Florida Electric Cooperatives Association (August 12, 2014)

Florida Electric Cooperatives Association (August 12, 2014)
 eddy Florida Electric Cooperatives Association, Inc.
2916 Apalachee Parkway
Tallahassee, Florida 32301
(850) 877-6166
FAX: (850) 656-5485
VIA EMAIL
Kathryn Cowdery, Esq.
Florida Public Service Commission
2540 Shumard Oak Boulevard
Tallahassee, FLL 32399-0850
КК: Comments on EPA” proposed Clean Power Plan
Dear Ms. Cowdery:
The Florida Electric Cooperatives Association (“FECA”) appreciates the opportunity to submit
comments to the Florida Public Service Commission (“FPSC”) on the U.S. Environmental
Protection Agency’s (“EPA”) proposed “Carbon Pollution Emission Guidelines for Existing
Stationary Sources: Electric Utility Generating Units” (“Clean Power Plan” or “CPP”) (79 FR
34829).
FECA has serious concerns about the impact that EPA’s Clean Power Plan would have on the
reliability of Florida’s electric grid, and the increased costs ratepayers will be forced to pay for
electricity. FECA’s comments are based on the understanding that the CPP would require at
least 90% of Florida's coal-based electric generating capacity to be retired, some units as early as
2020. Additionally, this baseload capacity would have to be replaced by a combination of
intermittent renewables, demand-side efficiency, existing natural gas capacity, and new natural
gas plants. Even if Florida's ratepayers are willing and able to pay significantly higher electric
rates to implement the CPP, FECA believes the EPA’s timelines will create an unrealistic, and
likely unachievable, requirement for Florida’s utilities to replace their existing coal facilities in a
relatively short time period while maintaining grid reliability.
FECA’s specific concerns are as follows:
e If Florida’s coals plants are required to be retired as early as 2020, how can Florida’s
utilities replace this baseload power given the long lead times to plan, permit, and build
new baseload generation?
e Increased costs to electric cooperatives and their members due to the CPP’s mandate to
dispatch generation based on environmental considerations, as opposed to dispatching
units based on economics and system reliability.
e The emission targets are unfair to Florida as compared to targets for other states.
There are fundamental flaws with the emission target methodology.
e The EPA lacks jurisdiction to adopt those portions of the targets that are derived from
Building Blocks 2, 3, and 4.
e With coal no longer being a viable generation resource, it will be very difficult for the
FPSC to “take into account the need for . . . fuel diversity and supply reliability” in need
determination proceedings when fuel diversity is unnecessarily restricted.
Reliability
Federal Energy Regulatory Commission (“FERC”) Chairwoman Cheryl Lakleuer wrote, “FERC
has closely followed the development of the Clean Power Plan because it 1s clear that such
regulations and related state compliance plans could have implications for the operation of the
orid.” However, 1t 1s obvious from the FERC Commissioner's testimony on July 29, 2014,
before the House Energy and Power Subcommittee” that the EPA has not formally consulted the
FERC on the proposed rule, and that reliability 1s not a primary consideration tor the EPA.
Reliability must be fully vetted by the FPSC and the FERC before the EPA 1ssues its final rule.
FECA believes the EPA’s expedited timeline to replace Florida's baseload coal generation with
natural gas and intermittent renewables has serious implications for the reliability of Florida's
electric grid. First, under normal circumstances 1t takes more than 5 years to plan, permit, and
construct a natural gas combined-cycle plant, which is the only new baseload that can be added
within the CPP’s timeline. However, for the foreseeable future the timeline for building new
natural gas plants will almost certainly be much longer than normal given the demand for new
natural gas plants that the CPP would create across the United States. Then there is the question
of whether there will be enough pipeline capacity in Florida to supply natural gas to all of the
new generators that would be required by the CPP. Even if we assume that the proposed Sabal
Trail Transmission pipeline 1s approved and constructed on schedule, 1t still 1s not clear that
Florida would have enough natural gas to accommodate all of the new natural gas capacity that
would be required by the CPP. Clearly, this and other reliability 1ssues must be fully evaluated
before the CPP can be adopted.
The EPA’s apparent lack of concern regarding reliability 1s disturbing and 1s counter to the
efforts that utilities, Congress, and various other federal agencies are taking to increase the
reliability of the grid. The North American Electric Reliability Corporation and the FERC are in
Section 403.519(3), Florida Statutes.
7 Hearing on "FERC Perspectives: Questions Concerning EPA’s Proposed Clean Power Plan and other Grid
Reliability Challenges".
the process of adopting standards for physical security of the grid, and already have adopted
cyber security standards. Of course all of these efforts will be for naught 1f there 1s not enough
generation capacity or enough fuel for the generators.
Cost
There ıs no doubt that the CPP will increase the electric rates of those utilities that are planning
to use existing coal generation beyond 2020. For every coal plant that is retired prematurely
because of the CPP, ratepayers will be forced to pay not only for the life that was remaining in
the coal plant, but they also will pay for the replacement power plant. Thus, ratepayers will be
paying roughly double for the same generation capacity.
