Greenhouse Gas Regulations
In the absence of federal legislation to reduce greenhouse gas (GHG) emissions, the U.S. Environmental Protection Agency (EPA) set itself on a course to regulate GHG emissions under the Clean Air Act. The EPA has already established a rule requiring the consideration of GHG emissions for permitting new sources or for major modifications of existing sources that would trigger a Prevention of Significant Deterioration permit. That rule is undergoing judicial review.
In April 2012, the EPA proposed New Source Performance Standards (NSPS) regulations for CO2 emissions from new electric generating units under Section 111 of the Clean Air Act. These performance standards would apply to most new fossil steam generating and combined cycle units. However, as proposed, the rule effectively precludes the construction of new coal-fired electric generating units as it establishes a single emission rate standard that is based on a natural gas combined cycle unit. Because natural gas is inherently less CO2 emission-intensive than coal, construction of a coal unit will be impossible without the use of carbon capture and storage, a technology that is not yet commercially available.
AEP is not currently planning to build new coal-fired capacity, but economics, the need to maintain fuel diversity, and other factors could lead us down this path in the future. We strongly believe that the EPA should not dictate energy policy, and that over-dependence on a single fuel with a history of price volatility has inherent risks. Moreover, without greater harmonization of the natural gas and electricity markets and significant investments in pipelines and infrastructure, gas dependency exposes the electricity grid to new reliability risks. AEP has submitted comments encouraging the EPA to withdraw or revise the regulations to set different standards for new natural gas and coal-fired facilities, consistent with its previous practice under the Clean Air Act.
The EPA also made a commitment to issue new NSPS guidelines for CO2 emissions from existing electric generating facilities; however, no timetable has been announced for these regulations. Such guidelines are intended to establish procedures so that states can develop and implement the standards through their state implementation plans. If the EPA does move forward, it will be important that the program:
- Provide maximum flexibility under the Clean Air Act to minimize the economic impacts, including evaluating the potential for a market-based trading program and the use of greenhouse gas emission offsets;
- Take into account the wide range of existing sources and the limitations in efficiency improvements that can be achieved at existing power plants; and
- Ensure that any new standard does not force us to abandon the billions of dollars in emission control investments already made on the existing fleet of coal-fueled power plants to meet other EPA emission regulations.
Without a regulatory proposal to address GHG emissions from existing units, AEP is unable to speculate on the potential impact of this rulemaking on our operations. We will, however, take an active approach in the regulatory process to ensure the resulting regulations are both realistically achievable and cost-effective.