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Wednesday, September 17, 2014

No surprises in the GAO report on EPA

In July 2012, the U.S. Government Accountability Office (GAO) reported that between 2 and 12 percent of coal capacity then in existence would retire by 2025. An updated report was released on September 15, 2014 that now pegs the expected retirements to about 13 percent of capacity, or 42 gigawatts (GW), nationwide. While Ohio is expected to see more retirements than any other state, Pennsylvania is number two with a little over 4.5 GW expected.

For those keeping score, this is on track with the 5 GW of capacity retirements we were expecting, but way less than alarming claims of a 75 percent loss of capacity (14 GW) that industry representatives and their allies have  been spreading.

While alarming claims are likely to continue and industry isn't going to stop blaming the Environmental Protection Agency (EPA) any time soon, the GAO reports there are stakeholders admitting that "some of these projected retirements may have occurred without the environmental regulations. Specifically, these stakeholders noted that several industry trends may be contributing to the retirement of coal-fueled generating units, including relatively low natural gas prices, increasing prices for coal, and low expected growth in demand for electricity."

That is supported by other information in the report, such as the characterization of which units are planned for retirement. The companies identified units that tend to be smaller, more polluting, and operating less than half of the hours they are available. That last item is particularly telling. In a competitive electric generation market like ours, plants bid into the market based on how much it costs them to operate, and the lowest bids get called to run first. If a plant isn't called up for most of its available hours, it's because it isn't cost-competitive with the other available generation. Once again showing that any "war on coal" that may exist is being fought between coal plants and more efficient generators, not coal vs. the EPA.

Contrary to claims that the EPA is out of touch, the GAO report also shows the EPA is paying close attention to issues such as price and reliability. Back in 2012, the GAO recommended the EPA, the Department of Energy (DOE), and the Federal Energy Regulatory Commission (FERC) create a process to "monitor industry progress" in responding to environmental regulations and the potential impacts. The GAO now reports that the EPA has organized a "regular monthly meeting with the three agencies and key stakeholders" as well as separate monthly conference calls with the agencies and electric grid operators.

It is understood that with the new EPA proposal, the monitoring and modeling efforts will need to increase, but it is clear that the EPA is sensitive to price and reliability issues. This is nothing new and it shouldn't be surprising. While EPA wants to avoid subsidizing polluters by letting them avoid regulatory requirements, there are many cases where EPA and states work together to make extensions to compliance deadlines when reliability is a legitimate concern. (As of last August, for example, the DEP reported approving 12 of the 13 requests for compliance extensions they received related to a recent EPA rule, and are still working on the remaining request.)

What this report shows, is that EPA is paying attention to concerns. When it comes to the Clean Power Plan, or any other environmental regulations, the EPA would be happy to hear better alternatives. They have even given extra time (until December 1, 2014) for folks to get comments in. If those who disagree with this plan have a better, more cost-effective plan to achieve the same reductions, let's hear it.

Rob Altenburg is senior energy analyst for PennFuture and is based in Harrisburg. He tweets @RobAltenburg.

Progress on updated building codes

On September 10, 2014, the Review and Advisory Committee (RAC) met to discuss its review process for changes to the Uniform Construction Code (UCC). Updated building codes save consumers’ money, reduce energy usage, and protect homeowners, workers, and first responders. Every three years, new model building codes are published and reviewed by the RAC. The Governor-appointed members of the RAC meet to determine which of these changes should be adopted. They have one year from the publication of the model codes to complete their review.In 2012, the RAC failed to follow legal requirements that guide the review process, and instead rejected all code updates.

This cycle, the RAC is tasked with reviewing thousands of changes to the code. Under the UCC, for each change to the code, the RAC needs to consider: (i) The impact that the provision may have upon the health, safety and welfare of the public; (ii) The economic and financial impact of the provision; and (iii) The technical feasibility of the provision. In addition, pursuant to the Pennsylvania constitution, they must also consider the impact of their decision on the environment. The RAC has until July 2015 to figure out which of the thousands of code changes to recommend for adoption based on the above three standards.

In 2012, the RAC failed to perform the analysis required by the act, instead arbitrarily rejecting all code changes and effectively halting any progress that Pennsylvania could have made in the past three years to embrace updated building codes. As it currently stands, the Pennsylvania building codes are based on the 2009 UCC, putting us six years behind up-to-date building codes.  Confounding matters, the RAC is not permitted to review the changes set forth in the 2012 codes unless that same code is revised in the 2015 UCC. So, even assuming the RAC does its job this year, energy codes will not be able to be reviewed or adopted until they are revised again, whenever that may be.

But it’s not all bad news. PennFuture was pleased to see the RAC make some good faith efforts to develop a transparent and legally compliant code review process. The procedure announced at the September meeting establishes various sub-committees to review code revisions and make recommendations to the RAC throughout the review cycle. The RAC has a history of operating behind closed doors, outside of public scrutiny. The procedure announced at the September meeting will allow the public to comment both in writing and in scheduled meetings on recommendations that the sub-committees make. We still have concerns that due to the RAC's delay in developing a workable review process, the council will not be able to deal with the amount of work that is required by June.

Hopefully, this review cycle will be conducted in a timely manner with the benefit of insight from the public so that we can be sure that the RAC is considering our concerns.

Heather Langeland is a staff attorney for PennFuture and is based in Pittsburgh.

Does PA have the least competitive coal?

Recently, in Pennsylvania, we've been hearing a lot about the "War on Coal."  Opponents of the Environmental Protection Agency's (EPA) carbon rule for existing power plants claim that reducing carbon will kill the coal industry and coal jobs. But as I've said before, coal isn't dying, it just can't compete with cleaner, cheaper resources such as natural gas, energy efficiency and renewables. The reality is that given coal's penetration in the market, it will continue to play a role in U.S. energy supply for a long time to come, but it will be losing market share.