Increases in costs for natural gas and for new infrastructure also are likely due to supply and
demand constraints as a majority of the nation’s coal plants are forced to shut down and be
replaced with new natural gas plants in a relatively short time period. The price of natural gas
has been historically volatile and could spike with a sudden increase in demand. The prices for
new infrastructure most likely will increase significantly due to supply limitations. Vendors for
new gas turbines, associated pipelines, solar equipment, and other ancillary infrastructure most
likely would take advantage of the insatiable demand created by all of the utilities across the
country trying to comply with the CPP goals and timelines. Those utilities that are able to obtain
the infrastructure may be required to pay a significant premium, similar to the situation in the
early 2000s when gas turbine manufacturers sold slots in the manufacturing queue that added to
the cost of the turbine.
The Florida Goal 1s not Fair
On 1ts face, the EPA’s goals for Florida are unfair. The 2030 goal for Florida is 740 1b/MWh,
which 1s more than a 56 percent carbon dioxide (“CO”) reduction from 2005 levels. However.
as explained on the attached Fact Sheet from the EPA, EPA’s 2030 goal for the nation is “30
percent from 2005 levels.” The EPA has not provided justification for Florida's goal to be
significantly higher than the national average. It also is telling that the EPA’s goals for Florida’s
existing fossil fuel generation are more stringent than the CO; goals recently established as Best
Available Control Technology in the EPA’s “Standards of Performance for Greenhouse Gas
Emissions from New Stationary Sources: Electric Utility Generating Units” (79 FR 1429). That
should not be possible under the Clean Air Act. Florida also should be given credit for
customer-owned renewable generation that 1s subsidized through net metering rates, tax
exemptions, or rebates from the State or the local utility’. Florida and its ratepayers are directly
and indirectly subsidizing these customer-owned low emission generators, and the EPA’s goal
should give Florida credit for its achievements.
> In addition to the federal tax credits.
Ihe CPP’s emission targets and timelines are flawed
It reducing CO; is the overarching goal of the CPP, utilities should be given a planning horizon
that allows flexibility to utilize the lowest emitting baseload plants that are available. New
nuclear facilities take approximately 20 years to plan, permit, and construct. The EPA’s 2030
deadline eliminates the option of using new nuclear to significantly reduce a utility’s carbon
footprint. Instead, the CPP would require state-of-the-art coal plants to be shuttered and replaced
with natural gas generation, which will only reduce CO, emissions by approximately 50 percent
and will strand coal plant assets in Florida that are worth billions. The flawed logic of the CPP is
apparent when the four Building Blocks are evaluated. The most glaring example is the portion
of the goal that 1s derived from Building Block 1, which is based on heat rate improvements for
coal plants. Obviously this portion of the goal cannot be achieved if in fact those plants are shut
down as required by the CPP.
The EPA Lacks Jurisdiction to Mandate a Goal for
Renewables or Demand-side Energy Efficiency
[t 1s very doubtful that the EPA is authorized to adopt those portions of the goal that are derived
from Building Blocks 2, 3, and 4, since they do not relate to standards for the regulated
stationary source. The EPA standards for stationary sources under Section 111 should begin and
end with the regulated source itself. A new source performance standard (“NSPS”) or existing
source guideline must apply to individual sources; must be based on reductions that an individual
source can achieve; and must be based on the use of a system that is incorporated into the design
of the source. FECA seriously doubts that Section 111(d) authorizes the EPA to force a utility to
retire 1ts existing state-of-the-art coal plant and replace that power by buying natural gas
generation from another entity or build a new natural gas generator, which would be required by
Building Block 2. Regarding Building Blocks 3 and 4, the EPA clearly has no authority to
impose a standalone renewable mandate or a demand-side energy efficiency mandate for
Florida's utilities, and it is extremely doubtful that the EPA can claim such authority under
Section 111(d). Florida should be very reluctant to allow EPA to usurp Florida's jurisdiction
over these areas, especially when EPA has little or no experience with (and apparently very little
concern about) the reliability of the Grid or the cost of electricity.
Conclusion
FECA believes the CPP poses significant reliability, cost, and jurisdictional challenges that must
be fully vetted before the proposed rule can be finalized. FECA does not believe the CPP is
realistic or achievable given the emission reduction targets for Florida and the unnecessarily
accelerated timeline. Forcing existing coal-fired power plants to retire early will lead to
increased costs for consumers, and will jeopardize the reliability of Florida's electric grid unless
sufficient time is allowed to build new generation.
Please call me if you have any questions regarding our concerns with the EPA’s proposed rule.
