Today, the Environmental Protection Agency (EPA) under President Biden’s leadership released an important set of pollution limitations for power plants that will improve people’s health and help preserve a stable climate. Specifically, four power plant rules are part of the package: limits on carbon dioxide emissions, mercury and air toxics, effluent limitation guidelines, and coal ash.
Taken together, the rules will reduce harmful pollution from America’s air and water, improve public health, and help preserve a stable climate. Collectively, they will save thousands of people’s lives, prevent thousands of people from developing asthma, and prevent other severe health outcomes. They will save Americans hundreds of billions of dollars that would otherwise be required for healthcare and missed work days, responding to climate change impacts, premature deaths, and more. Expert analysis shows that the rules will also help our nation to meet growing electricity demand reliably while supporting the deployment of modern electricity generation technology. The rules additionally safeguard the reliability of the electric grid by providing allowances for emergency situations and extreme weather events when the grid is stressed.
Of these rules, our focus at SACE has been on the rules limiting carbon dioxide pollution from power plants. Burning coal and gas for electricity generation emits about a quarter of all the climate pollution across the country, yet until now, this pollution has been essentially unregulated by the federal government. Today’s announcements begin to change that.
While we at SACE can’t precisely predict how the new rules limiting carbon pollution from power plants will affect what power plants get built in the future or how they will be operated, we recognize the rules will act as one of many drivers of the shifting nature of the landscape of the utility industry, as modern and clean energy resources supplant outdated fossil resources.
Ultimately, today’s announcement is a wake-up call to Southeast utilities, regulators, and lawmakers, that the status quo of building large unabated baseload fossil gas plants can’t continue. The power plant rules are substantive and final, and utilities and regulators need to treat them as such. Even though EPA has had the proposed version of these rules on the books for about a year, major utilities, including Duke, Georgia Power, TVA, Dominion Energy South Carolina, and Santee Cooper have failed to adequately plan to comply with the rules, while committing tens of billions of ratepayers’ dollars to gas projects subject to these rules. Today’s announcement sends a clear signal: utilities and regulators must rethink the reckless drive toward a risky gas-dominant future.
Breaking Down The New Carbon Rules
The new carbon dioxide rules are really two separate rules: one that covers existing coal plants, and another that covers new, yet-to-be-built gas plants. These two sources are responsible for a tremendous level of climate pollution. According to 2022 data, coal combustion for electricity generation is the source of about 14 percent of climate pollution across the country. Likewise, new gas plants stand to be a massive source of carbon pollution if and when the plants come into service. This is particularly true in the Southeast U.S., where our major utilities like TVA, Duke Energy, Georgia Power, and Dominion Energy South Carolina are proposing to build tens of thousands of megawatts of new fossil gas power plant capacity.
Carbon Limits at Existing Coal Plants:
The rules for existing coal power units will base the stringency of pollution reduction on how long the units will run in the future. Coal units that retire by January 1, 2032 are not subject to the new rules. Units that will retire between 2032 and 2039 are designated as “medium-term” units, and will have to reduce emissions by 16% (the equivalent of co-firing with 40% gas) beginning in 2030. For units that stay online until 2040 or later (designated “long-term” units), they will have to reduce carbon dioxide pollution by 90%, by installing carbon capture equipment for example, beginning in 2032.
To ensure compliance with the new rules for existing coal plants, individual states will have to create state implementation plans to achieve the new emission limit guidelines. The new rules contain several provisions to promote flexibility in implementation, depending on each state’s particular circumstances: compliance determination through annual averaging and alternative calculation methods (mass-based vs. rate-based), emissions trading and averaging across multiple facilities, one-year compliance extensions to account for circumstances outside of the owner/operator’s control, and more. While state implementation plans, which will be created over the next two years, will be the ultimate guide for how this rule is applied to existing coal units, the final rule published today establishes enough regulatory certainty that all utilities must integrate the rules into all planning processes.
Carbon Limits at New, Yet-To-Be-Built Gas Units:
The rule for new, yet-to-be-built gas units would primarily apply to gas units that run a lot. In recent years, utilities have increasingly justified the construction of new gas power plants citing their capabilities to balance out the intermittent characteristic of renewable energy generation–so that solar and wind can do the bulk of powering the grid when the sun is shining and wind is blowing, and gas can pick up the slack at other times.
The new EPA rule reflects this industry trend by applying the most stringent requirements on gas units that run far more frequently than their purported grid balancing roles should require, and lenient requirements on gas units that truly serve the role of being grid backstops when electricity demand is very high. EPA designates the most frequently run units as “base load” units, meaning they run over 40% of the time, the peak-serving units as “low load” units, meaning they run less than 20% of the time, and an in-between category called “intermediate load” units that run 20-40% of the time. As gas plants are currently operated, most fall into either the “base load” category with usage rates approaching 70-80%, or the “low load” category where they are used only to meet peak energy demands and have usage rates of 5% or lower. While it might not be immediately obvious, even low load “peaker” units create significant amounts of carbon pollution due to their inherent inefficiency.
The new rules require base load units to reduce 90% of their carbon dioxide emissions, with carbon capture equipment for example, by 2032. Low load units, on the other hand, will not be required to significantly reduce their carbon pollution. The “intermediate load” category requires units to merely operate “efficiently,” which is described as having emissions less than 1,170 lb CO2/MWh. This new standard for future generating units is actually more lenient than the average emissions rate of near-current gas power generation in the Southeast (averaging 856 lb. of CO2/megawatt-hour in 2021).
These rules apply to any new gas burning power facilities that have yet to break ground or those that have broken ground since the draft rule was proposed in May of 2023.
What The New Carbon Rules Mean In The Southeast
In the Southeast, the new rules mean that utilities should rethink the many thousands of megawatts of gas fueled combined cycle power plants that they have proposed in recent and ongoing integrated resource plans. For example, it was reported early this year that TVA, Duke, and Georgia Power have collectively proposed more than 16,000 megawatts of new gas power capacity, and SACE’s internal analysis shows that there is much more than this in early planning stages. In fact, the major utilities in our region are proposing to build more new fossil gas power capacity than any other utilities in the country: TVA has the most aggressive plan through 2028, with Duke having the largest planned gas build overall, most of which is set to go online in the late 2020s and early 2030s. The majority of planned new gas capacity in the Southeast is combined cycle plants, which can run 80-90% of the time and would fall into the base load category with the most stringent emission standard. However, many of the other new units planned in the Southeast are combustion turbines, which would probably fit into the low or intermediate load categories.
To explore further how the new power plant carbon rules will affect the Southeast, please join us on our webinar on May 7 at 1:00 pm ET. We will be joined by Carrie Jenks, Executive Director of the Harvard Law School Environmental & Energy Law Program, to unpack the new rules, and SACE Research Director Maggie Shober will discuss regional context for the Southeast, including our major utilities’ current energy portfolios and proposals, such as Duke Energy, Southern Company, TVA, and Dominion Energy South Carolina.