If we dig deeper, the question becomes what are the most competitive coal resources given current market conditions? The answer may be that Pennsylvania coal is losing its competitive advantage relative to cheaper sources of coal.

Coal Types and Regions
First, there are generally two main uses for coal, thermal (i.e. power production) and metallurgic (i.e. steel production). This blog will focus on thermal coal. Within the U.S., there are three main coal mining areas (Appalachian, Interior and Western), each hosting various coal formations that produce different types and qualities of thermal coal. In general, "Northern Appalachian" coal mined in Pennsylvania has a high energy content, but medium to high sulfur content. Interior coal has very high sulfur content, and medium energy content. Conversely, Western coal has the lowest energy and sulfur content.

Coal Mining Costs
In general, it costs more and is more capital-intensive to mine coal that is deep underground than it does to mine coal that is closer to the surface. The majority of coal mined in the Appalachian region is recovered from underground mines, while Western coal is all surface mines and Interior coal is about 50% surface production. Looking at August 2014 data, you can see how the relative cost of coal mining is reflected in prices: Northern Appalachian region (Pennsylvania's coal) was around $63/short ton, Central Appalachian coal (e.g. West Virginia) was $57/short ton, Interior (Illinois basin) was $44/short ton, and Western (Powder River Basin) coal is the cheapest at $12/short ton. Coal mining costs have been increasing as the "easy to mine" seams have already been exploited.

PA Coal Market
According to the PA Coal Alliance, Pennsylvania is the fourth largest coal producing state in the nation with about 80 percent of total production coming from underground mines. According to EIA data, PA produced 10 million short tons of bituminous coal in 2012, of which 9.3 million short tons were used for the electric power sector. A little over half (4.75 million short tons) of PA coal used for electric power is used in PA power plants; the rest of PA coal used in the power sector (4.5 million short tons) is burned in power plants outside of PA (e.g. DE, FL, IN, MD, MA, MI, MS, NH, NJ, NY, NC, OH, SC, TN, WV, WI). As you can see, some of these states are east of PA, some are to the west.

PA Coal's Competitive Advantage
As a result of cost competition from natural gas and deferred investments in pollution controls, many older coal plants with marginal economics have retired or announced plans to retire. The coal plants that remain competitive are newer, more efficient plants with modern pollutions controls (e.g. scrubbers). In the past, PA coal's competitive advantage relied on high-energy content and medium sulfur content coal that was easily accessible to rail transport (especially to the east).

For many power plants that can access cheaper Western and Interior coal, PA coal is losing its competitive advantage. For example, plants to the west of PA can now access closer (i.e. lower transport costs) and relatively cheaper Interior coal. This is because scrubber technology allows them to burn the Interior region's higher sulfur coal while still meeting emissions limits, therefore eroding the competitive advantage that the relatively lower sulfur content PA coal once maintained. As shown by the graph below, EIA forecasts a strong overall market for coal, with losses in the Appalachian region being made up for by big gains in the Interior region and modest to flat growth in the Western region.
(EIA Annual Energy Outlook 2014, Coal Market Trends)

Longstanding Employment Trend Decline
Reduced PA coal competitiveness may serve to exacerbate employment problems already plaguing the national coal industry. About 178,000 people were employed in coal mining at its peak in the mid-1980s. By 2000, 14 years before the EPA released new pollution regulations, that number had dropped to about 71,000 people. Increased automation has had a lot to do with the decline in jobs, as miners are replaced by machines.

(Graph Courtesy of the Federal Reserve Bank of St. Louis)

Within the context of the U.S. coal industry, PA's coal looks to be losing its competitive advantage in the face of its relatively higher production costs compared to alternative coal resources, decreased market value of medium sulfur content coal, and higher delivery costs to some destinations. While coal will continue to play a major role in the U.S. energy portfolio, the Appalachian region looks to be the hardest hit.

Christina Simeone is director of the PennFuture Energy Center and is based in Philadelphia. She tweets (occasionally) @SimeoneEnergy.

Thursday, September 11, 2014

U.S. states adding more capacity, more solar, more wind

The Energy Information Administration (EIA) just released its mid-year report on capacity growth for the first six months of 2014 vs. the first six months of 2013. The result: The United States is on track to add more capacity than in 2013, there were more gas additions and less coal ZERO COAL additions, and more wind and solar deployment than in 2013. Note that this data includes only utility scale capacity additions and not distributed sources such as rooftop solar.

Note from the information displayed below that utility scale solar was the fastest growing renewable energy source for the first six months of 2014. If solar stays on track, it will be the second year in a row that solar growth has outstripped wind, hydro, and other renewable sources. Perhaps we'll get to the end of 2014 without putting any new coal online, although there are two coal projects on track for development. Depending on the size of those projected new coal projects, 2014 may be the first year that new renewable capacity outstrips King Coal. We'll be watching.

graph of U.S. power plant capacity additions, as explained in the article text
Source: U.S. Energy Information Administration, Electric Power Monthly, August 2014 edition with June 2014 data
Note: Data include facilities with a net summer capacity of 1 MW and above only.
Evan R. Endres is Project Manager for the PennFuture Energy Center and based in Pittsburgh. He tweets @ER_Endres.

Wednesday, September 10, 2014

Wind-powered Pittsburgh lawyers join EPA Climate Challenge

Pittsburgh-based law firm Leech Tishman recently became the first local law firm to be recognized as Pittsburgh’s only Leader in the American Bar Association (“ABA”) – Environmental Protection Agency (“EPA”) Law Office Climate Challenge. Leech Tishman received this recognition when it agreed to purchase renewable energy credits from Pennsylvania wind farms equal to 100 percent of its Pittsburgh office annual energy use. These credits, purchased through Choose PA Wind, ensure that Leech Tishman is taking a leadership role in both environmental responsibility and Pennsylvania economic development. The firm is also recognized as a Leader with the EPA’s Green Power Partnership.

