Designing CO2 Performance Standards for a Transitioning Electricity Sector: A Multi-Benefits Framework

Date01 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 signicant 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 signicant 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, retrot 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 (“Signicant
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 eciency; and public policy initiatives
and environmental regulations.”).
2. Mercury and Air Toxics Standards (MATS), 77 Fed. Reg. 9304, 9367-70
(Feb, 16, 2012) (codied at 40 C.F.R. pts. 60, 63); Cross-State Air Pollution
Rule, 76 Fed. Reg. 48208, 48208 (codied 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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