Conference Highlights Document Template 2014

Observations
And Insights
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Introduction
Nearly 2,000 professionals gathered in early February at EUEC 2016, the Energy, Utility and
Environment Conference and Expo, to exchange ideas, and discuss current and critical energy,
environmental, and climate change issues. EUEC is the largest conference of its kind in the
United States and is a key platform for the power industry to meet, share information on the
challenges facing the industry, and discuss solutions for advancing our nation’s energy future.
ERM is proud to have been part of the fabric of EUEC for many years.
One characteristic of EUEC 2016 that was markedly different from past conferences was the
growing interest and positioning of renewable energy as the future. Regardless of the outcome of
the ongoing dispute now taking place in the Courts surrounding the Clean Power Plan,
renewables have reached the tipping point. As of 2014, nearly one-third of US power generation
comes from zero emissions sources while CO2 emissions have decreased 15% since 2005.
Market forces will continue this trend into the future.
The regulatory challenges the power generation industry continues to face show no sign of
relenting and, as usual, the Clean Air Act presents more than its fair share of challenges to
traditional electric generating units. The Ozone National Ambient Air Quality Standards (NAAQS),
EPA changes to long-established dispersion modeling protocols, Mercury and Air Toxics
Standards, the Cross States Air Pollution Rule, Greenhouse Gas Regulation and the 1-hour SO2
NAAQS continue to garner attention. Coupled with the underlying disruption in the sector as
distributed generation continues to grow and new business models evolve, it is clear that the
power sector faces unprecedented challenges as it charts its future.
ERM contributed thought leadership at EUEC 2016 on a number of key themes that are creating
challenges for our clients. ERM leaders spoke about the complexity of the regulatory regime
facing the industry and the need for regulatory clarity. We addressed critical air permitting and
modeling issues, and, as always, advocated for improving the permitting and regulatory process.
This document is our top line view of the key themes and observations from EUEC 2016, and our
insights around them. While this is not meant to be an exhaustive summary, we hope it stimulates
thought or reinforces your own thinking, which we would be happy to discuss with you.
Scott Moorhouse, NA Power Sector Managing Partner
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Observations and Insights
The Clean Power Plan is at the Top of Industry Concerns
Note that shortly after EUEC 2016, the Supreme Court stayed
implementation of the Clean Power Plan while challenges wind
through the Circuit Court. Nevertheless, the U.S.
Environmental Protection Agency’s (EPA’s) Clean Power Plan
(CPP), if implemented, would have broad-ranging effects on
U.S. power generation and delivery infrastructure, system
reliability, greater reliance on renewables and natural gas, and
ultimately economic impacts to the U.S. economy. Stakeholder
perspectives vary widely with regard to the proposed rule’s
legality and the extent of EPA’s ability to enforce such a program. Twenty-nine states joined the
litigation in some form to object to the CPP, while 18 states intervened on the side of the U.S.
The debate appears to be more about the appropriate time to accomplish a shift in the U.S.
generation mix as opposed to whether or not the shift will occur. In 2015, coal accounted for only
about one-third of U.S. power generation, down from 50% in 2005. Natural gas now commands
33% of the generation mix, up from 19 percent. This trend will continue regardless of the Clean
Power Plan along with growth in wind and solar as they have become competitive in parts of the
country.
Coal Survivors?
Although CPP was clearly the number one “hot topic”, presentations on other coal compliance
regulations and issues (316(b), CCR, ELG, MATS) continued to be plentiful and well-attended as
coal unit operators grapple with compliance strategies and shutdown decisions in the face of the
onslaught of recent coal-challenging regulations. The future of coal might take hope from the
st
USDOE/NETL titled “Opportunities for Coal Power in the 21 Century” and subtitled “Coal Hybrid
Systems for the Future”. It included NETL’s evaluation of advances in coal power plant
technology that might be employed to meet the NSPS Subpart TTTT CO2 standard of 1,400
lb./MWh for coal. This included a fairly rigorous evaluation of not only the increasing efficiency of
next generation “advanced ultra-supercritical” (AUSC) boiler designs that could achieve 45%
efficiency, but incorporation of direct integration of renewables into conventional power plant
designs, meaning employment of such things as solar-assisted feed water heating. Other direct
renewables integration concepts include use of solar PV or wind power to run auxiliary
equipment. Use of natural gas fuel cells for feed water heating and use of batteries for energy
storage are also being studied.
