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Climate Change Blog

  • 05
  • October
  • 2015

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The Clean Power Plan’s Building Block 2: Generation Shifts Among Affected EGUs

This is the third in a series of posts explaining the “building blocks” that EPA used to determine emission goals for existing power plants in the Clean Power Plan. This post focuses on what EPA calls building block 2. In the final rule, building block 2 assumed a shift of generation—phased in gradually over the 2022 to 2030 interim period—from existing fossil-fuel fired steam generating units to existing natural gas combined cycle (“NGCC”) units, increasing the annual utilization rates of NGCC units, on average and within each region, to 75 percent on a net summer capacity basis.

EPA explained that “substituting generation from less carbon-intensive affected EGUs . . . for generation from the most carbon-intensive affected EGUs . . . is a component of the BSER for steam EGUs because generation shifts that will reduce the amount of CO2 emissions at higher-emitting EGUs . . . are technically feasible, are of reasonable cost, and perform well with respect to other factors relevant to” BSER.1 By carbon intensity EPA means the pounds of CO2 that are emitted for each MWh of electricity that is generated. 

In 2012, national average CO2 emission rates across the following technology types on a net generation basis were:  

  • Coal Steam: 2,217 lbs/MWh
  • Oil/Gas Steam: 1,435 lbs/MWh
  • NGCC: 905 lbs/MWh2

Building block 2 only took “existing EGUs” utilizing NGCC into account, but for purposes of the final rule, the phrase “existing EGUs” included units that were under construction as of January 8, 2014.

EPA’s Basis for the Magnitude of Generation Shift

EPA concluded that “an annual average utilization rate of 75 percent on a net summer basis is a conservative assessment of what existing NGCC units are capable of sustaining for extended periods of time.” This is compared to EPA’s calculation that the NGCC fleet operated with an average annual capacity factor of 46% in 2012. EPA’s estimation of the amount of generation that can be shifted to NGCC was based on the assessment of two factors. First, EPA examined the ability of NGCC capacity to shift from its traditional use for peaking to serving as baseload generation with a higher utilization rate. Second, EPA examined the technical capacity of NGCC to sustain higher utilization rates.

To determine the extent to which generation could be shifted from existing coal to existing NGCC capacity, EPA looked at historical generation shifts to NGCC generation. Between 2005 and 2012, EPA determined that NGCC generation increased by approximately 439 TWh, representing an 83 percent increase. Importantly, while the GHG Mitigation Measures TSD was not explicit on this point, it appears that EPA’s evaluation of historical generation growth included both increased utilization of natural gas capacity that was already in existence, as well as the installation of new generation capacity over the period of analysis. EPA used this historical overall growth rate in NGCC as the basis for its expectation of the rate at which NGCC generation at existing units would grow under the Clean Power Plan. 

EPA compared its calculated 2005 to 2012 growth rate to the 2015 to 2022 time period (a time period of the same duration) to determine the potential growth in NGCC capacity that would result from the application of building block 2. Applying building block 2, total NGCC generation from these existing sources in 2022 was expected to be 1,498 TWh, which is an increase of approximately 44% over 2014 generation levels.

In addition to technical capability to support shifting generation, EPA concluded that the increase in NGCC generation assumed for building block 2 can be achieved without impairing power system reliability. EPA’s conclusion was based in large part on the fact that a shift in average annual utilization across existing EGUs will not interfere with the power sector’s ability to maintain adequate dispatchable resources to maintain reliability. Moreover, because sources are not required to achieve the full extent of building block 2, sources will have the flexibility they need to preserve reliability.

EPA also looked at the technical capability of existing natural gas infrastructure and the electricity transmission system to take on increased quantities of natural gas and to accommodate shifting generation. EPA determined that the natural gas pipeline system is already supporting national average NGCC utilization rates of 60 percent or higher during peak hours and concluded that it is reasonable to expect that similar utilization rates are possible in non-peak hours when constraints are typically less severe. 

EPA looked at projected natural gas production going forward and determined that the increase in NGCC generation contemplated under building block 2 is consistent with the production potential of domestic natural gas supplies. 

EPA evaluated the potential impact on the transmission planning process and concluded that the generation shift would not impose a significant additional burden on the transmission planning process and would not necessitate major construction projects. EPA’s conclusion was based in part on the fact that building block 2 does not call for the connection of any new capacity to the power grid. Moreover, EPA determined that regional grids are already supporting the operation of NGCC units at high capacity factors and for sustained periods of time. As such, EPA does not expect building block 2 to necessitate significant new construction beyond upgrades that are part of the normal planning process. 

Phase-In Schedule

EPA established the building block 2 phase-in schedule in two steps. The Agency first determined the generation shift that would be feasible by 2022, the first year of the interim period. It then considered how quickly that amount could grow until the full amount of NGCC generation (all existing plants operating at 75% of peak summer load) could be achieved as part of the BSER. EPA based both determinations on historical growth rates.

To determine the 2022 level, EPA identified the single largest annual increase in power sector gas-fired generation since 1990. The largest annual increase occurred between 2011 and 2012 and was equal to 22 percent. Therefore, EPA assumed that between 2012 and 2022 gas-fired generation would increase by 22 percent. For each year after 2022, EPA applied the average annual growth in gas-fired generation in the power sector between 1990 and 2012: approximately 5 percent per year.

Applying each of the above quantities, the final rule provided that for purposes of calculating BSER:  

  • NGCC generation in 2022 is limited to a maximum of a 22% increase from 2012 levels in each region.
  • In each subsequent year, NGCC generation is limited to a maximum of a 5% increase from the previous year.
  • The phase-in continues until the full level (75%) is reached in each region.  
BSER Maximum NGCC Generation by Region and Year (TWh).

1 Preamble, Pg. 429. 
2 Greenhouse Gas Mitigation Measures Technical Support Document, Pg. 3 – 4.

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Author

Margaret E. Peloso

Margaret E. Peloso Partner