Sincerely,
William B. Willingham
Executive V.P. & General Manager
Attachment: EPA Fact Sheet
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e Setting state goals— To set state-specific goals, EPA analyzed the practical and affordable strategies that
states and utilities are already using to lower carbon pollution from the power sector. These include
improving energy efficiency, improving power plant operations, and encouraging reliance on low-carbon
energy. Together, these make up the best system for reducing carbon pollution because they achieve
meaningful reductions, and create jobs by driving clean energy investment and reducing energy waste to save
families money.
e Goals give states flexibility—Each state has the flexibility to choose how to meet the goal using a
combination of measures that reflect its particular circumstances and policy objectives. While EPA identified a
mix of four “building blocks” that make up the best system of emission reductions under the Clean Air Act, a
state does not have to put in place the same mix of strategies that EPA used to set the goal. States are In
charge of these programs and can draw on a wide range of tools, many of which they are already using, to
reduce carbon pollution from power plants and meet the goal, including renewable energy portfolios and
demand-side energy efficiency measures.
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e EPA is proposing state-specific emissions goals for reducing carbon dioxide (CO.) emissions from the power
sector.
e These state goals are not requirements on individual electric generating units. Rather, each state has broad
flexibility to meet the rate by 2030 by lowering the overall carbon intensity of the power sector in the state.
e The basic formula for the state goal is a rate: CO2 emissions from fossil fuel-fired power plants in pounds (lbs)
divided by state electricity generation from fossil-fuel fired power plants and certain low- or zero-emitting
power sources in megawatt hours (MWh).
o This approach factors in megawatt hours from fossil fuel power plants plus other types of power
generation like renewables and nuclear, as well as megawatt-hour savings from energy efficiency In
the state.
e State- and regional-specific information is plugged into the formula, and the result of the equation is the
state-specific goal.
e [Each state's goal is different, because each state has a unique mix of emissions and power sources to plug in
to each part of the formula.
e FPA is proposing a two-part goal structure: an “interim goal” that a state must meet on average over the ten-
vear period from 2020-2029 and a “final goal” that a state must meet at the end of that period in 2030 anc
thereafter.
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e Fach state will choose how to meet the goal through whatever combination of measures reflects its particular
circumstances and policy objectives. A state does not have to put in place the same mix of strategies that EPA
used to set the goal, and there are no specific requirements for specific plants.
e EPA is proposing the state goal approach under Section 111(d) of the Clean Air Act, which requires that EPA
identify the “best system of emission reduction ... adequately demonstrated” (BSER) that is available to limit
pollution — and set guidelines for states to achieve reductions that reflect that system. States then make plans
to get the reductions that would result from that system.
e In this case, EPA identified four sets of measures — or “building blocks” — that are in use today by many states
and utilities and that together make up the best system for reducing carbon pollution.
e These building blocks recognize the interconnected nature of the power sector — looking broadly to find cost-
effective and proven solutions.
o For example, 47 states have utilities that run demand-side energy efficiency programs, 38 states have
renewable portfolio standards or goals, and 10 states have market-based greenhouse gas programs.
e EPA analyzed historical data about emissions and the power sector to create a consistent national formula for
reductions that reflects the building blocks. The formula applies the building blocks to each state's specific
information, vielding a carbon intensity rate for each state.
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Value Allocated
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Building Block
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“Make fossil fuel power plants more efficient
e Improve equipment and processes to get as much
electricity as possible from each unit of fuel
e Using less fossil fuel to create the same amount of
electricity means less carbon poliution.
Average heat rate improvement
of 6% for coal steam electric
generatirg units (EGUSs)
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Use low-emitting power sources more
e Using lower-emitting power plants more frequently
to meet demand means less carbon pollution.
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Dispatch to existing and under-
construction natural gas
combined cycle (NGCC) units to
up to 70% capacity factor
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Use more zero- and low-emitting power sources
e Expand renewable generating capacity, which is
consistent with current trenas.
e Using more renewable sources, including solar and
wind, and low-emitting nuclear facilities, means less
carbon pollution.
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Dispatch to new clean generation,
including new nuclear generation
under construction, moderate
deployment of new renewable
generation, and continued use of
existing nuclear generation
Value Allocated
Building Block [| |
5 in Goal-Setting Formula
Use electricity more efficiently Increase demand-side energy
e Reducing demand on power plants is a proven, low- efficiency to 1.5% annually
cost way to reduce emissions, which will save
consumers and businesses money and mean less
carbon pollution.
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e EPA is also proposing to give states the option to convert the rate-based goal to a mass-based goal if they
choose to in their state plans.
о Adopting a mass-based goal would better allow a state or group of states to cap their tonnage о? CO
emissions and set up a trading program if they choose that option.
States can develop a state-only plan or collaborate with each other to develop plans on a multi-state basis to
meet the goals outlined in the proposal.
e EPA is only proposing goals for states with fossil fuel-fired power plants. Vermont and Washington, DC are not
included in this rule because they do not have fossil fuel-fired power plants.
e EPA is not proposing emission rate goals or guidelines for the four affected sources located in indian country
at this time. EPA will work with those tribes and sources to develop or adopt Clean Air Act programs.
EPA will accept comment on the proposal for 120 days after publication in the Federal Register and will hold four
public hearings on the proposed Clean Power Plan during the week of July 28 in the following cities: Denver,
Atlanta, Washington, DC and Pittsburgh. The proposed rule, information about how to comment and supporting
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