Designing CO2 Performance Standards for a Transitioning Electricity Sector: A Multi-Benefits Framework
Date | 01 December 2014 |
Author |
44 ELR 11068 ENVIRONMENTAL LAW REPORTER 12-2014
Designing CO2
Performance
Standards for a
Transitioning
Electricity Sector:
A Multi-Benefits
Framework
by Jonas Monast and David Hoppock
Jonas Monast is Climate and Energy Program
Director at Duke University’s Nicholas Institute for
Environmental Policy Solutions and a Senior Lecturing
Fellow at Duke Law School, and David Hoppock is
Senior Policy Analyst at Duke University’s Nicholas
Institute for Environmental Policy Solutions.
A signicant transition is underway within the elec-
tricity sector due to several market forces, retirement
of certain plants, and regulatory pressures. ere is
notable overlap bet ween available strategies for miti-
gating electricity sector risks and potential compli-
ance strategies for states under the Clean Power Plan.
is overlap presents regulators with an opportunity
to pursue strategies that help manage the transition
occurring in the electricity sector and achieve green-
house gas reductions required under the Clean Power
Plan, particularly in the areas of end-use energy e-
ciency and additional renewable power generation.
I. Introduction
e proposal by the U.S. Environmental Protection
Agency (EPA) to limit carbon dioxide (CO2) emissions
from existing power plants comes at a t ime when the elec-
tricity sector is in the midst of a signicant transition due
to market, regulatory, and technological forces. Low natu-
ral gas prices, driven by the rapid expa nsion of shale gas
production using hydraulic fracturing and horizontal drill-
ing, have led to a shif t toward natural gas-red electricity
generation.1 e shale gas boom occurred at the same time
that EPA promulgated new rules, the Mercury and Air Tox-
ics Standards (MATS), to limit hazardous air pollutants as
well as rules to limit downwind transport of sulfur diox-
ide (SO2), nitrogen oxides (NOx), and particulate matter,
intensifying economic pressure on coal-red power plants
operating without adequate pollution control technolo-
gies.2 e combination of t hese factors is causing power
plant operators to choose whether to retire older coal-red
units, retrot them with new pollution control technolo-
gies, or convert them from coal to natural gas generation.
ese trends have had a major impact on the coal sector,
but coal-red power plants are not the only facilities fac-
ing a new economic reality. Low natural gas prices a nd, in
some markets, increasing wind generation are also creating
economic pressure on nuclear power plants3—a situation
that would have seemed high ly unlikely only a few yea rs
ago. Together, relatively at electricity demand and inex-
pensive photovoltaic panels have the potential to challenge
the traditional electric utility business model by shrinking
revenues from electricity sales.4 In addition to these eco-
nomic, technica l, and regulatory shif ts, in Januar y 2014,
1. -
Commerce, 113th Cong. (2013) (written testimony of John R. Norris,
Commissioner, Fed. Energy Reg. Comm’n), available at http://www.ferc.
gov/CalendarFiles/20131205094304-Norris-12-05-2013.pdf (“Signicant
change is occurring in the energy sector. is change is driven by a new,
abundant supply of natural gas; technological innovations in grid opera-
tions, renewable energy and energy eciency; and public policy initiatives
and environmental regulations.”).
2. Mercury and Air Toxics Standards (MATS), 77 Fed. Reg. 9304, 9367-70
(Feb, 16, 2012) (codied at 40 C.F.R. pts. 60, 63); Cross-State Air Pollution
Rule, 76 Fed. Reg. 48208, 48208 (codied at 40 C.F.R. pts. 51-52, 72, 78,
97).
3. J J M L, U.S. E I. A. (EIA), I
F: I A P P R,
DOE/EIA-0383 (2014), http://www.eia.gov/forecasts/aeo/section_issues.
cfm#power_plant.
4. Peter Kind, Edison Elec. Inst., Disruptive Challenges: Financial Implications
(2013).
Copyright © 2014 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
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