The ABA – EPA Law Office Climate Challenge was created in March 2007 by the American Bar Association Section of Environment, Energy and Resources (SEER) and the U.S. Environmental Protection Agency. The goal of this program is to encourage environmental practices including switching to green power and participating in EPA’s Green Power Partnership program. As stated on the Law Office Climate Challenge website, the program covers four areas: “Conserve energy. Support renewables. Stop wasting all that paper. Do something about global warming.”

Choose PA Wind is an initiative to encourage energy consumers in the state to power their businesses and homes with energy from Pennsylvania wind farms. Its mission is to educate consumers about the environmental and economic benefits of using local, Pennsylvania-sourced wind energy. More support means more wind farms in Pennsylvania, thereby bringing more jobs, investment dollars, and economic stimulus to local communities while producing zero emissions. For more information, visit

Evan R. Endres is Project Manager for the PennFuture Energy Center and is based in Pittsburgh. He tweets @ER_Endres.

Major grid policy overhaul in the works

January's polar vortex situation, where temperatures dropped to record lows, revealed a wide range of emerging "winter peak" issues in the electric power sector. Approximately 22 percent of electric power supply capacity in the regional grid could not produce power, resulting in reliability concerns and skyrocketing electricity prices. 34 percent of the outages were due to coal plants not being able to operate, 24 percent was due to gas plants not being able to operate, and 23 percent was due to natural gas plant interruptions (mostly related to inability to obtain fuel supply).

On August 1, PJM Interconnection, the electricity grid operator serving Pennsylvania and 12 other states, released a paper outlining problems with its capacity market. The reliability pricing model (RPM), also known as the capacity market, is the mechanism through which PJM ensures there will be enough power supply resources to meet future electricity demand. The problem statement identified two main themes: 1) poor power plant performance (e.g. related to lack of operations and maintenance investments), and 2) gas commodity-electric system coordination has not kept pace with the electricity market's newfound dependence on natural gas.

On August 20, PJM released its Capacity Performance Proposal, which aims to correct the issues identified in the problem statement. The proposal would create a new capacity resource product, the Capacity Performance Product (CPP), which would have more stringent deliverability requirements in exchange for higher financial payments for performance, as well as higher penalties for failures. The CPP is meant to increase price signals to incent certain types of generation resources and, in this case, it looks like high efficiency gas plants will be the winners. The CPP will be voted on by the PJM board in November before it is submitted to the Federal Energy Regulatory Commission (FERC) for approval.

PJM's proposal could spell bad news for clean energy resources (renewables, efficiency, demand response), since the CPP will take up approximately 85 percent of the capacity market, leaving only 15 percent of the capacity market for renewables, efficiency and demand response. Variable generation resources, like renewables, don't rely heavily on capacity payments for project finance so it is unclear what impact the CPP will have on renewables. However, for demand response and energy efficiency, the picture could be bleak (not to mention unanswered questions with the vacature of FERC 745). Old coal plants, especially ones with Title V run-time limitations, will also be hurt under this proposal.

At the same time PJM is embarking on the CPP process, they are also reviewing their variable resource requirement (VRR) curve which is used to determine how much excess capacity (i.e. reserve margin) PJM should procure in order to maintain reliability. In basic terms, PJM is looking to increase the amount of excess capacity they procure, in an effort to acquire additional resources needed to maintain reliability.

There are more questions than answers at this point. In my mind, it is clear that PJM has to do something to ensure the lights will stay on, but it is unclear if the solutions on the table are appropriate or overkill, cost-effective or exorbitant, equitable or discriminatory.

Christina Simeone is director of the PennFuture Energy Center and is based in Philadelphia. She tweets (during the Harvest Moon) @SimeoneEnergy.

Wednesday, September 3, 2014

Doing nothing is not an option

The Environmental Protection Agency's (EPA) Clean Power Plan Rule (CPPR) seeks to reduce emissions of carbon pollution nationwide by an average of 30 percent from 2005 levels by 2030. While not a solution in and of itself, such a reduction is a good starting point for our fight against climate change. It is also stringent enough that it will take national leadership and a coordinated effort of the states if we are to achieve it.

While the national goals are important, at its core, the CPPR isn't a national plan. It sets the targets under which individual states craft their own plans. When we look at the details for Pennsylvania, 30 percent isn't our target.

What are our actual goals?

For Pennsylvania, emissions from our fossil fuel generation facilities along with all other creditable measures are expected to result in an emission rate equivalent to 1,052 pounds of carbon dioxide emissions for each megawatt hour of electricity produced. This number is based on applying what EPA has determined to be the best system of emission reductions (BSER) that, after considering costs and benefits, has been adequately demonstrated. Applying BSER to the 2012 emissions resulted in each states' individual goals.

Since the actual targets are based on 2012 emissions and not the 2005 emissions used in the "30 percent" national numbers, it's difficult to compare our requirements to that average. Instead, we can compare our 2012 baseline of 1,627 pounds per megawatt hour (lb/mWh) to our 2030 goal of 1,052 lb/mWh, which is a 35 percent reduction. At first glance, it seems like Pennsylvania must achieve more than average, but the national average when comparing goals this way is about a 42 percent reduction. So, Pennsylvania is actually being asked to achieve a little less than most other states.

Where are we now?

EPA calculated its goals by including five elements in the BSER. (EPA says there are four, but I'm separating nuclear power and renewable energy for this discussion.) Pennsylvania is not required to use the same measures that EPA used for its target calculation, but limiting our analysis to those measures provides a conservative estimate of where we are now.

Heat Rate Improvement

After surveying over 800 coal-fired facilities of all types and sizes, EPA found that the best facilities are much more efficient -- often 15 percent more efficient than comparable facilities. In light of these results, EPA selected a more modest 6 percent improvement on which to base its target.

