The Environmental Protection Agency’s Clean Power...

The Howard H. Baker Center for Public Policy The Howard H. Baker Center for Public Policy

Policy Brief

Student Voice 1.14

The University of Tennessee

Bredesen Center for Interdisciplinary Research and Graduate Education

Student Comment on:

The Environmental Protection Agency’s Clean Power Plan

Justin Knowles Mark Christian

Emily Clark Mary Alice Cusentino

Kristian Myhre Guinevere Shaw

Student Voice 1.14



Student Comment on:





Student Voice 1.14



Student Comment on:





Student Voice 1.14



Student Comment on:





Baker Center Board

Cynthia BakerMedia ConsultantWashington, DC

Sam M. BrowderRetired, Harriman Oil

Patrick ButlerCEO, Assoc. Public Television StationsWashington, DC

Sarah Keeton CampbellAttorney, O’Melveny & Myers, LLPWashington, DC

Jimmy G. CheekChancellor, The University of Tennessee, Knoxville

AB Culvahouse Jr.Attorney, O’Melveny & Myers, LLPWashington, DC

The Honorable Albert Gore Jr.Former Vice President of The United StatesFormer United States SenatorNashville, TN

Thomas GriscomCommunications ConsultantFormer Editor, Chattanooga Times Free PressChattanooga, TN

James Haslam IIChairman and Founder, Pilot CorporationThe University of Tennessee Board of Trustees

Joseph E. JohnsonFormer President, University of Tennessee

Fred MarcumSenior Advisor to Senator BakerHuntsville, TN

The Honorable George Cranwell MontgomeryFormer Ambassador to the Sultanate of Oman

Regina MurrayKnoxville, TN

Lee RiedingerVice Chancellor, The University of Tennessee, Knoxville

Don C. Stansberry Jr.The University of Tennessee Board of TrusteesHuntsville, TN

The Honorable Don SundquistFormer Governor of TennesseeTownsend, TN

William H. SwainThe University of Tennessee Development CouncilHuntsville, TN

The Honorable Fred ThompsonFormer United States SenatorWashington, DC

Robert WallerFormer President and CEO, Mayo ClinicMemphis, TN

Baker Center Staff

Matt Murray, PhDDirector

Nissa Dahlin-Brown, EdDAssociate Director

Jay CooleyBusiness Manager

Elizabeth WoodyOffice Manager

William Park, PhDDirector of Undergraduate ProgramsProfessor, Agricultural and Resource Economics

Charles Sims, PhDEnergy & Environmental PolicyAsst. Professor, Economics

Krista Wiegand, PhDGlobal Security PolicyAssoc. Professor, Political Science

About the Baker CenterThe Howard H. Baker Jr. Center for Pub-lic Policy is an education and research center that serves the University of Ten-nessee, Knoxville, and the public. The Baker Center is a nonpartisan institute devoted to education and public policy scholarship focused on energy and the environment, global security, and leader-ship and governance.

Howard H. Baker Jr. Center for Public Policy1640 Cumberland AvenueKnoxville, TN 37996-3340

[email protected]

DisclaimerFindings and opinions conveyed herein are those of the author(s) only and do not necessarily represent an official position of the Howard H. Baker Jr. Center for Public Policy or the University of Tennessee.

Baker Center Board

Cynthia BakerMedia ConsultantWashington, DC The Honorable Howard H. Baker Jr.Former Ambassador to JapanFormer United States Senator The Honorable Phil BredesenFormer Governor of Tennessee

Sam M. BrowderRetired, Harriman Oil Sarah Keeton CampbellAttorney, Williams & Connolly, LLPWashington, DC

Jimmy G. CheekChancellor, The University of Tennessee, Knoxville AB Culvahouse Jr.Attorney, O’Melveny & Myers, LLPWashington, DC

The Honorable Albert Gore Jr.Former Vice President of the United StatesFormer United States Senator Thomas GriscomCommunications ConsultantFormer Editor, Chattanooga Times Free Press

James Haslam IIChairman and Founder, Pilot CorporationThe University of Tennessee Board of Trustees Joseph E. JohnsonFormer President, University of Tennessee Fred MarcumSenior Adviser to Senator Baker The Honorable George Cranwell MontgomeryFormer Ambassador to the Sultanate of Oman Regina MurrayKnoxville, Tennessee Lee RiedingerVice Cancellor, The University of Tennessee, Knoxville

