Podcast Summary
Two industry events for energy and climate tech professionals in June: Transition AI Boston focuses on AI applications in energy, with industry experts speaking. Canary Live Seattle features industry leaders and is hosted at KEXP. New EPA power plant emission standards propose significant changes, success depends on legal challenges, structure, and carbon capture role.
There are two important industry events coming up in June for energy and climate tech professionals. On June 15th, Transition AI Boston will be held in downtown Boston, focusing on AI applications in the energy system. Speakers include industry experts from Climate Change AI and the US Department of Energy. Our listeners can get a 20% discount by using the code pspods20. On the West Coast, Canary Media is hosting Canary Live Seattle on June 28th, featuring industry leaders like Amy Harter, David Roberts, and Ramesh Nam. The venue is the legendary radio station KEXP in downtown Seattle. Another significant development is the newly proposed EPA power plant emission standards. While the responses to the proposal have been varied, with some arguing it will lead to further fossil infrastructure lock-in and others claiming it's unrealistic to implement carbon capture, John Larson, a partner at Rhodium Group, believes the outcomes could be different. The success of the regulations depends on three key questions: whether they will hold up in legal and policy challenges, the details of the structure and compliance requirements, and the role of carbon capture and hydrogen co-firing in the market. Stay tuned for the full conversation with John Larson to gain a better understanding of the implications of these new regulations.
EPA's Long-Standing Efforts to Regulate Power Plant Emissions: The EPA has been trying to regulate power plant emissions as pollutants since 2008, with various approaches including vehicle regulations, new power plant regulations, and the Clean Power Plan, which was deemed unconstitutional. The current proposal aims to continue these efforts.
The current EPA proposals to regulate power plant emissions are a continuation of efforts started under previous presidential administrations. The EPA first decided it had the authority to regulate greenhouse gases as pollutants in 2008, and started with regulating emissions from vehicles. They then moved on to regulating new power plants, which led to the regulation of existing power plants. The Clean Power Plan, introduced during the Obama administration, aimed to reduce emissions by building renewable energy sources and displacing coal and gas power. However, this approach was deemed unconstitutional by the Supreme Court in 2020. Since then, the Trump administration attempted to regulate only new and existing plants through efficiency improvements, but this was also struck down. The current proposal, which replaces the Trump rule, is a continuation of these efforts to regulate power plant emissions.
New EPA regulations for power plants' emissions: The Biden admin proposes new rules for power plants' emissions using tech-based standards, affecting new & existing plants, potentially boosting clean energy investment
The Biden administration's proposed regulations for reducing greenhouse gas emissions from existing power plants represents a legal workaround after the Clean Power Plan was struck down. The new rules allow the Environmental Protection Agency (EPA) to regulate emissions using technology-based standards, similar to how it has approached regulating methane and CO2 from oil and gas wells. The first step covers new fossil fuel-fired power plants, which already face emission standards. The second step focuses on existing power plants, where the EPA will set emission limits based on the best system of emission reduction. The rules' legal road ahead is uncertain, and their impact on the market could be significant, potentially leading to increased investment in cleaner energy sources and retrofitting existing plants.
New EPA proposal sets strict emissions standards for large-scale gas-fired power plants: EPA proposes 90% carbon capture by 2035 or 96% hydrogen co-firing by 2038 for large-scale gas plants, while smaller or less frequent generators have less stringent requirements, aiming to discourage new base-load gas plants and encourage carbon capture or hydrogen in peaking plants, and only considers adequately demonstrated and cost-effective technologies.
The EPA's new proposal for controlling emissions from new gas-fired power plants sets strict emissions standards for large-scale plants operating at high capacity factors. These standards include achieving 90% carbon capture by 2035 or 96% hydrogen co-firing by 2038 for plants over 300 megawatts. Smaller generators or those operating at lower capacity factors have less stringent requirements. The proposal aims to discourage new base-load gas plants and encourage the use of carbon capture or hydrogen in peaking plants, as carbon capture only makes economic sense when running a plant frequently. Additionally, the EPA can only consider technologies that are adequately demonstrated and have reasonable costs when setting these standards. This proposal is a significant step towards reducing emissions from the power sector and reflects the ongoing shift towards renewable energy and decarbonization.
New coal plant regulations require 90% carbon capture or retirement: The Biden administration's regulations push coal plants towards retirement or 90% carbon capture technology. Around 130 gigawatts of coal capacity needs to adapt, with natural gas co-firing and smaller gas plants exempted for grid reliability.
The Biden administration's proposed power plant regulations would require significant changes for existing coal plants aiming to operate beyond 2032. These plants must install 90% carbon capture technology if they wish to continue operating. However, around 70 gigawatts of coal capacity is already scheduled to retire before 2032, leaving 130 gigawatts that would need to adapt to meet the new standards. Natural gas co-firing with coal plants could be a possible solution for some, but 90% carbon capture is a more effective method for reducing emissions. Existing natural gas plants with a capacity of over 300 megawatts will also face new regulations, but smaller peaker plants and load-following combined cycle units are exempt. This exemption is crucial for maintaining grid reliability, as these plants are essential for balancing electricity supply and demand during peak hours.
