New Environmental Protection Agency Greenhouse Gas Rule Takes Aim at Fossil-fueled Power Plants

• Publication year: 2024
• Citation: Vol. 2 No. 5

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Eric Groten, William Scherman, Ronald J. Tenpas, Jeffrey Jakubiak, Jason Fleischer, and Thomas Aird ^*

In this article, the authors discuss the Environmental Protection Agency's final rule establishing Greenhouse Gas Standards and Guidelines for Power Plants.

The U.S. Environmental Protection Agency (EPA) has finalized a host of new requirements for fossil-fueled power plants, including new source performance standards (NSPS) for new and modified coal- and gas-fired plants and emission guidelines for existing coal-fired plants. The rules for existing and new coal plants and for new gas plants operated near base load do not so much set numeric emission limits as direct the use of control technologies that have not been widely deployed to date, and may be unproven or unavailable at scale. Accordingly, these new requirements, if upheld against litigation and legislative responses—a big if—could represent the end game for coal-fired electricity generation in the United States and present heavy headwinds for new gas-fired plants intended to be operated above a 40 percent capacity factor. But, departing from its proposal, the EPA spared existing natural gas power plants from this new rule, at least for now—their fate will be determined by a subsequent EPA rulemaking. Any plant closures would be occurring as the U.S. faces unprecedented increased demand for electricity and as electricity regulators are increasingly concerned about grid reliability issues.

The EPA recently published a final rule ¹ establishing Greenhouse Gas Standards and Guidelines for Power Plants (the GHG Rule). This final rule had been announced on the same day as three other EPA rules focused on fossil-fueled power generation. ² Together, the four new rules place significant economic and logistical burdens on new and existing coal-fired power plants and

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communicate the Biden administration's goal to discourage future generation planning based on fossil fuels. The record timing of Federal Register publication of these voluminous rules appears to reflect the administration's desire not only to beat the clock for Congressional Review Act reversal by a new Congress but also to ensure that the current administration will be defending the rules when they reach the stay stage of litigation in the U.S. Court of Appeals for the District of Columbia Circuit.

Coal-Fired Power Plants

Coal-fired power plants face a highly uncertain future under the GHG Rule. To remain in compliance, these generating facilities must:

1. Convert to natural gas co-firing by January 1, 2030, and then retire by 2039;
2. Install by 2032 carbon capture and sequestration (CCS) technology capable of capturing 90 percent of all CO₂ emissions; or
3. Cease operations by 2032.

These requirements are based on the EPA's assertion that CCS represents the best system of emissions reduction (BSER), at least for plants with a run time extending beyond the next seven years. As part of its BSER justification, the EPA asserts that "CCS is an adequately demonstrated technology that achieves significant emissions reduction and is cost-reasonable, taking into account the declining costs of the technology and a substantial tax credit available to sources." ³ This BSER rationale by the EPA is at best overly optimistic: There are disputes over whether one U.S. plant that tried to achieve near-90 percent reduction of CO₂ emissions was able to do so—some say yes ⁴ and others suggest it was only able to achieve emission reductions of 55 percent to 70 percent. ⁵ Further, the BSER relies on the assumption that CO₂ and natural gas pipelines can be built to facilitate CCS or the conversion to natural gas co-firing, and that third parties will be available to off-take and store any captured CO₂. These assumptions, too, are highly uncertain, as CCS and natural gas pipeline developers themselves face significant regulatory hurdles in getting permits. Ironically, some environmental groups are leading the charge to block them.

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For these and other reasons, the EPA's BSER rationale will be challenged in the litigation that already commenced upon the rule publication. ⁶

New Natural Gas Power Plants⁷

Newly constructed natural gas-fired plants are treated somewhat better than their coal-consuming counterparts, in that the administration is seeking only to derate rather than abolish them: new base load gas-fired power plants (i.e., those with capacity factors greater than 40 percent) must meet detailed NSPS requirements based on "high efficiency" combined cycle combustion technology immediately upon start-up and then install CCS by January 1, 2032. As with the coal-fired power plant requirements, the CCS equipment must capture 90 percent of all CO₂ emissions. The inevitable effect of this capacity factor cut-off will be to substantially reduce the chance that new base-load gas plants can be built.

For intermediate load gas-fired power plants with capacity factors between 20 percent and 40...