John SeigenthalerFounder, First Amendment Center, Vanderbilt University Don C. Stansberry Jr.The University of Tennessee Board of Trustees The Honorable Don SundquistFormer Governor of Tennessee William H. SwainThe University of Tennessee Development Council The Honorable Fred ThompsonFormer United States Senator Robert WallerFormer President and CEO, Mayo Clinic

Baker Center Staff

Matt MurrayDirector

Nissa Dahlin-BrownAssociate Director

Michelle Castro Development Director

Patti RebholzBusiness Manager

Elizabeth WoodyOffice Manager

Carl PierceDirector Emeritus & Senior Fellow for Baker Studies

About the Baker CenterThe Howard H. Baker Jr. Center for Public Policy is an education and research center that serves the University of Tennessee, Knoxville, and the public. The Baker Center is a nonpartisan institute devoted to education and public policy schol-arship focused on energy and the environment, global security, and leadership and governance.

Howard H. Baker Jr. Center for Public Policy1640 Cumberland AvenueKnoxville, TN 37996-3340

[email protected]

The contents of this report were developed under a grant from the US Department of Education. How-ever, these contents do not necessarily represent the policy of the US Department of Education, and you should not assume endorsement by the federal government. Findings and opinions conveyed herein are those of the authors only and do not necessarily represent an official position of the Howard H. Baker Jr. Center for Public Policy or the University of Tennessee.

About Student Voice We are pleased to feature the work of outstanding University of Tennessee un-dergraduate and graduate students who are associated with the Baker Center. Student Voice papers may feature commentary, scholarly research, conference reports, or reaction papers. They have been reviewed by a faculty member or a professional in the field, who may also have served as an advisor or mentor to the student(s). We hope you enjoy this series and we wel-come your comments and suggestions.

1The Howard H. Baker Center for Public Policy The Howard H. Baker Center for Public Policy

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The University of Tennessee Bredesen Center for Interdisciplinary Research and Graduate Education Comment on:


Justin Knowles, Mark Christian, Emily Clark, Mary Alice Cusentino, Kristian Myhre, Guinevere Shaw

ABSTRACT The Bredesen Center for Interdisciplinary Research and Graduate Education at the University of Tennessee supports the Environmental Protection Agency’s actions to reduce carbon dioxide emissions from currently operating electricity generating facilities. Carbon dioxide emissions could have a variety of considerable negative impacts to our nation, including global climate change. Regulating carbon emissions from the electric power industry is an effective way of reducing the nation’s contribution to this effect. The Bredesen Center has uncovered inconsistencies in the Clean Power Plan and its application to existing power plants. The identified inconsistencies have been shown to have negative implications on existing facilities. The Bredesen Center urges the Environmental Protection Agency to correct these inconsistencies and instead apply technology-neutral regulations on carbon emissions to all states in order to allow industry to employ a free market approach. A technology-neutral regulation methodology will provide both an accurate picture of the emission goals and the freedom for states to reach these goals in a manner most appropriate for their circumstance. This increased accuracy and freedom is more politically viable and therefore more likely to reach the emission reduction goals initially set forth by the Clean Power Plan.

RECOMMENDATIONS

1. Include 100% of nuclear and hydroelectric generation in the development of state carbon reduction goals.

2. Remove technology-specific calculations from state carbon reduction goals.

3. Include all states in the Clean Power Plan.

4. Correct future electricity generation projections.

5. Calculate the nationwide carbon dioxide reduction target using recent data that reflects entire energy portfolio.

2 The Howard H. Baker Center for Public Policy

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INTRODUCTION The Bredesen Center commends the United States Environmental Protection Agency (EPA) for its effort to address the carbon intensity of domestic electrical production, as this is a necessary step towards a secure and environmentally responsible energy generation portfolio. The Bredesen Center wishes to support this effort and as part of this has produced a series of comments on the plan. These comments address aspects within the Clean Power Plan (CPP) that should be modified to assure both the accuracy of its statements and the neutrality in technologies implemented. These recommendations, if integrated into the CPP, will ensure that the plan provides accurate and responsible recommendations for a modification of electrical production carbon intensity while allowing individual states the freedom to choose the manner in which these goals are met.

RECOMMENDATIONS In the Environmental Protection Agency’s proposed plan, the contributions of nuclear and hydroelectric power are not taken into full consideration, thereby skewing the perception of the current generation methods and causing carbon emission reductions to be miscalculated.