New EPA regulations for power plants: Different rules for new and existing sources: EPA proposes new carbon emission reduction rules, with different timelines and enforcement methods for new and existing power plants. The process from proposal to enactment may take mid-next year.
The Environmental Protection Agency (EPA) has proposed new regulations for existing power plants to reduce carbon emissions, with different timelines for carbon capture for new and existing sources. For new sources, EPA will issue permits and enforce the standards, while for existing sources, states will create plans to meet the guidelines and get them approved by EPA. Existing gas plants may have more opportunities for leniency than coal plants. The process from proposal to enactment includes the rule being published in the federal register, a comment period, finalization, and potential lawsuits, likely occurring mid-next year.
Uncertainty Surrounds New EPA Regulations for Power Plants: Power industry faces uncertainty with new EPA regulations for carbon emissions from power plants, affecting decisions for existing and new coal and gas plants.
The proposed EPA regulations for reducing carbon emissions from power plants, while technically taking effect for new plans immediately upon publication in the federal register, are subject to legal challenges and uncertainty. For existing power plants, the requirements will not kick in until several years later, also subject to legal challenges. The next administration could potentially shelve the whole thing. Generators, IPPs, utilities, and coal and gas plant owners are advised to consider various scenarios and adopt a "no regrets pathway." Some may choose to hold off on decisions until more clarity emerges. Existing coal plants, which are already on their way out, may find it easier to make decisions based on the current situation. The biggest uncertainty lies with existing gas plants, which make up almost 300 gigawatts of combined cycle units. The outcome of the regulations will significantly impact the power industry and requires careful consideration.
Opportunities and Challenges for Gas Plants with Inflation Reduction Act: The Inflation Reduction Act presents opportunities for financial benefits and regulatory certainty through tax credits for clean hydrogen and carbon capture, but the 2035 emissions regulation deadline and political uncertainty pose challenges.
The Inflation Reduction Act and the impending emissions regulations present both opportunities and challenges for existing and new gas plants. The Inflation Reduction Act offers tax credits for clean hydrogen and carbon capture until the early 2030s, making it financially advantageous for plants to comply early. However, the regulatory requirement to capture 90% of emissions by 2035 looms large, and missing the early 2030s window for these incentives could result in significant financial loss. Additionally, political changes could impact the implementation and longevity of these regulations, adding uncertainty to the situation. Ultimately, plants have three main options: shutting down or not building, complying early for financial benefits and regulatory certainty, or waiting and potentially facing financial penalties or regulatory changes.
EPA rule pushing natural gas towards peaker role: EPA rule drives natural gas towards peaker role due to high carbon capture cost, increasing renewables, and lower cost for uncontrolled fossil fuel generation. Many gas plants may retire or operate at lower capacity factors, contributing to continued emissions.
The EPA's proposed rule for reducing carbon emissions from power plants is pushing natural gas generators towards becoming peaker or load-following resources, rather than installing carbon capture technology. This is due to the high cost of carbon capture, the increasing role of renewable energy sources like wind and solar, and the lower cost requirements for uncontrolled fossil fuel generation. The EPA's own analysis shows that there will still be significant natural gas generation without carbon capture by 2035. Instead of competing with heavily subsidized new clean generation, many gas plants will retire or operate at lower capacity factors. The market shifts driven by the Inflation Reduction Act are also reducing the role of gas and changing the way it operates on the grid. While this may force natural gas into a less desirable role on the grid, it's unclear if EPA should consider other options for natural gas generation from an emissions standpoint. The continued operation of natural gas plants without carbon capture, even at lower capacity factors, still contributes to greenhouse gas emissions.
EPA rule could lead to additional emission reductions beyond IRA: The EPA rule could contribute to further emission reductions, but the extent depends on the cost and availability of technologies like carbon capture and hydrogen.
The EPA's proposed rule for power sector emissions could lead to some additional emission reductions beyond what the Inflation Reduction Act (IRA) would achieve, but the shift towards gas generation and the role of carbon capture and hydrogen are uncertain. The IRA is projected to reduce power sector emissions significantly, but not eliminate them entirely by the mid 2030s. The EPA rule could lead to further reductions, but the extent of these reductions depends on the cost and availability of technologies like carbon capture and hydrogen. If these technologies become cheaper than anticipated, they could play a larger role in the power sector, potentially displacing gas generation. However, there are other factors that could influence the outcome, such as the expiration of tax credits for nuclear power and the potential emergence of other low-carbon technologies like geothermal. Overall, while the EPA rule could contribute to further emission reductions, the full impact will depend on the pace of technological innovation and market dynamics.
Significant Changes in US Energy Sector with IRA: The Inflation Reduction Act will accelerate carbon capture adoption and coal plant retirements, with a focus on NetPower technology and potential carbon pricing implications in blue states.
The passing of the Inflation Reduction Act (IRA) in the US will lead to significant changes in the energy sector, particularly regarding carbon capture and the retirement of coal plants. Developers are considering building new carbon capture facilities, especially those using NetPower technology, which has high capture rates. The retirement of coal plants is also expected to continue or even accelerate, as they still emit more greenhouse gases per megawatt hour compared to natural gas. Additionally, the EPA's handling of carbon pricing in blue states, such as California and New York, could impact their response to the new regulation. Overall, these developments will provide insights into the direction the world is heading in terms of energy transition and emissions reduction.