It's possible that between now and 2030, some of our coal facilities will voluntarily adopt measures that result in such efficiency improvements. But, until we see some action on this measure, it's not something we can count on. For the purpose of this discussion, we won't assume any credit and keep our emission rate at the baseline rate of 1,627 lb/mWh.

Redispatch of Generation to Natural Gas Combined Cycle

EPA found that Natural Gas Combined Cycle (NGCC) facilities can operate at 70 percent capacity but, for market reasons, they often do not. In 2012, Pennsylvania facilities were only operating at 63 percent capacity. EPA proposes that states take steps to increase the capacity of its NGCC plants to 70 percent. This would require these plants to assume some of the load currently provided by coal facilities.

Other states may need to implement programs to encourage such redispatch, but Pennsylvania shouldn't need to. Coal plants that have already either retired or announced plans to retire will result in Pennsylvania needing to redispatch more generation to NGCC plants than EPA predicted.

It is possible that we will see even more retirements before 2030. The median age for coal units is currently 48 years, and even after the planned retirements, most of our larger units will be over 40. For our purposes though, we will stick to the already announced retirements. The combination of planned retirements and existing NGCC's increased capacity brings our average emission rate to 1,494 lbs/mWh, with no further action.

Nuclear Power

For the next element of our target, EPA looked at the lifespan of nuclear generating stations and found that, nationally, we would expect 5 percent of our facilities to retire before 2030. To meet this goal, we would need to implement measures to keep that 5 percent operating.

Once again, this shouldn't be a problem in Pennsylvania. We currently have five nuclear generating stations within the state and all of them are licensed to continue operating beyond 2030. Assuming they continue operating as is, without any uprates or other new capacity, this will bring our average emission rate down to 1,448 lbs/mWh.

Renewable Energy

Under the EPA's plan, states are expected to generate 13 percent of their electricity from creditable renewable sources. Pennsylvania's Alternative Energy Portfolio Standard (AEPS) already mandates that 8 percent of retail sales of electricity will come from cleaner Tier-I renewable sources by 2020. There is also a requirement to generate an additional 10 percent of our energy from Tier-II alternative energy sources. While some of the generation sources included in Tier-II may be creditable towards our goal, limiting our calculations to just the existing Tier-I requirement brings our average rate to 1,322 lb/mWh.

Energy Efficiency

Like AEPS, Pennsylvania has taken the lead in enacting a program to encourage energy efficiency, known as Act 129. There are some differences between Act 129 and the program EPA envisioned when creating this goal. For example, in phase I and II of Act 129, the state targets have been given as cumulative goals over a three-year period. The EPA's targets, on the other hand, assume cumulative reductions calculated over a ten-year period.

There is also an issue in that, because Phase II of Act 129 does not overlap with the CPPR's compliance period, it is likely going to be Phase III or beyond that achieves most of the energy efficiency reductions needed for CPPR compliance. Since phase III will not be finalized until next year, it is difficult to predict how much credit may be obtained. During the development of the Phase III goals, PennFuture and other stakeholders will be sure to recommend ways to maximize the amount of creditable reductions, but these are not reductions that are already on the books.

While it's difficult to predict what goals will be set in the future, we can look to current data, which has demonstrated that the Phase II goals are achievable and cost effective. Because of this, it is unlikely that future phases will require less. In fact, because we will be able to take credit for the actual life span of installed equipment and other measures beyond a three-year window, we may obtain significantly higher creditable reductions even if the future targets remain the same. Taking a conservative approach once again and assuming credit on par with existing Phase II targets brings our average emission rate down to 1,296 lb/mWh -- more than halfway to our goal.

Are we there yet?

No, doing nothing is not an option.

While we will have to act, our requirements are fairly modest. The EPA established the goals based on measures that experience shows are both achievable and cost effective. Pennsylvania was given a target less stringent than most other states. Then, after considering the real world situation, we see that just maintaining our existing programs will get us more than halfway there.

There are still a lot of voices saying that progress isn't possible, but the truth is far different than their doom and gloom -- we are entering a race with a huge head start. Not only are our goals achievable but with our lead, we have more freedom to focus on innovative and cost effective measures than other states. We know energy efficiency pays huge cash benefits directly to our citizens and renewable energy is getting cheaper all the time, and we can do a lot more in both areas. CPPR provides a great opportunity to put our knowledge and experience into practice and continue to lead the way.

Rob Altenburg is senior energy analyst for PennFuture and is based in Harrisburg. He tweets @RobAltenburg.

Thursday, August 7, 2014

MAREA report points to declining solar prices

Late last month, the Mid Atlantic Renewable Energy Association (MAREA) released a report that represents the most complete and detailed picture of solar growth and costs in Pennsylvania. The report titled PA Sunshine Count: Our Common Solar Wealth can be found on the front page of the organization's website.    

The report analyzes data from the now closed PA Sunshine Solar Grant Program. The data was acquired by MAREA through a Right-to-Know request from the Pennsylvania Department of Environmental Protection. The completeness of the findings and information provided is staggering.

In addition to a set of maps that chart the growth of solar installations across the state from 2009-2014, the report provides details of geographic concentration, pricing, and equipment deployment by brand and company across PA. The analysis concludes that the market has matured to such a degree that prices for solar today -- even without the grant program -- are now lower than in 2009 when sunshine grant monies were included.

PennFuture analyzed similar sets of data and agrees with the conclusions in this report. It should be noted, however, that consumer prices for solar today are likely even lower now than prices bench-marked in the final days of the PA Sunshine Program and reflected in this study.  Our assessment for residential pricing for 2013 put the average cost for systems sized over 10 kW at about $4.01 per watt and under 10kW at about $4.38 per watt.  

