International power on "power".

Author:Ferrey, Steven
Position:IV. United States Direct and Indirect Carbon Regulation B. United States Unilateral Executive Actions Targeting C(O.sub.2
  1. Mercury and Air Toxics Standard

    Mercury (Hg) is a naturally occurring element. The most significant human-caused way that mercury is released into the environment is through burning coal. Mercury is a pollutant that is regulated as a toxic chemical by the Clean Air Act. (175) In 2000, the EPA determined that mercury emitted by electric generation units (EGUs) was a HAP and therefore regulated EGUs' emissions of mercury under section 112 of the Clean Air Act. (176) Four years after this determination, EPA decided it would be more effective to regulate EGUs with a cap-and-trade system under section 111 of the Clean Air Act, (177) and proceeded to remove EGUs from the list of HAPs in Section 112. (178)

    New Mercury and Air Toxics Standards (MATS) set limits for all HAPs emitted by coal- and oil-fired electric generating units with a capacity of 25 Mw or greater. (179) MATS is specifically aimed at reducing power plants' emissions of toxic air pollutants--rather than criteria pollutants--including toxic arsenic, chromium, nickel, hydrochloric acid, and hydrofluoric acid, in addition to mercury. (180) The rule provides existing large electricity generation facilities four years to achieve full compliance, with an additional year available to the power plants that the Federal Energy Regulatory Commission (FERC) deems electric "reliability-critical" to maintain adequate voltage in the nation's bulk power system or for emergency start to meet system crises. (181) MATS further provides that if a source cannot come into compliance within the time frame allowed, EPA will determine--on a case-by-case basis--whether and to what extent it will assess individual fines or penalties for noncompliance. (182)

    In 2014, the D.C. Court of Appeals upheld EPA's MATS regulation after the U.S. Chamber of Commerce brought suit in White Stallion Energy Center LLC v. EPA. (183) What makes this somewhat controversial is that the co-benefits associated with fine particulate matter ([PM.sub.2.5]) reductions comprise the overwhelming majority of all benefits attributed to the MATS regulations, and [PM.sub.2.5] is already otherwise heavily regulated by the EPA under other regulations. (184) EPA designed the rule, in part, to achieve through executive action [PM.sub.2.5] emissions reductions that it could not lawfully compel using provisions of the CAA authorizing direct regulation of [PM.sub.2.5]. (185) The majority at the Court of Appeals deferred to EPA's technical judgment. (186)

    The federal appellate court found that the action was not arbitrary and capricious because EPA demonstrated a reasonable connection between its actions and the record of decision and it was accorded Chevron deference. (187) Many in the regulated community expressed concern about the environmental regulations' likely impact on electric grid reliability, (188) and the possibility that many electricity generating plants would be forced to shut down in order to avoid individual noncompliance and fines, risking "the reliability of the" larger electric system. (189) Indeed, FERC deemed some of the affected units poised for permanent or temporary shutdowns after promulgation of the rule as reliability-critical to maintain successful grid operation. (190)

    The Supreme Court overturned the D.C. Circuit decision in 2015. (191) The Court focused on the agency's failure to consider costs, stating:

    One would not say that it is even rational, never mind "appropriate," to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits. In addition, "cost" includes more than the expense of complying with regulations; any disadvantage could be termed a cost. (192) Because EPA failed to consider costs in its decision to regulate power plants, the Court held that the MATS regulation was unreasonable. (193) MATS mandated massive reductions in both HAPs and [PM.sub.2.5] from power plants over the next several years. (194) Assuming that EPA is able to justify its regulation after the Supreme Court remand and the regulation, once justified in terms of its costs, survives, this will affect larger coal plants--if coal is greater than 10% of fuel input and the unit is greater than 25 Mw capacity, produces electricity for sale, and supplies more than one third of its potential output to any utility power distribution system--unless its annual capacity factor is less than 8% of rating (i.e. only used for peaking purposes). (195) Individually and collectively, these three unilateral executive actions, through the promulgation of much more demanding regulations, will change the use of coal power in the United States. There will be numerous shutdowns of existing coal-fired generation plants in the next three years.