Nuclear and hydroelectric inconsistencies The EPA’s Clean Power Plan proposal considers only 5.8% of the electrical generation produced by nuclear power and 0% produced by hydroelectric power. According to 2013 Energy Information Administration (EIA) data, nuclear and hydroelectric generation account for 19% and 6.8% of domestic electrical production, respectively, which totals to 1.04 trillion kilowatt hours of electricity annually. Hydroelectric and nuclear production combined represent 80.5% of domestic carbon-free generation. It should be clearly noted that the EPA’s proposed plan, which considers 5.8% of nuclear and 0% of hydroelectric production, disregards 75.8%, or 788 billion kilowatt hours, of domestic carbon-free electricity generation. The rationale for disregarding a significant portion of the production from nuclear sources comes from the assumption that 5.8% of current nuclear facilities are currently at-risk for closure. The EPA’s plan elects to disregard the production from the other 94.2% of facilities and instead focuses solely on the preservation of the 5.8%. The EPA’s rationale for excluding the hydroelectric power contribution of domestic energy projection is based on economy of scale, and states that, since hydroelectric production currently comprises 52% of renewable generation, any increase in non-hydroelectric based production would appear to be insignificant.

Implications of inconsistencies These inconsistencies result in quantifiable repercussions that lead to inaccuracies in the stated results of the EPA’s proposed plan. These are consequences of the plan’s disregard for 25.8% of domestic

1. Include 100% of nuclear and hydroelectric generation in the development of state carbon reduction goals.

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production, specifically the subset that is responsible for 80.5% of carbon-free generation as stated above. As a result of the exclusion of hydroelectric and nuclear power contributions, any claims of carbon intensity are inaccurate. Specifically, any claims of increased carbon-free production on behalf of the EPA’s plan are reduced by 80% in reality. The Bredesen Center stresses that these generation inconsistencies must be addressed as they significantly alter the stated results of enacting the CPP. In the case of hydroelectric power production, the EIA confirms that non-hydroelectric based electrical production routinely out-produces hydroelectric generation. Non-hydroelectric power is anticipated to permanently outpace hydroelectric production in the coming years. While hydroelectric power currently represents 52% of the domestic renewable portfolio, wind-based production accounts for 32%. The EPA’s depiction of hydroelectric production dwarfing less developed sources of renewable energy is inaccurate. When considering nuclear generation, the EPA states that they wish to preserve “at-risk” nuclear capacity in the CPP. The Bredesen Center recognizes that considering only 5.8% of nuclear generation in the CPP is a misrepresentation of the nuclear industry and leaves most generation unprotected from closure. The at-risk power plants identified by the EIA are unique cases local to only a few states. The application of a uniformly distributed risk factor will not successfully preserve these individual plants. It should be noted that for all states with nuclear power, 5.8% of total nuclear generation is less than the generation of one nuclear unit. The CPP in its current revision did not allocate sufficient incentive for utilities to maintain nuclear generation and exacerbates the host of issues faced by all nuclear units. The Bredesen Center understands that there are concerns about the overshadowing of some forms of new electrical production by established technologies, such as nuclear and hydroelectric power. However, an emissions reduction plan such as the CPP should remain technology-neutral. Disregarding energy sources for their widespread use has the repercussion of removing their significant contributions along with eliminating the potential expansion of established emission free technology. The Bredesen Center recognizes that emissions based regulations are most effective when they remain technology-neutral. As it is currently written, the CPP proposed state goals are oriented towards specific technology requirements and provide uneven emissions regulations across all states. This method of setting emissions goals is more difficult and less effective than a technology-neutral solution. In the following sections, the damaging implications of setting state goals on specific technology changes are discussed. The Bredesen Center strongly recommends removing these technology requirements included in state goal calculations and replacing them with evenly applied carbon intensity reduction goals based on the EPA’s intended 2030 target of reducing the nation’s carbon emissions by 30%.

Natural gas capacity factor The CPP predicts capacity factor for natural gas in many states is expected to shift from peak generation to baseload generation. This requires plants to increase their operating capacity to 70% on average. Even though this value is achievable with Natural Gas Combined Cycle (NGCC) plants and will reduce average



