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EIA Says EPA Plan Could Cut PowerGen CO2 29-36% in 2030 Relative to 2005 Levels

The U.S. Energy Information Administration (EIA) says the Environmental Protection Agency's (EPA) proposed Clean Power Plan (CPP) could reduce carbon dioxide (CO2) emissions in the power generation sector 29-36% in 2030 from levels observed in 2005, depending upon a series of different scenarios, including one that relies heavily on oil and natural gas.

But an EPA official said the EIA report didn't examine how the CPP would affect every state, and it was based on a proposal the EPA made back in June 2014, meaning it doesn't represent the final plan that will take into consideration the 4.3 million public comments it received for the plan.

Under the CPP, states would be required to develop plans to reduce CO2 emissions rates from existing fossil-fueled electricity generating units (see Daily GPI, June 2, 2014).

In a 103-page report, EIA said reductions in projected CO2 emissions in 2030, relative to baseline projections for that year, range from 484 to 625 million metric tons (mmt). According to the EIA, the projected power sector emissions level in 2030 ranges from 1,553 to 1,727 mmt across five different scenarios, leading to a 29-36% reduction from 2,416 mmt, the level of emissions from 2005.

"Switching from coal-fired generation to natural gas-fired generation is the predominant compliance strategy [for the states] as implementation [of the CPP] begins, with renewables playing a growing role in the mid-2020s and beyond," EIA said. "Demand-side energy efficiency plays a moderate role in compliance, relative to the early role of natural gas and the eventual role of renewables.

"The economics of increased natural gas generation and expanded renewable electricity capacity vary regionally, the key determinants being -- first, the natural gas supply and combined cycle utilization rates by region; and second, the potential for penetration of renewable generation in regions including states that have no (or low) renewable portfolio standards."

Under a scenario called “Policy with High Oil and Gas Resource” (HOGR), CO2 emissions are projected to decline, relative to the baseline, by about 200 mmt in 2020, and 500 mmt in 2030 and 2040.

The EIA said CPP will have a "significant effect" on the number of projected retirements and additions of electric generation capacity. The agency found that projected coal plant retirements between 2014 and 2040 -- which were estimated at 40 GW in the Annual Energy Outlook 2015 reference case, with most of them occurring before 2017 -- increases to 90 GW in the base policy scenario for the CPP, with nearly all of the retirements occurring by 2020.

"Retirements of inefficient units fueled by natural gas or oil, generally involving primary steam cycles, are also projected to rise," EIA said.

Natural gas and renewables are projected to dominate additions to capacity between 2014 and 2040, and under favorable natural gas supply conditions CPP also increases additions to power generation capacity fueled by natural gas in the HOGR scenario. The agency added that the CPP's effect on natural gas production and prices were very sensitive to baseline supply conditions.

"The CPP increases natural gas use significantly relative to baseline at the start of CPP implementation, but this effect fades over time as renewables and efficiency programs increasingly become the dominant compliance strategies," EIA said. "While there are significant differences in projected natural gas prices across baselines, with persistently lower prices in the HOGR case, the CPP itself does not significantly move natural gas prices, with the exception of an initial impact expected during the first two to three years after the start of implementation."

On Friday, Liz Purchia, the EPA's deputy associate administrator for public affairs, said that while the EIA's report had the aforementioned shortcomings, the EPA "appreciates EIA's work to develop this assessment based on the agency's proposed CPP, and the agency will be reviewing the assessment as we work to develop the final rule."

EIA's report came at the request of U.S. Rep. Lamar Smith (R-TX), chairman of the House Committee on Science, Space and Technology.

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