could result in a 2030 emission rate of between 1,620 lbs/MWh and 1,717 lbs/MWh. Overall, even though the Compliance Scenario is less aggressive than EPA under Building Blocks1 and 3, it claims to make up for these differences by being more aggressive under Block 4 and by looking to “other” areas of compliance not incorporated into the Building Blocks such as hydropower, natural gas plants, combined heat and power facilities, and dispatch of existing coal generating units.
IV. Policy Recommendations and Conclusions
Finally, the Discussion Paper notes that there are many avenues available to the state in order to accomplish its goals. The Discussion Paper makes policy recommendations based on the fact that state plans must demonstrate how the state will achieve compliance.
Policy Recommendation 1: Adopt an Energy Efficiency Resource Standard
The Discussion Paper asserts West Virginia utilities do not currently offer West Virginians the highest level of energy efficiency service. As such, the Discussion Paper recommends the West Virginia legislature pass an energy efficiency resource standard (“EERS”) bill that would regulate the level of energy efficiency utilities must provide to their customers. One such bill was considered in 2013 but it did not pass. The Discussion Paper recommends adopting a revised version of this bill, saying that it “would provide tangible economic benefits and a low-cost emission reduction measure that could be demonstrated in a state plan to help the state meet its CO2 emission reduction requirements under the Clean Power Plan.”
Policy Recommendation 2: Require Binding Renewable Energy Targets
West Virginia has in place an Alternative and Renewable Energy Portfolio Standard (“AREPS”) that requires utilities to supply customers with a certain percentage of energy from alternative or renewable sources. The Discussion Paper considers the commitment to renewables to be non-binding, however, because the required percentages can be supplied solely through fossil-fuel-derived alternative sources rather than renewables. The Discussion Paper recommends that Legislature revise AREPS to include binding targets for the development of new renewable energy, such as wind, solar, hydropower, and biomass sources.
Policy Recommendation 3: Encourage Use of Natural Gas
The Discussion Paper recommends taking advantage of West Virginia’s natural gas capabilities by building NGCC plants, building new combined heat and power facilities, and co-firing existing coal plants with natural gas when possible. It states that integrating of natural gas would help diversify West Virginia’s electric system, drive down electricity costs, create additional export opportunities for West Virginia-produced natural gas—all while helping the state comply with the Clean Power Plan.
Policy Recommendation 4: Require “Integrated Resource Planning” for Utilities
The Legislature passed a bill in 2014 that requires utilities use “integrated resource planning.” IRP requires utilities to evaluate resource alternatives for meeting projected electricity demand, including new generating capacity, power purchases, energy conservation and efficiency, cogeneration and district heating and cooling applications, and renewable energy resources. Under IRP, conservation and energy efficiency should be given the same consideration as the more traditional alternatives. The Discussion Paper recommends that the Public Service Commission draft a “robust integrated resource planning requirement will ensure that energy efficiency, renewables, natural gas, coal, and other resources are evaluated on equal footing . . .” and “provide an important framework for evaluating and securing the lowest-cost compliance options under the Clean Power Plan.”
The Discussion Paper says these recommendations will “put the state on a path toward compliance with the Clean Power Plan, while at the same time providing consumers reliable electricity service at reasonable costs, growing the state’s energy economy, and reducing the impact of energy production on the environment.”
This article was authored by Jennelle Arthur, Jackson Kelly PLLC. For more information on the author, click here.