ERM was on a panel addressing state and regional perspectives to CPP compliance. State
regulators and planners are currently considering alternatives that reduce emissions, are costeffective for consumers, and ensure the reliability of the electric grid. This is true of states that are
either net electricity importers or exporters. No state is an island. As our electricity grids cross
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state lines, states will need to work closely with their neighbors, the federal government, and
regional transmission organizations (RTOs) to minimize energy market disruptions, preserve
electric supply reliability, and maintain fuel diversity to avoid over-dependence on any single
generation source.
On this same panel, Victor Niemeyer, a Senior Technical Executive at EPRI, presented an
analysis of both rate-based and mass-based approaches for various states to illustrate that there
are potential attainable compliance paths for each. Trading, including either Emission Rate
Credits (ERCs) under rate-based paths or trading Allowances under mass-based paths, can lead
to significant reductions in cost, but states differ in their potential needs (or supplies) of these
trading elements. Therefore, which states choose which pathways will impact the respective
markets.
The optimal compliance strategy will be state- and region-specific, taking advantage of existing
assets and available renewable energy resources. Given market forces that are already at work,
significant reductions would come from low natural gas prices, reduced utilization, increasing
renewable penetration, and possibly additional facility retirements.
Critical Air Issues Remain at the Forefront
Appendix W (Federal Air Dispersion Modeling Guidelines)
The air-modeling world continues to wait for the finalization of the proposed changes to
Appendix W. The following three aspects of the changes are of particular interest/concern, as
they clearly impact project schedules and cycle time to market for new generation:
1. Removal of CALPUFF from EPA’s list of recommended models. With CALPUFF being
removed and no replacement model named, there is no clear path to performing an air quality
impacts analysis for distances greater than 50 kilometers from the study site. It appears EPA
wants SCICHEM to be that replacement, but the model does not yet appear to be ready for
prime time. Guidance is needed on how to perform these analyses in the future; otherwise,
many projects will face delays, as it will be necessary to justify the appropriate long-range
model and use of CALPUFF on a case-by-case basis.
2. The adaptation of the low wind adjustments into AERMOD. Two adjustments to the AERMOD
modeling system, ADJ_U* and LOWWIND3, which correct known issues in AERMOD’s
handling of low-wind speed stable conditions and often cause the model to greatly over predict
impacts, are proposed to become part of the regulatory default model. Nationally, modelers
have been using these two adjustments in their modeling studies already, but as they are still
beta features, they require full justification for their use and agency approval. EPA rejected all
attempts to use LOWWIND3 in the recent round of SO2 Data Requirements Rule modeling,
leaving a cloud around how, and if, LOWWIND3 will indeed become part of the regulatory
default. ERM continues to advocate for these updates, as we believe they will improve the
reliability of the model results and provide for improved regulatory clarity.
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3. Single-source modeling of ozone. The proposed changes to Appendix W include, for the first
time, provisions for single-source modeling of ozone using complex photochemical models
such as CAMx or CMAQ. The proposed guidance includes a two-tier analysis that would be
used to screen out sources not expected to cause a significant increase in regional ozone.
The proposal would develop the concept of MERP’s (Model Emission Rates for Precursors),
that would represent a level of emissions of precursors not expected to contribute to ambient
concentrations of ozone. Future rulemaking is needed to define these MERPs as well as the
screening process.
Finalization of the proposed Appendix W changes is expected in the Summer of 2016.
Revisions to the Ozone NAAQS
A current air regulatory change of considerable concern to
industry is the tightening of the ozone NAAQS from 75 ppb
to 70 ppb, which went into effect on December 28, 2016.
While the new standard is now in place, the rules regarding
its implementation have not yet been proposed, leaving
those currently in the midst of the PSD permitting action with
difficult issues to address, especially around developing a
project schedule. Both those in favor of and those against
the revision have filed numerous lawsuits. Industry believes
there is no scientific basis for the change, and argues that
the background concentrations of ozone in the western U.S.
are close to or at the standard, making it difficult or
impossible for those areas to demonstrate attainment.
Environmental advocates argue that the change to 70 ppb is not enough and that a standard of
65 ppb is called for by the prevalent science. Meanwhile, the possible requirement of expensive
and time-consuming photochemical modeling of ozone impacts lingers on the horizon (see
above).
