How Will Industry Be Impacted By EPA’s New Power Plant Proposal?

Manufacturers are sweating the Environmental Protection Agency’s proposed power plant rule to cut greenhouse gases. But they are also touting the steps they have taken to cut emissions, including using combined heat and power and reducing methane.

The courts have given EPA the right to regulate CO2. And with that, the agency wants to provide industry the flexibility it needs to dramatically cut heat-trapping emissions — steps that include capturing and burying CO2, buying renewables and hydrogen fuels, or retiring older plants. EPA says the rule will cut carbon pollution by 80% by 2040 compared to 2005.

The proposal would hit coal and natural gas plants the hardest. As expected, opposition abounds, centered on the combined market share between the two fuels in the electricity production mix. But it is unreasonable to lump in natural gas with coal. The net-zero goal is paramount, not the promotion of specific fuels or the elimination of natural gas.

“With nearly 60% of our nation’s energy generated from natural gas and coal, this will either require deployment of still nascent technologies or force those plants to shut down entirely,” says National Association of Manufacturers Vice President of Energy and Resources Policy Brandon Farris. “The U.S. cannot afford to shut down more than half of our power generation and grind our economy to a halt.”

The U.S. Supreme Court knocked down President Obama’s Clean Power Plan that mandated carbon cuts. That ruling said EPA only has the power to regulate “inside the fence,” which means it cannot order “generational shifting.” However, it can prod companies to switch to cleaner fuels or deploy new technologies. Power plants account for 25% of this country’s CO2 releases.

This proposal comes atop the Inflation Reduction Act, which extends tax benefits to wind and solar development. But it also gives production tax credits for clean hydrogen production — as much as $3 a kilogram. That means everything from renewable electrolysis to carbon capture to methane pyrolysis is eligible for funding. While EPA is agnostic about which technologies industry applies, it is committed to cutting CO2 levels from a 2005 baseline by 40% by 2030. The goal is carbon neutrality by 2050.

“There is a very bright future for carbon capture and sequestration (CCS),” says Scott Segal, partner with Bracewell, in an interview on PBS
PBS
. “But in the power sector, there are very few examples of commercial scale application of CCS.”

What about energy security and reliability?

The coal-producing states are determined to torpedo this proposal. Plants are already closing rapidly, and coal is now only 19% of the electricity mix. Senator Joe Manchin of West Virginia said the proposal will regulate coal and gas plants “out of existence,” calling it a “radical climate agenda.”

But natural gas is a different breed. That resource will remain a staple in the home-heating business and be used to firm up renewable resources. Natural gas, which makes up 40% of the electricity portfolio, has replaced coal because it releases about half the emissions when burned in a power plant.

Wind and solar make up 10%, although their outlook is much brighter because costs are nosediving. Nuclear energy makes up 19% of the country’s electricity composition while representing 60% of its carbon-free generation.

BP says the coal-to-natural gas transition has reduced CO2 emissions by hundreds of millions of tons over the last decade. By 2040, it adds, renewable energy will comprise 14% of the electric generation pie — meaning that natural gas will have to kick in and back it up. It also says that the technologies and the economics underlying carbon capture and sequestration are improving.

“We are shifting the company to an integrated energy company,” says Orlando Alvarez, chief executive of BP Energy Co., at a webinar. “Our portfolio of fuels is changing. But hydrocarbons are core to our strategy, and we believe that natural gas has a future. It can enable the transition. We are making sure that natural gas is in the narrative. This is not a race to renewables but to lower carbon.”

To that end, natural gas producers have cut methane emissions, which are 80% more potent than CO2. EPA reported that those emissions decreased 23% between 1990 and 2018.

And industry is using combined heat and power at its facilities — a technology that recycles wasted heat. That has a 90% efficiency rate — the total energy generated from each unit of fuel input. The waste heat from the natural gas engines is captured and reused.

About 82,000 megawatts of installed onsite combined heat and power exist across the country at almost 4,000 industrial and commercial facilities, says ICF. That’s about 8% of the U.S. electric generation base.

EPA has the absolute legal right to regulate CO2 under the Clean Air Act. The agency maintains it gives ample lead time and compliance flexibility to allow power companies time to adjust. It says price fluctuations would be minimal — well within historical boundaries.

Time will tell just how practical this proposal is, especially for the corporate sector. Businesses may have net zero goals, but many industries still depend on natural gas produced by power companies, which may cause EPA to temper its proposal.