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production, specifically the subset that is responsible for 80.5% of carbon-free generation as stated above. As a result of the exclusion of hydroelectric and nuclear power contributions, any claims of carbon intensity are inaccurate. Specifically, any claims of increased carbon-free production on behalf of the EPA’s plan are reduced by 80% in reality. The Bredesen Center stresses that these generation inconsistencies must be addressed as they significantly alter the stated results of enacting the CPP. In the case of hydroelectric power production, the EIA confirms that non-hydroelectric based electrical production routinely out-produces hydroelectric generation. Non-hydroelectric power is anticipated to permanently outpace hydroelectric production in the coming years. While hydroelectric power currently represents 52% of the domestic renewable portfolio, wind-based production accounts for 32%. The EPA’s depiction of hydroelectric production dwarfing less developed sources of renewable energy is inaccurate. When considering nuclear generation, the EPA states that they wish to preserve “at-risk” nuclear capacity in the CPP. The Bredesen Center recognizes that considering only 5.8% of nuclear generation in the CPP is a misrepresentation of the nuclear industry and leaves most generation unprotected from closure. The at-risk power plants identified by the EIA are unique cases local to only a few states. The application of a uniformly distributed risk factor will not successfully preserve these individual plants. It should be noted that for all states with nuclear power, 5.8% of total nuclear generation is less than the generation of one nuclear unit. The CPP in its current revision did not allocate sufficient incentive for utilities to maintain nuclear generation and exacerbates the host of issues faced by all nuclear units. The Bredesen Center understands that there are concerns about the overshadowing of some forms of new electrical production by established technologies, such as nuclear and hydroelectric power. However, an emissions reduction plan such as the CPP should remain technology-neutral. Disregarding energy sources for their widespread use has the repercussion of removing their significant contributions along with eliminating the potential expansion of established emission free technology. The Bredesen Center recognizes that emissions based regulations are most effective when they remain technology-neutral. As it is currently written, the CPP proposed state goals are oriented towards specific technology requirements and provide uneven emissions regulations across all states. This method of setting emissions goals is more difficult and less effective than a technology-neutral solution. In the following sections, the damaging implications of setting state goals on specific technology changes are discussed. The Bredesen Center strongly recommends removing these technology requirements included in state goal calculations and replacing them with evenly applied carbon intensity reduction goals based on the EPA’s intended 2030 target of reducing the nation’s carbon emissions by 30%.

Natural gas capacity factor The CPP predicts capacity factor for natural gas in many states is expected to shift from peak generation to baseload generation. This requires plants to increase their operating capacity to 70% on average. Even though this value is achievable with Natural Gas Combined Cycle (NGCC) plants and will reduce average



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emissions intensity across a state, this scenario would likely have several negative implications, including a decrease in peak generation. The cost of natural gas has been volatile at the Henry Hub due to seasonal demand for heating. If natural gas is to be used for primary baseload generation, seasonal changes could be expected to cause considerable consumer electricity price volatility. Additionally, natural gas has historically been used by utilities for power peaking. If renewables are employed more widely, as projected in the CPP, the need for demand response power peaking will become even more critical than it is today. By requiring an increase in average capacity factor, the CPP lessens states’ abilities to keep natural gas plants on standby for power peaking purposes. Including increases in natural gas capacity factor creates an uneven landscape for state carbon reduction goals. A technology-neutral plan would not include this requirement.

Coal heat rate improvement Currently, there is a range of coal plant efficiencies throughout the U.S. According to the EIA, in 2012 the average coal plant heat rate was 10,107 Btu, with the top five plants ranging from 8,888 Btu to 9,174 Btu. The EPA currently suggests a heat rate reduction of 4-6%, with 6% corresponding to the proposed plan. This would require the national average to be decreased to a value of 9,500 Btu. Although this is higher than the top five plants in the nation, it will be difficult for plants that are already at an optimal heat rate to make any further improvement. By using a blanket approach to require all coal power plants to improve their heat rates by 6%, the CPP is disadvantaging states that already have very efficient coal plants. These states will not be able to reduce their emissions through efficiency improvements and will therefore be required to meet the CPP reduction by other means. If this type of carbon regulation were technology-neutral, it would not demand specific requirements that would unfairly disadvantage some states, such as coal heat rate improvements.

Renewable increases The CPP proposes a nationwide goal of achieving 13% of total electricity generation from renewable sources by 2030. The Bredesen Center supports the development and installment of renewable power generation. However, this technology-specific requirement creates an unfair landscape for some states. According to the EPA’s Greenhouse Gas Abatement Measures Technical Support Document, renewable energy projections were based on existing Renewable Portfolio Standards (RPS) in specified regions. Renewable generation targets were calculated as averages of all 2020 RPS requirements in a region. Because states’ RPS timelines did not necessarily align to that of the CPP, the EPA had to interpolate its results to the reference year. This creates a landscape that is not only unrepresentative of any existing RPS, but also sets a much different timeline than an individual state would historically anticipate. Due to the effects from interpolating dates and averaging regions, the CPP requires 4 states to reduce their renewable generation between 2012 and 2030. A carbon emissions reduction plan should not recommend this action. This clearly reveals the inconsistency in setting state goals using specific technology requirements.