As evidenced by this report, it's a great time to go solar in our state. But Pennsylvania leaders are still missing an opportunity to kick our solar industry into high gear. It's clear that the solar industry is doing its part; will policy maker meet them half way? Time, and public pressure, will tell. 

Evan Endres is project coordinator for the PennFuture Energy Center and is based in Pittsburgh. He tweets @ER_Endres.

The anatomy of a Big Coal talking point

In Pennsylvania Senate testimony in June, John Pippy, CEO of the PA Coal Alliance, made the claim that if we implemented the EPA's Clean Power Plan Rule (CPPR), "coal consumption by Pennsylvania's electric utilities would decrease by about 70 percent by 2030 compared to 2012 consumption levels." He repeated this "70 percent" talking point at the Environmental Protection Agency (EPA) hearings on the CPPR in Pittsburgh on Thursday, July 31, and maintained that under the plan, "most coal-fired plants would be decommissioned."

If we look at the EPA data for the 2012 base year, PA coal facilities produced 88.1 terawatt hours (tWh) of power.  So Pippy's talking point is suggesting that the EPA's plan will somehow be responsible for the loss of 61.7tWh of coal generation. If true, that would be a staggering number and one would expect the PA Coal Alliance to be up in arms. (While we could discuss the many health and environmental benefits from reducing coal use by such an amount, and how the savings could be used to assist displaced workers, that would be a purely academic discussion since the EPA's plan does't require any such thing.)

Errors of Omission
A number of coal plant operators have, in fact, retired uneconomical coal plants since 2012 or have announced plans to retire such plants the next couple of years. Current data shows this will result in a drop of about 16tWh in coal production or about 17 percent of the 2012 baseline. These retirements were all announced before the EPA proposed the CPPR, and in many cases were announced before President Obama issued his Climate Change Action Plan, so it would be a stretch of the imagination to claim these were caused by the climate plan.

This is where the exact wording of a talking point matters. If one says "if we implemented the EPA's plan, we will see a 17% reduction in coal consumption," it implies the EPA is causing the reduction without actually claiming that is the case. One just neglects to say "if we don't implement the EPA's plan, we will also see exactly the same reduction."

A long way from 70 percent
Slick wording aside, 17 percent is still a lot less than 70, so it's worth asking where the 70 percent number comes from. Unlike students in high school math, registered lobbyists are not required to show their work, but some quick calculations can show us what a "70 percent plan" would look like.  You would need to assume that the state decides to retire that amount of coal capacity, including the 17 percent that was going to retire anyway, and redispach 90 percent of the lost generation to natural gas combined cycle (NGCC) plants and the remaining amount to some other non-fossil fuel source. We could point out that this would require more than doubling our NGCC fleet, and raise other technical issues, but we don't need to address those points because once again: This is not the EPA's plan.

What about the other EPA measures?
EPA based its targets on what it determined was the best system of emission reductions (BSER) that includes a number of demonstrated cost-effective measures besides redispatching load from coal plants. Why weren't they included? One might argue, like DEP Deputy Secretary Vince Brisini has suggested, EPA may lack the authority to include other measures in BSER.  Even if the courts eventually agree with Deputy Secretary Brisini on this point, it strains credibility to suggest EPA would not be able to consider other measures in BSER but still be able to set targets for states based on the use of those measures. If we are going to assume that EPA ultimately finalizes the proposed state targets, we have to assume that states will be able to use the tools EPA has suggested for getting there.

What happens to the "70 percent plan" when we include other options?
  • If we only take credit for continuing to operate our current nuclear capacity, which is already licensed past 2030, we would need to reduce coal usage by 66 percent.
  • If we also meet the EPA targets for renewable energy, which would create new jobs and increase energy independence, it would become a 34 percent plan.
  • If we also save the cumulative 11.69 percent of energy sold at retail through energy efficiency measures that would put more money in consumers' pockets than they cost to implement, the result would become an 18 percent plan.
  • If we also meet the EPA target for improving the heat rate at existing coal plants, it would become a 10 percent plan.
We already expected to redispatch 17 percent of 2012's coal generation to other sources before EPA even proposed their plan. So, without considering any other possible measures, we are already exceeding EPA targets by a comfortable margin. In light of that, John Pippy and the PA Coal Alliance might want to update their talking point to something like this:

"If Pennsylvania's compliance plan uses the best system of emission reductions as identified by EPA, we can exceed our targets with no further reduction in coal consumption."

Rob Altenburg is senior energy analyst for PennFuture and is based in Harrisburg. He tweets @RobAltenburg.

Wednesday, July 23, 2014

Controlling methane leakage: Opportunity knocks

The Environmental Protection Agency's (EPA) Clean Power Plan Rule is tied very closely to issues surrounding natural gas. One of the four elements that was used to calculate Pennsylvania's target was to transfer, or "redispatch," some electric generation from older and less efficient coal-fired power plants to more modern, natural gas combined-cycle (NGCC) plants.

In 2012, the base year EPA used for planning, Pennsylvania's NGCC plants were running at, on average, about 60 percent of their nameplate capacity. Under EPA's plan, sufficient load would be transferred from coal plants so NGCC facilities would produce about 70 percent of their nameplate capacity. This amounts to about 6.1 million megawatt hours (MWh) of generation moving from coal to NGCC plants, saving around 3.8 million tons of CO2 per year. This appears to be a very reasonable goal for Pennsylvania.

Since 2012, a number of coal plants have either already been retired, or planning is underway to retire the plants. Altogether, these plants generated over 14.6 million MWh in 2012. If all the existing NGCC plants were raised to the planned 70 percent factor, we would still need another 500 megawatts of generation to make up for lost capacity from the deactivated coal plants plus additional generation to make up for any growth in demand. (This should be easily achievable with newer and cleaner power we already expect to be coming on line.)

