The ACE Rule: When is an Emission Increase an Emission Increase?

The Trump EPA’s new Affordable Clean Energy (ACE) rule proposal announced today aims to replace the Obama EPA’s Clean Power Plan (CPP) for limiting CO2 emissions from coal-fired power plants. The new proposal finds that the Best System of Emission Reduction (BSER) for such plants is Heat Rate Improvements (HRI) — that is, to have each affected plant figure out how to generate more electricity with less fuel. This approach is in stark contrast with CPP which contained a complex “building block” approach to BSER.

But aside from the controversy that will inevitably surround the less stringent CO2 reductions required, there are also proposed changes to EPA’s New Source Review (NSR) permitting program that may stir up just as much hoopla.

NSR is one of EPA’s bedrock programs that has been around almost as long as EPA itself. The NSR program requires sources to undergo a pretty expensive, time-consuming, rigorous (some would say “onerous”) review to determine whether constructing a new facility or modifying an existing facility would result in the “significant increase” of a regulated pollutant. If there is a significant increase, the plant would then be subject to potentially much more stringent (i.e., costly) requirements. Needless to say, most plants avoid NSR entanglement like the plague.

The current NSR approach to determining whether there is a significant increase is incredibly complex and detailed but in broad strokes goes something like this…

Step 1: Is there a physical or operational change? If yes, go to Step 2. If no, end.

Step 2: Is there an ANNUAL increase in actual emissions greater than the EPA significance threshold? If yes, go to Step 3. If no, end.

Step 3: Is there a significant increase in NET ANNUAL emissions? If yes, our condolences… you are subject to NSR rules. If no, congrats, you are not subject to major source NSR (maybe minor though).

The key takeaway here is that a significant increase in emissions is determined on an annual basis. That creates a potential problem from the power plant’s perspective. How? At the present time, there is no system in place to store the power produced by power plants. So the output of all the power plants on the electrical grid must be continually adjusted based on the electrical demand. This process is called dispatching. The more efficiently a plant operates, the more likely it is to be dispatched at a higher output or for longer periods of time. Therefore, if a plant improves its efficiency through a heat rate improvement project under ACE (a good thing), it will likely be operating at higher loads over a longer period of time. This may trigger NSR applicability (a not-so-good thing). This may happen even though the plant’s pollutant emission concentrations remain unchanged or even are reduced. It’s simply a matter of ANNUAL operating time. Yes, the efficient plant is generating electricity in place of a less efficient plant, but that offset is not recognized by the NSR approach.

Now, I’m not going to get into a debate about NSR stringency here and whether that’s a good thing or a bad thing. I’m simply stating that from a power plant’s perspective, NSR can be viewed as inhibiting potential efficiency increases. And the ACE proposal is all about power plant efficiency.

To address this issue, the ACE proposal changes the NSR significant increase procedure for coal-fired plants from three steps to four…

Step 1: Same as now

Step 2: Is there an increase in HOURLY emissions? If yes, go to Step 3. If no, end.

Step 3: Same as Step 2 now

Step 4: Same as Step 3 now

EPA is proposing several alternatives to how this hourly test would be calculated. The overall idea is to limit exposure to NSR applicability when initiating projects to improve plant efficiency. This could be considered in the same light as EPA current NSR exemption for pollution control projects. In any case, the proposed change is not mandatory but simply an option that may be adopted by states in their State Implementation Plans to meet ACE requirements.

I’m looking forward to the debate on this one…