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The Art of the Plausible

Prospects for clean energy legislation in 2011.

Fortnightly Magazine - April 2011

comprehensive multi-pollutant legislative program would be useful, although there has been no agreement on the specifics.

In recent months, a number of groups have analyzed the potential impacts of implementation of EPA’s Transport rule, the utility MACT rule, and, in some cases, a coal ash rule and a 316(b) cooling water intake rule. The results of estimated impacts have varied, with the analyses predicting shutdowns of between 20 GW and 75 GW of largely coal-fired generation by 2015-2018; dates vary because of uncertainty about final compliance time frames for the rules. 14 As a result, there’s some concern that a large number of coal plant retirements during uncertain but near-term time frames will be disorderly, perhaps threaten reliability, and leave little time to plan for and construct replacement generating facilities.

To the extent Congress seriously entertains a CES in the near future, some industry observers have argued that it would make sense to both define what types of generating resources should replace those expected to be shut down, and to establish a firm and certain legislative schedule for rule compliance to ensure an orderly transition. In the absence of legislative action, the default replacement option for most of the retired coal capacity will be gas, since prices are generally low for now, and gas-fired generating facilities can often be built more quickly than other alternatives. Hence, there are some policy reasons to consider addressing the EPA power plant regulations, and there appears to be some recent political interest in doing so as well.

While the specifics of any legislative proposals remain very uncertain, legislation from last Congress offers two different approaches. First, as noted, Lugar’s CES provided, in effect, a short-term exemption from compliance with most of the expected EPA power plant regulations for coal units that agree to shut down by the end of 2018. That approach, in essence, offers an opt-out for units that will retire, would establish planning certainty with respect to time frames, and promotes an orderly transition. It doesn’t, however, address any of the underlying regulatory requirements, or the cost or time-frame impacts on units that will comply.

In contrast, legislation introduced last year by Carper and Alexander (S. 2995) did attempt to address some of the underlying requirements of the new EPA regulations by establishing new and tighter NOx and SOx caps, compared to the Transport Rule, that would be phased in over time, and reinstating the agency’s authority to apply the regulations through unfettered interstate trading after a federal district court circumscribed that authority in 2008. 15

In addition, the legislation would establish a specific standard for mercury—one of the hazardous air pollutants EPA will address in its upcoming utility MACT rule. However, this legislation was relatively limited, and didn’t address key cost drivers in the new EPA regulations, including MACT for pollutants other than mercury. Under this model, legislation essentially would seek to replace either the regulatory requirements or timelines of the Transport Rule and the utility MACT rule (if broadened to cover other pollutants such as acid gases that are driving expected coal