Since the design of the CPPR is reliant on keeping and expanding natural gas generation, addressing issues such as methane leakage that threaten to derail our progress are even more critical. But, maybe a more interesting point is the ability to use reduction in methane leakage as a compliance option. EPA will likely find reduction in upstream methane leakage creditable as part of a state plan. They actually considered such leakage as a part of their regulatory impact analysis. Redispatch from coal to NGCC was ultimately used without leakage considerations after EPA found that "any net impacts from methane emissions are likely to be small compared to the CO2 emissions reduction impacts of shifting power generation from coal-fired [power plants] to NGCC units."

That finding might seem a bit odd to those who are familiar with recent findings on the global warming potential of methane and the fact that leakage rates may be significantly higher that what has been estimated. But, it's less surprising when one realizes that EPA has based its targets on the same suite of measures in every state. Since relatively few states have large shale-gas industries like Pennsylvania and all but a few states have both coal-fired and NGCC generation, basing its targets on more widespread operations is a reasonable approach. (Not to mention a more politically feasible approach.) 

An opportunity for Pennsylvania?

Our state plan isn't an either-or proposition. The Pennsylvania Department of Environmental Protection (DEP) is expected to draft a plan using the most effective measures available in Pennsylvania—even if they are not the same ones chosen by EPA. That means we can get credit for both redispatch of coal-fired power to NGCC plants and from any progress we make stopping upstream methane leakage. As one of the leaders in shale gas production, we have a unique opportunity for significant reductions.

DEP recently released a 2012 air emissions inventory where the Marcellus shale drillers reported over 123,000 tons of methane emissions as well as many other pollutants. There are reasons to believe that this report significantly underestimates actual emissions but for the purposes of CPPR, more emissions in the base year means more potential reductions for which we can take credit.

Using the Intergovernmental Panel on Climate Change (IPCC) 20-year global warming potentials, which find methane has 86 times the potential of CO2, that 123,000 tons of methane is equivalent to more than 10 million tons of CO2. If only half of that reduction was achievable, we would still expect more benefit from reducing methane leakage than EPA expects from improving efficiency at the coal-fired power plants themselves.

It's too early to start counting chickens (or megawatt hours). We have a long way to go before CPPR is finalized and longer still until DEP finalizes our state plan. Along the way we will, hopefully, get much better data on which to base our planning. Through that process, though, DEP needs to keep a close eye on methane leakage. Even though EPA didn't include methane reductions as part of its plan, Pennsylvania shouldn't overlook the opportunity.

Rob Altenburg is senior energy analyst for PennFuture and is based in Harrisburg. He tweets @RobAltenburg.

How Pennsylvania can address crude-by-rail concerns

Pennsylvanians are being exposed to unacceptable levels of risk as a result of volatile shale-based oil being shipped on railroads in outdated tanker cars throughout our state. Pennsylvania's leaders are doing little to nothing about it.

Many argue this issue needs to be addressed by the federal government but there are plenty of things our state and local governments can be doing to help address the situation. In the absence of action, our leaders are allowing rail carriers and the businesses they serve to externalize (i.e. shift) the costs and risk of spills and accidents onto local communities.

Here is a very general overview of federal and state jurisdictional issues, and some ideas for what state and local policymakers can do to better protect Pennsylvanians.

Federal authority:
  • However, federal policy and oversight has been problematic:
    • The Government Accountability Office (GAO), National Transportation Safety Board (NTSB), U.S. Department of Transportation Office of the Inspector General, and the Congressional Research Service have all issued reports that criticize various aspects of federal rail oversight Examples include lack of inspectors, inadequate funding and staffing, inability to respond to changing safety and oversight needs, and failure to meet statutory deadlines for implementing new safety regulations; there are many more.
    • There are also problematic loop holes in federal law. For example, federal law requires railroads to either have a basic response plan or a more comprehensive response plan, depending on the volume capacity of the rail car transporting the oil. Since DOT-111 units -- the outdated tankers being used to transport crude-by-rail -- are under the 1,000 barrel threshold (they hold around 700 barrels), they only require a basic response plan, which is not subject to FRA approval.
State role:
  • According to the Pennsylvania Public Utility Commission (PA PUC), Pennsylvania has about 9,000 miles of track and approximately 70 operating railroad companies, which is the largest number of rail companies per state in the U.S.
  • FRA is permitted to delegate oversight and enforcement authority to states that enter into voluntary rail safety programs (FRA State Rail Safety Participation Program). Pennsylvania has entered into this program, which is administered by the PA PUC. According to PA PUC, Pennsylvania's rail safety staff includes seven inspectors and six engineers. That is about one inspector per 1,285 miles of rail.
  • The PA PUC has exclusive jurisdiction over the construction, relocation, suspension and abolition of public highway road crossings. 
  • The PA PUC enforces federal regulations promulgated by the FRA, including operating rules, locomotive safety provisions, freight car safety standards, power brakes and drawbars, and more.
  • The PA PUC can:
    • Issue an emergency order if a situation presents a clear and present danger to life or property.
    • Conduct inspections and investigations to determine compliance with federal regulations under its jurisdiction.
    • Process complaints and institute investigations into the safety of a highway crossing.
What are other states doing? (some examples)