    1. State Legal Authority over Power Choice

    While the federal government has promulgated Clean Air Act environmental regulations that inhibit use of coal-fired power and tax incentives which subsidize renewable energy, the significant support for renewable energy and greenhouse gas reduction is at the state level. Forty-four of the fifty states have enacted one or more regulatory mechanisms to promote renewable energy substitutes to fossil fuel power generation. Understanding how each operates, and its legal foundation, is the first step.

  2. State Regulation of "Anti-Carbon "

    Before addressing direct carbon regulation, some states have promoted "anti-carbon" laws and orders through renewable energy policy initiatives in the past two decades and by sculpting sustainable energy initiatives, including primarily use of:

    * Net Metering: In 85% of states (196)

    * RPS: In 65% of states (197)

    * FiTs: Tried in a few states (

    Each of these can be a powerful stimulant to sustainable renewable energy deployment in a market economy, as each provides a financial inflow at either the point of project construction or through generation of renewable electric power.

    1. FiTs

      FiTs deliberately set an above-market price to be paid by utilities for renewable power as a way to encourage it. (199) FiTs are unconstitutional when promulgated by a U.S. state as a way to compel regulated private utilities. (200) Administratively-set FIT prices for power have traditionally been too high, obligating utility customers to pay higher rates for the decades of the affected long-term contracts. (201) In 2011, Oregon lowered the price paid under its solar FiT for the third time in its one year of existence, reducing it from its original $0.65/Kwh to $0.374/Kwh. (202) Each of the prior iterations at higher prices was oversubscribed within less than ten minutes of its availability, even though each time the tariff was lowered 10%-20% from the prior available price. (203)

      The experience of government not correctly pricing FiT incentives and incurring significant amounts of debt--which is then passed on to utility ratepayers--is duplicated internationally. Germany and Spain are the leading countries using the FiT to achieve solar photovoltaic (PV) development, and are among the most successful in achieving wind project development with FiTs. (204) Spain's FiT was successful in quickly mobilizing significant and dramatic increases in the use of renewable energy: from less than 1% of total energy supply in 1990 to 24.7% in 2009, and 54% in 2013, (205) overrunning the national target for of 400 Mw of PV production by 1000% by 2010. (206) However, the Spanish FiT started in 1980 at 36 cents [euro]/Kwh for small solar projects, (207) rose in 1994, (208) and in 2004 had increased to 575% more than the average price of electricity. (209)

      The high FiTs proved that their costs to the utility system were unsustainable, and rates were reduced in 2008. (210) In 2010--with a tariff debt from the FiT program of 26 billion [euro]--contracts were abrogated by the utility, rates reduced, and the number of hours that the rate applied were reduced post facto. (211) Spain's utilities reneged on their existing power purchase contracts when the nation reconfigured its FiT rate by slashing it to 13cents [euro]/Kwh, a small fraction of the contractually agreed rate. (212) Additional radical cuts and abrogations of existing contracts occurred in 2013. (213) Spain now pays almost 1% of its gross domestic product (GDP) in subsidies for renewables, which is more than it spends on higher education. (214) When Spain abrogated its FiTs contracts and its power purchase agreements, it resulted in litigation alleging that the retroactive application was unconstitutional. (215) The European Commission criticized Spain's radical change in policy as a threat to foreign investment in the E.U. (216)

      In Germany, starting in 1990, the FiT morphed from a modestly designed program for PV power paying 8.57cents [euro]/Kwh--modestly above the wholesale value of that power--into a program paying 50.62 cents [euro]/Kwh by 2000--more than 1,000% above the value of wholesale power--for a twenty-year period of production of renewable power. (217) Nonetheless, the price for PV power in 2004 was increased to 57.4 cents [euro]/Kwh. (218) In 2009, because of concern about excessive payments to renewable energy projects under the FiT, the PV rate was lowered to 43.01 cents [euro]/Kwh, and additional retractions for future projects occurred in 2010. (219) By 2011, the rate for rooftop solar was reduced to 28.74 cents [euro]/Kwh. (220) By 2012, it had been reduced to 13.5 cents [euro]/Kwh for future eligible renewable energy facilities. (221)

      Germany slashed its initial FiTs in several states to approximately half their values from seven years ago. (222) Household electricity prices are four times as high in Germany as in the United States. (223) Germany, the world's fourth-largest economy, has experienced average electricity prices for companies jumping 60% over the past five years due to costs passed along as part of the government subsidization of renewable energy producers. (224) Retail prices are now almost triple...

To continue reading