Power Plant Siting Issues
Pulling from our substantial experience, ERM contributed to the dialog surrounding air quality
considerations for power plant siting and development. Early consideration of implications arising
from the many applicable federal, regional, and state air quality regulations may facilitate
successful siting and development of fossil-fired power plants in the U.S. Such regulations
include the EPA CPP for existing assets and the Carbon Pollution Standard (CPS) for new
generation, as well as recent revisions to the NAAQS for nitrogen dioxides and ozone. New
Source Review and market-based criteria emission reduction programs also have impacts, and
Renewable Portfolio Standards and regional greenhouse gas regimes are also factors to be
considered.
The impacts of these regulations need to inform strategies for acquisitions and divestitures of
power assets. For example, the CPP regulations are expected to impact the current generation
fleet and influence the future fleet by creating opportunities for repowering coal assets and new
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development of combined cycle gas turbines. Additionally, the CPP State Implementation Plans
may significantly affect the market value of existing assets, with some potentially rendered
obsolete. Implications of the CPS, as well as the attainment status relative to the NAAQS, may be
used to inform a technical air quality permitting strategy for development. For example, areas that
are expected to be non-attainment with the 1-hour NO2 or 8-hour ozone standards are likely to
face operating hurdles and limits on future expansion. Additionally, projects located in nonattainment areas may need to create or purchase offsets to permit new or modified fossil power
plants. The feasibility and cost of obtaining offsets to satisfy permitting requirements in a nonattainment area may play a large role in the evaluation of a particular location for the siting and
development of a new power plant, or even repowering of an existing facility.
Finally, carbon reduction requirements inherent in the RPS and regional GHG programs impact
siting and development by encouraging the development of renewables (e.g., solar, wind, etc.).
These state policies related to renewables show us which states will be focusing more on
development of renewables and, therefore, where siting a new fossil plant may be less desirable.
The higher degree of change within the generation fleet will mean more need for rapid ramping,
flexible assets to integrate the renewables, and less need for base load generation.
Natural Gas Development Topics
Evaluation of Fatal Flaws and Critical Issues in Power Plant Siting and Licensing
Natural gas-fired combustion turbine based generation will continue to provide the important
“bridge” to the future low-carbon power industry, with development spurred by low cost natural
gas and increasing coal plant shutdowns in the wake of a number of increasingly stringent
environmental regulations. Air permitting and environmental licensing considerations are often the
critical path in the schedule for a new fossil fuel generation development project. Screening of
critical issues is a key first step for evaluating potential fatal flaws and development of the
permitting strategy.
Because a project’s potential emissions (compared to major source thresholds) define the extent
of PSD and/or non-attainment new source review required, this initial applicability analysis will
define which pollutants are subject to control technology (BACT/LAER) review, air quality impact
analysis and emissions offsets requirements. Operating restrictions and project design changes
may be considered to limit impacts of these requirements, in particular for sites in locations where
emissions offsets are very limited and/or expensive. Control technology requirements and
emission limits are well-established for gas-fired simple cycle and combined cycle facilities at this
point, and the relatively new GHG BACT requirements have not yet resulted in meaningful project
design changes or carbon capture and sequestration requirements.
With the recent promulgation of more stringent short-term NAAQS for SO2, NO2 and PM-2.5,
potential air quality impacts have become a key issue even for gas-fired facilities and more so for
those with back-up oil capability. A site assessment should include a preliminary modeling impact
assessment, including evaluation of availability of representative meteorological data, nearby
terrain, emissions from existing and nearby facilities, minimum/maximum stack height, fence lines
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and start-up impacts. Proximity to Class I Areas can be an extremely critical issue for some
facilities.
Additional (non-air) environmental issues may also represent fatal flaws, including presence of
wetlands and delineation, availability of well water or water from other sources. Stakeholder
engagement is another area where early groundwork can identify critical issues, including
delineation of environmental justice populations and non-governmental organization interests and
activity. Public opposition to fossil fuels and projects associated with unconventional “fracking”
gas sources must be taken into account.