  • New York
  • Minnesota
    • Passed a law in May that would require railroad companies to submit disaster prevention plans and emergency response plans to the state; creates an annual assessment on railroad companies to fund more state-level rail inspectors; requires rail companies to provide emergency response training to local fire companies; and enhances railroad company responsibility for accident clean up.
What can be done in Pennsylvania?
  •  Key risks that deserve policy maker focus:
    • Routing trains through highly populated areas -- Creates greater potential public health and safety risks.
    • Inadequate financial responsibility for accident cleanup and liabilities -- Railroads carry commercial insurance, but not in amounts adequate to cover worst-case scenarios. The railroad responsible for the Lac Megantic disaster filed for bankruptcy, shifting millions of dollars of liability to the public.
    • Security concerns -- Oil trains routed through populated areas create greater vulnerability for terrorist attacks. These trains are clearly marked and highly visible to the public.
    • Environmental contamination -- There is the potential for water and other environmental contamination from oil spills.
    • Disparate impacts -- Many crude-by-rail train routes go through low-income communities, creating a disparate risk impact for individuals in these neighborhoods.   
    •  Potential recommendations:
      • The Governor's office should issue an executive order creating an inter-agency working group tasked with developing a report (within nine months) on the risks posed to Pennsylvania by crude-by-rail. transportation and developing a set of recommendations for action.
      • The PA PUC should use its authority (or be petitioned to exercise its authority) to identify high-risk areas and issue emergency orders as needed. The Commission should also conduct a comprehensive investigation of rail company compliance with federal laws.
      • The General Assembly should pass laws based on the recommendations of the inter-agency report.
      • Local governments should focus on emergency preparedness, responder training, and coordination with state officials and local rail companies. Since local responders are typically the first on the scene when accidents take place, preparedness is critical. A key issue should be how to generate revenue to enhance preparedness efforts.

    As recently as this morning, the U.S. Department of Transportation issued two proposed rules (a proposed rule related to enhanced tank car standards and operational requirements for trains transporting high-hazard flammable materials, and a rule on oil spill response planning) aimed at improving crude-by-rail safety. Clearly, the federal government is in the driver's seat when it comes to having the power to improve crude-by-rail safety. However, state and local governments also have a role to play and shouldn't be relegated to the back seat.

    Christina Simeone is director of the PennFuture Energy Center and is based in Philadelphia. She tweets (sparingly) @SimeoneEnergy.

    Energy professionals: Make your voice heard on proposed changes to net metering

    Last week, my colleague Rob Altenburg reported on the proposed changes to net metering that were formally introduced on July 5, starting a 30-day comment period. It is critically important to have your comments on this matter formally logged with the Public Utility Commission (PUC). If you are a company that designs or installs net-metered technologies in Pennsylvania, please make your voice heard. If your are a business or public entity that has installed, or is looking to install, these technologies in the future, please make your voice heard. 

    To make it easier to have your comments formally logged with the PUC, the member organizations of the Pennsylvania Net Metering Coalition (see below) have provided a comment portal geared toward energy professionals. Click here to be taken to that portal. This system allows a company's comments to be attached to six core technical statements that were developed by the coalition. We would also invite businesses and organizations to utilize this portal. For private citizens concerned about this matter, we will provide a link to a separate petition sponsored by a partners' petition in next week's blog. 

    Comments submitted through this portal are due no later than 5:00 p.m. on Wednesday, July 30, 2014. If you wish to submit comments directly, outside of this portal, please see instructions, mailing address, and docket number listed in the portal.


    The coalition includes PennFuture Energy Center, PASEIA, SDF, Sierra Club, Clean Air Council, MAREA,  and Audubon  and is convened to share information and insights into the threats to net metering in Pennsylvania. 

    Evan Endres is project coordinator for the PennFuture Energy Center and is based in Pittsburgh. He tweets @ER_Endres.

    Wednesday, July 16, 2014

    Building codes bill moves in Pennsylvania House

    Act 1 of 2011 made changes to how Pennsylvania evaluates and updates its building codes. A council of appointed representatives known as the Review and Advisory Council (RAC) now must approve all codes, opting in to each code with a 2/3 majority vote. This has resulted in an unworkable building code adoption process in Pennsylvania and led to the state's failure to adopt the 2012 building codes. The RAC must make a decision about adopting the 2015 codes by the middle of next year, and it is way behind.

    This process is fatally flawed. Meanwhile, the health, safety and pocketbooks of Pennsylvanians are being negatively impacted.

    One potential solution to this problem is Senate Bill 1023, which seeks to amend the building code adoption process. As you may recall, SB 1023 passed through the Senate in June with some positive changes, while troubling provisions remained.  

    The Senate bill was then sent to the House for consideration. On July 2, the bill was amended in the House Labor and Industry Committee but tabled before the committee could vote to pass the bill on to the full House for consideration. While the amendment represents a step in the right direction -- and even does some good things -- it falls far short of fixing Pennsylvania's broken code adoption process.  

    Why the amendment is flawed  

    Non-controversial code process - The amendment proposes a process with an initial 120-day comment period for RAC members and the general public.  Within 90 days of the close of the comment period, code provisions that do not receive substantive comments recommending rejection or modification would be subject to a two-thirds majority vote of the RAC in order to be deemed as not subject to further review.  On its face, this seems great because it would allow the RAC to focus efforts on the more controversial code changes.  However, at any time, the RAC can re-classify a non-controversial code change as controversial by only a simple majority (rather than two-thirds). More importantly, during the 2012 code review process, the RAC encountered significant controversy surrounding the idea of a "patchwork" code (i.e. some provisions being accepted and others rejected). How does this process fix this problem, and doesn't the modification proposal exacerbate the issue? 

    Controversial code changes - For code provisions identified as being controversial, the RAC would have to review public comments and consider certain factors (e.g. health, safety, welfare, technical, economic, etc.) before voting to adopt by two-thirds. If they can't come to any agreement, then the codes are rejected. When the RAC considered the 2012 code updates, they couldn't reach two-thirds consensus on any of the code provisions, and instead rejected the entire catalog of code changes. They also failed to perform the require analysis to support their decision. How does this amendment attempt to fix the process? 

    What is needed 

    • Return to pre-Act 1 of 2011 "opt-out" process - This would limit the workload of the RAC by allowing hundreds of non-controversial code changes to take effect while focusing the RAC's work on controversial codes. 

    • Require analysis to ensure against arbitrary decisions - In 2012, the RAC failed to do the legally required analysis (e.g. health, safety, welfare) on each code provision and arbitrarily rejected the entire set of code updates. Failure to perform and document the analysis should result in the invalidation of the RAC's action.

