Responding in June 2014 to conclusions by the scientific community that climate change is posing risks to health and our economy, the EPA introduced the Climate Action Plan. The plan seeks, among other directives, to cut carbon pollution from power plants. According to the EPA, the plan “will maintain an affordable, reliable energy system while cutting pollution and protecting our health and environment now and for future generations.”
Patricia Vincent-Collawn, chairman, president and CEO of Public Service Co. of New Mexico, believes the Climate Action Plan is “probably not the best tool for reducing carbon in the most cost-effective manner.”
“It’s the tool the EPA has, and they’re very thoughtful public servants in putting this together,” Vincent-Collawn continued, speaking as a member of the North American Power Plenary panel at IHS CERAWeek 2015 held recently in Houston. “But we probably do need some changes so we as an industry that’s worked very hard to reduce our carbon profile can make it work.”
One particularly daunting hurdle the plan poses to the energy industry, Vincent-Collawn cited, is the plan’s 2020 compliance deadline.
“There are, I believe, 11 states that would have to make 75 percent of their reductions by 2020 with New Mexico being one of those,” she said.
Leo Denault, chairman of the board and CEO of Entergy Corp., agreed the timeline is difficult, adding compliance would be challenging on a market-to-market basis.
“There’s a difference in markets,” Denault explained. “The way they handle nuclear power, for example, doesn’t really give nuclear the credit in the rule other non-emitting resources get. Some of those are in utilities and some of those are in competitive markets. There’s a lot of complexity to be worked out.”
Citing power plants as “the largest source of carbon pollution in the U.S., accounting for roughly one-third of all domestic greenhouse gas emissions,” the EPA’s proposal seeks to cut pollution that leads to soot and smog by over 25 percent in 2030.
Reliability and rate-based programs
Calpine Corp. President and CEO Thad Hill is confident the plan poses no threat to reliability; his focus, he said, leans toward market design. Further, he hopes the EPA plan’s “rate-based nature” can be addressed by accepting individual state plans.
“What you really need is one price for CO2 within a region,” Hill said.
Specifically, Hill is hopeful the EPA’s federal implementation plan will include compliance options that allow for states to pursue rate-based programs allowing for individual states as well as multistate areas like New England to have a mass-base for common price for carbon dioxide (CO2) across different state lines.
“We’re very optimistic, and we’re doing the best we can to work with them,” Hill said.
In addition to making the U.S. electricity system less polluting, the EPA says its Climate Action Plan will shrink electricity bills by roughly 8 percent in 2030.
“I would bet wholesale power prices are not that different than they were in 2014, and are a long way below where they were in 2007 or 2008,” Hill observed. “If we went back and parsed it, I think we would see most of the increase in power bills is coming from transmission, distribution and other situations other than the cost of wholesale power.”
“We’ll have to wait and see what the final rule looks like,” Vincent-Collawn concluded. “We’re hopeful they take the best of those millions of comments and alter the rules in a way they can work for everybody.”
For more information, visit www.epa.gov or BICMagazine.com.
