The EPA is playing a very significant role in shaping our resource portfolio, especially when you think in terms of capacity affected – i.e. residential solar legislation is awesome, but it takes a ton of effort to impact the grid on a large scale through that path. Meanwhile, a 2.3GW resource might be shut down with the stroke of a pen when you’re considering the EPA and coal. I have a deep understanding of the Arizona-New Mexico power market right now due to current assignments, and in that region, 6.0GW of baseload capacity (all of which is operating at 70-80% capacity factors) is facing potential retirement decisions due to decisions to be released by the EPA in the next few months.
I’ll introduce myself a little bit before I go on – I’m from Vermont, went to Brown, and majored in environmental studies. They called me flaming liberal quite a lot when I went to my first job with New Yorkers and other jaded types. I cried when I got my first assignment related to coal. Nonetheless, I’m glad that I’m now getting closer to the fossil fuel part of the business because it is the other side to the renewable/green coin, and you can’t go anywhere without dealing with it. (I’ve also stopped crying about assignments.)
I want to see immediate reductions in carbon emissions because I believe in the science of global warming and want to mitigate its impacts as much as possible. I also believe we also need to address the issue head-on, because the price of using patchwork regulations to squeeze this change out of the market is ultimately going to be high.
In the case of the Navajo Generating Station in Arizona (2.3GW), it appears the EPA is using its power under the Regional Haze provision of the Clean Air Act to require the plant to add one or both of SCR and baghouses to each of the three units, projected to cost over $1bn. Specifically, the EPA is in the process of issuing a rule to control emissions from Navajo that contribute to haze at the Grand Canyon and other national parks and wildness areas (Class 1 Areas under the Clean Air Act). NOx particularly contribute to haze, and they can be mitigated with SCR, SNCR, and low NOx burners. Of these, SCR is much more expensive that SNCR, and also more effective.
The EPA’s rule will be based on what it determines is the best available retrofit technology (BART) for the plant. The Clean Air Act requires BART decisions to take into account the cost of compliance, existing control technology at the source, the remaining useful life, and the degree of improvement in visibility anticipated to result from installation of BART. Not all EPA technology standards require taking economic impacts into account, such as MACT.
The EPA allowed NREL to conduct a study addressing the economic and other issues connected with the Navajo case. NREL acknowledges that NOx emissions from Navajo are a likely contributor to haze at the Grand Canyon, however, “whether the incremental contribution is significant or even perceptible is a matter of debate among experts in the field of visibility science”. Meanwhile, controlling emissions using SCR would raise power rates for the Central Arizona Project, which a major water delivery project, by $0.004 to $0.005 per kWh, causing water rates for agricultural users to increase by 13% to 16%, and 5% to 7% for other users. This is a significant increase for a debatable improvement in the purported objective of the EPA.
As we aim to be more responsible in our power procurement, both in terms of the environment and health, we are likely to see rates rise. In my view, this is acceptable, however it needs to be done honestly (is reducing regional haze the EPA’s true primary objective in this case, or is this just a mechanism that allows them to take action?). Let’s be transparent in the objectives we are after as we make changes that will increase the cost of one of the most basic goods in our country. And then let’s strive for a more perfect power supply.