    • Promote public transparency through open rulemaking - The current law requires the Department of Labor and Industry (L&I) to codify the RAC's decision. Specifically, L&I can't make changes to the RAC's recommendations, which go to final-form rulemaking. This puts too much control in the hands of the advisory committee and reduces public input in the regulatory process.

    What is next?

    Hopefully, the Pennsylvania legislature will act this fall to make additional improvements to SB 1023. The House will have time to consider this bill again during its fall session. Pennsylvania cannot afford to continue to fall behind on requiring modern, safe and energy efficient building standards.

    Evan Endres is project coordinator for the PennFuture Energy Center and is based in Pittsburgh. He tweets @ER_Endres.

    Sneak preview: Clean Power Plan Rule comments

    On July 31 and August 1, hundreds of people will be converging on Pittsburgh to make their voices heard at the Environmental Protection Agency's (EPA) public hearing on the Clean Power Plan Rule (CPPR), and to attend a rally that Thursday in support of the rule.

    There are a bunch of resources available for those planning to testify. The EPA's analysis, for example, shows that nationwide, CPPR will reduce power plant carbon pollution by 30 percent between 2005 and 2030. While doing so, it will help us avoid thousands of premature deaths, hundreds of thousands of asthma attacks, lower electric bills, and lead to between $55 billion and $93 billion in health and climate benefits. PennFuture has also provided some excellent starting points for developing testimony.

    Since I plan on being in Pittsburgh to testify, I thought I'd share some notes that may include a sneak preview of my comments.

    Strong and uniform federal standards are needed

    As the Clean Air Act requires, the EPA is giving individual states a great deal of flexibility in designing their plans under CPPR. Rather than requiring states to adopt specific measures, the agency has instead proposed a goal and will leave the details to the environmental agencies in the various states. Flexibility can lead to much better results than a one-size-fits-all plan, but with flexibility comes the need for oversight.

    Having uniform regulations across states is essential to ensure environmental protection and maintain a level playing field for our businesses. We already have situations where inconsistent federal rules mean facilities in Ohio and other upwind states don't always have to meet the same standards as facilities in Pennsylvania. This is particularly troubling in our deregulated electric generation market, since cleaner facilities don't do any good if dirtier plants can run more cheaply and, therefore, run more often. As Pennsylvania Department of Environmental Protection (DEP) Secretary Chris Abruzzo has said, there is a simple solution: "Have the upwind states implement equally stringent air quality controls."

    Although Secretary Abruzzo is less likely to say it publicly, it's also harder for agencies like DEP to accomplish things they are not specifically required to do. Even when a particular plan is cost effective and benefits the majority of Pennsylvanians, going beyond minimum federal requirements often results in politicians getting involved and second guessing agency experts. We have already seen actions, like Act 60 of 2011 and HB 2354 that recently passed the Pennsylvania House, which add to the already extensive review process. The EPA's proposal has a very tight time frame to enact any new state-level measures--weak federal standards that lead to politicized decision making will make it that much harder to take meaningful measures in a timely manner.

    The EPA is likely overestimating compliance costs

    A number of old coal-fired plants have recently retired or will be retired in the next few years. Much of this capacity will be replaced by more modern and efficient gas plants, by renewable energy sources such as wind and solar, or by improvements in energy efficiency. This will help Pennsylvania meet the EPA's goals with lower costs than the EPA has predicted.

    In addition to these lower costs, an analysis of the EPA's data shows that Pennsylvania could meet the federal goals without the need to shut down any additional coal-fired power plants. That alone is a major takedown to one of the top talking points of the anti-environment crowd.

    Allowing off-site measures gives Pennsylvania the tools it needs

    Because the EPA doesn't limit Pennsylvania's plan to measures taken at the individual fossil fuel plants, Pennsylvania can build on the success of its Alternative Energy Portfolio Standard (AEPS) program to encourage construction of more solar and renewable energy. Not only does this bring more clean energy to the market, but building renewable resources creates jobs and strengthens the economy.

    Allowing off-site measures can also make energy efficiency the star of the show. Pennsylvania can build on the success of its existing Act 129 program to achieve significant cost-effective reductions. The Public Utility Commission's independent statewide evaluator has already determined that the efficiency measures in Phase 1 of Act 129 returned direct economic benefits of $3 for every $1 spent, and its market potential study shows we have just scratched the surface on what is possible.

    Where do we go from here?

    It's important to keep in mind that, rhetoric aside, the EPA is just proposing goals, not requiring a specific plan. Our actual plan is going to be developed by our DEP and will be the result of slow and deliberate processes with detailed analysis and extensive opportunities for public participation and comments.

    Once DEP prepares a draft plan, the agency will post a notice in the Pennsylvania Bulletin and in at least six newspapers across the state, opening a 60-day public comment period. In addition to accepting written comments, DEP will also hold its own public hearings to take testimony.

    The final plan will include an analysis of alternative control strategies considered and the reasons for selecting the final strategies; an analysis of the economic impacts of the strategies and alternatives on the regulated community and local governments; an analysis of the technical resources needed by the department to implement the strategy; and a comment/response document that responds to all comments received during the public hearings and comment period. Also, before submitting the plan to EPA, the plan and the comment/response document must be submitted to the state Environmental Quality Board (EQB) for review, and will be reviewed by DEP's Air Quality Technical Advisory Committee, the DEP's Small Business Compliance Advisory Committee, and the Citizens’ Advisory Council.

    Over the next few months, a lot of loud voices will try to bully EPA into backing down with claims the sky is falling. In response, we need to get across a simple message: Tell EPA you support its plan and that the agency shouldn't back down. Give DEP the time and tools it needs to do its job. 

    Rob Altenburg is senior energy analyst for PennFuture and is based in Harrisburg. He tweets @RobAltenburg.