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Energy efficiency Many states are currently implementing policies to improve energy efficiency (EE). According to the EPA, state improvements in EE have ranged from 0% to 2.19% with cumulative improvements of up to 15.77%. The EPA suggests using three different tiers of required EE improvements: over 1.5%, 1.0-1.5%, and less than 1%. The states that have shown the most initiative in EE will be required to make further improvements of over 1.5%. While these states have proven their commitment to EE, it will be more challenging for them to further increase EE compared to states that have made few efficiency enhancements. To require certain states to make larger increases in EE than others is a disadvantage to those states that are expected to achieve a higher level of improvement. In a technology-neutral plan, states would have the freedom to decide the necessary level of EE implementation towards attainment of the emissions goals. In addition, EE does not affect the carbon emissions from a power plant directly. Although EE will help lower the energy demand and thus potentially lower net carbon emissions, it does not improve the actual carbon intensity of energy produced. The proposed version of the CPP focuses on carbon intensity and existing plant emissions, but EE only affects the amount of power demanded. Although EE has its place reducing overall emissions, it should not be included in state goal emission calculations. Rather, EE improvements affecting a state's total energy generation will be credited, by default, as a total emissions reduction in the CPP. The Bredesen Center recommends that all states be held accountable for maintaining a clean energy portfolio. As the CPP is currently written, Vermont is excluded from any form of carbon reduction goals. The EPA has justified this exception contending that Vermont does not contain carbon-emitting power plants. Even though this is true, excluding Vermont from the CPP will not hold them accountable to maintaining a carbon-free electricity grid. As a result, Vermont will be able to introduce carbon-emitting sources without being penalized. This is especially important as Vermont currently plans to shut down the Vermont Yankee nuclear power plant, which could conceivably be replaced with a carbon-emitting source without any repercussions. It is crucial to include all states in any future carbon regulations to ensure that every state implements a responsible energy plan and that newly built nonrenewable energy sources are both regulated and energy efficient. A key component of the EPA’s CPP is a projected decrease in electricity generation from the EIA business as usual (BAU) scenario. The EPA predicts an 11% generation reduction from BAU in 2030 resulting from successes in energy efficiency and conservation. According to the EIA, net generation in the electric power sector has shown an increasing trend since 1949. In recent years overall electricity generation has decreased, but this can primarily be attributed to negative economic factors, rather than improvements in energy efficiency or conservation. Despite historical evidence that electricity generation generally increases over a decade, the EPA projects a 1.2% decrease from 2020 to 2030. This sharply

3. Include all states in the Clean Power Plan. 4.

4. Correct future electricity generation projections. 5.


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contrasts with the 7.8% increase in generation projected by the EIA over this time period. While the CPP should have a positive impact on energy efficiency and conservation, an 11% reduction in electricity demand would be a capacious feat, particularly in light of the energy efficiency statement found above. As stated by the EPA, the CPP promises to reduce carbon emissions by 30% by 2030. The EPA’s final carbon dioxide emissions projection for 2030 is 3.655x1012 lbs/yr, which corresponds to a 35% reduction in carbon dioxide emissions from 2005 levels. While this appears to be an ambitious goal, the Bredesen Center has found that this results in only an 18% reduction in emissions from 2012 levels. Meaning, the U.S. has already achieved half of the 30% goal from 2005 to 2012. According to the EIA, carbon dioxide emissions from energy consumption at power plants in 2012 have already decreased by 15% from 2005 levels. Therefore, the CPP is actually only requiring a 15% reduction in carbon emissions by 2030. In conclusion, the Bredesen Center recommends that the EPA set its goals based on 2012 levels. Furthermore, the carbon dioxide emissions rate calculation for each state should be corrected to include generation from all sources. In the proposed goal setting calculation, only the generation from existing fossil fuel plants is included for an initial carbon intensity value. Thus, the adjusted emissions rate will decrease by adding all other generation options in the denominator without changing the current energy mix. In order to determine a reasonable goal, both the initial and final emissions intensity calculations should include all generation sources.

CONCLUSION It is the Bredesen Center’s hope that the EPA takes our recommendations into consideration before progressing with the CPP. It is our belief that the CPP will be most effective when applied in a goal driven and technology-neutral manner which will allow states the flexibility to best adapt to this plan given their unique economic, demographic, and geographic features.

5. Calculate the nationwide carbon dioxide reduction target using recent data that reflects entire energy portfolio.

The Environmental Protection Agency’s Clean Power...

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