Other Natural Gas Development Topics
Panelists in the “Natural Gas” session of “Energy Policy & Security” cut across a broad range of
topics. Carbon Creek is marketing "frac-free" gas in California, where the anti-fracking sentiment
appears to be driven by water usage issues. This is in contrast with eastern U.S. perspective
where concern over groundwater contamination is the issue most often expressed. Carbon Creek
produces coal bed methane from the Powder River Basin for sale as regions and municipalities
declaring to be “frac-free” including Boulder, CO and Los Angeles, CA, but it is not apparent that
groundwater contamination risk is managed differently from fracking operations since the drill rig
still penetrates the aquifer. A number of projects with small-scale LNG storage at Distributed
Generation facilities were presented. Larger scale LNG storage facilities at generating stations
are being considered as a means of providing firm fuel in times of gas curtailment, but the LNG
must be trucked in unless a liquefaction plant is included in the design. Reporting on evaluation of
oil additions at gas-fired power generators in response to PJM’s “Capacity Performance Product”
was discussed as another option. Possible recent NOx LAER levels of 4 ppm for combustion
turbines was identified, though it isn't clear that this would be required for retrofits as well as new,
or that it would be an issue for many SCR equipped plants to meet. ERM has been engaged in a
number of such evaluations and permitting to support oil and/or LNG addition for fuel diversity.
Coal Combustion Residuals (CCR) and Effluent Limitation Guidelines (ELGs)
The importance of the recent CCR and ELG rules to the power sector was highlighted by the fact
that these topics were the subject of five panels this year. A variety of specific elements were
covered, with a focus on compliance requirements, strategies, and costs; re-use of coal ash; and
ash landfill and pond stabilization and closure. The near and mid-term compliance scheduling
requirements were discussed in detail, including fugitive dust control plans, notification of inactive
pond closure plans, hazard ranking analysis, annual inspection results, groundwater monitoring,
and other deliverables and activities.
As an indication of the significance of the new CCR requirements, Southern Company is planning
for an expenditure of approximately $1B to comply with the CCR rule. It was noted by one
speaker that up to 65% of utilities in the U.S. may be closing coal ash landfills or ponds as a
result of these requirements. Significant groundwater monitoring will be required at many plants.
The results of monitoring may trigger the need for significant corrective actions.
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With respect to ELGs, there was discussion that, in certain situations, plants with wet scrubber
systems may need to close ponds and achieve zero liquid discharge (ZLD) to achieve the
stringent effluent criteria. One solution discussed is conversion from wet ash handling to dry ash
systems. Isolating waste streams to avoid discharging multiple waste streams into a single pond
may also be a potential solution. Existing NPDES permits will not cover additional required pond
de-watering discharges and new permits will be required for these activities. In addition, many
utilities are completing major plant water management studies to provide comprehensive
assessments of water use and disposal at their facilities. Potential ash pond closure issues were
also discussed, with required solutions ranging from capping to removal of ash for compliance
with the CCR and ELG rules.
Conclusions
EUEC 2016 presented valuable discussion and insight. ERM had a significant presence and
made important contributions, particularly with respect to air quality and power plant siting and
permitting. In addition, attendance at the conference helped us continue to stay at the forefront of
the power industry’s key issues, including the Clean Power Plan, renewable energy, energy
delivery systems, CCR/ELGs, and other topics. In the future, we plan to continue and expand our
presence at the conference, and expand our contributions to both EUEC and the power sector.
About ERM
With over 5,000 professionals in 40 countries, ERM has been advising energy sector clients for
more than 40 years in the areas of entering new markets, capital project support, and operating in
a safe, compliant, and sustainable way. This includes using information solutions to improve
transparency and corporate reporting, as well as advising on a firm’s social performance, and
asset retirement strategies. The range of work we do for our clients gives us a broad-based and
hands-on perspective of many of the more pressing issues facing the energy sector, and hence a
wealth of insight and advice we are happy to share.
To find out more about how ERM can help you, go to www.erm.com or reach out to Scott
Moorhouse, scott.moorhouse@erm.com. For general inquiries about ERM’s presence at EUEC
2016, please contact Sion Hillebrand at sion.hillebrand@erm.com.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received, or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular
situation. ERM would be pleased to advise readers how the points made within this document apply to their circumstances. ERM accepts no responsibility, or
liability for any loss a person may suffer for acting or refraining to act, on the material in this document.
© 2016 ERM (Environmental Resources Management). All rights reserved.
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