Arizona utilities suggest Clean Power Plan alternative to FERC

A group of Arizona utilities told the Federal Energy Regulatory Commission on Feb. 23 that they, with the help of consultant Pace Global, have come up with an alternative version of EPA’s Clean Power Plan that wouldn’t zero out coal in their state by 2020, which is what EPA’s current plan would do.

The Arizona Utilities Group (AUG) filed its Feb. 23 comments as part of a FERC review of potential grid impacts of the Clean Power Plan, which was unveiled in proposed form last June and is due out in final form this summer. The plan has two compliance deadlines, in 2020 and 2030, and would cut CO2 emissions from existing power plants by 30%.

The AUG is an ad hoc, unincorporated association of individual electric utilities, including for purposes of these comments, Arizona Electric Power Cooperative (AEPCO), Arizona Public Service (APS), Salt River Project Agricultural Improvement and Power District (SRP), Tucson Electric Power (TEP) and UniSource Energy Services.

As demonstrated in the comments submitted by the Arizona Department of Environmental Quality (ADEQ) in November 2014 to EPA, the proposed rule’s assumed implementation of the entirety of Building Block 2 (BB2) in 2020 deprives Arizona, and a number of other similarly-situated states, of any meaningful flexibility in implementing the Clean Power Plan (CPP). In addition, as set forth in the ADEQ comments and these comments, implementation of the proposed CPP is likely not feasible as it is presently configured, endangers electric grid reliability, and imposes $5 billion of unnecessary infrastructure retirement and construction costs on Arizona consumers. Moreover, EPA’s current approach to implementation of BB2 does not allow for meaningful consideration of the “remaining useful life” of substantial generation assets, which is inconsistent with the clear language of Section 111(d) of the Clean Air Act, and unnecessarily increases the costs.

Given the clear and pressing concern regarding the impacts to Arizona, the AUG believes that adjustments to the proposed rule are required to address these concerns. The AUG recommends, and requests that FERC consider for recommendation, as well, a few targeted changes that, if adopted as a set, would address the primary technical problems associated with the current proposed Arizona goals, resulting in a final rule that: does not threaten electric reliability; still obtains substantial reductions in carbon emissions both in Arizona and nationwide; and would be substantially more cost-effective and attuned to the statutorily-mandated “remaining useful life” concept.

In essence, the proposal partially gets rid of the firm 2020 interim deadline and in part bases compliance on the age of the coal plants and the age of any air emissions controls that may have been installed on them, with the 2030 deadline still in place. Under the proposed alternative, redispatch from coal-fired electricity generating units (EGUs) to natural gas combined-cycle (NGCC) EGUs should occur upon the later of any of the following, if redispatch would occur prior to Jan. 1, 2030:

  • Jan. 1, 2020;
  • 40 years after initial commencement of operation; or
  • 20 years after commencement of operation of major pollution control retrofit, such as selective catalytic reduction (SCR), flue gas desulfurization (FGD), or baghouses at any EGU if installation occurred prior to issuance of the final 111(d) rule, or after commencement of operation of selective non-catalytic reduction (SNCR) or electrostatic precipitators (ESPs) at an EGU owned by a small utility as defined by the FERC if installation occurred prior to the first year of the compliance period (i.e., 2020). 

The filing said: “In summary, the AUG is proposing, and requests that the FERC consider similarly recommending, that EPA modify the life, the end of 20-year pollution control project book life, or, for EGUs subject to a shutdown or natural gas conversion requirement prior to December 31, 2029, the date of such shutdown or conversion. The AUG believes it is important to emphasize that this proposal is specifically intended to promote the calculation of more reasonable and achievable CO2 intensity targets and is not intended to suggest a date by which EGUs could or should be retired or cease burning coal.”

Arizona has some unique circumstances that limit coal replacement options

The filing later added: “Arizona has a unique climate that results a high peak demand for electricity in summer months. Most of central and southern Arizona, and specifically the cities of Phoenix and Tucson, have very high ambient temperatures during the summer months. As a result, Arizona has the greatest change in capacity utilization of any state on a month-to-month basis. Currently, the [natural gas combined cycle] capacity in the state of Arizona is designed to act as an intermediate capacity resource with the ability to quickly and efficiently meet peak summer month demands; the State’s current NGCC capacity is not sufficient to both redispatch coal generation and meet summer peak demand. If Arizona were to redispatch coal with the existing NGCC capacity, the State would need to build out significant additional NGCC capacity and infrastructure and renewable resources or make large and likely unsustainable market purchases. The Pace Study similarly found that existing NGCC EGUs are inadequate to replace the coal-fired EGUs.

“As noted by Pace, the existing transmission network is designed for coal-fired EGUs located in the eastern and southern periphery of the State, while the NGCC EGUs are located in and around Phoenix and in the western periphery of the State. Significant modifications and additions to the transmission network would be required to account for shutdown of the coal-fired EGUs and still provide reliable electricity. It does not appear that these issues were included in the proposed timing of BB2 implementation in 2020.

“Pace reviewed the natural gas pipeline capacity in Arizona. There are two major systems: Transwestern and El Paso. The Transwestern system is essentially at 98 to 100% utilization even prior to the Proposed Rule. Increased utilization would thus fall almost wholly on the El Paso system. Both systems would run out of capacity in the mid-2020s and time is short to fully integrate pipeline system improvements given lead times for such infrastructure projects.

“In recent history, at least one of the interstate gas pipelines passing through Arizona has been damaged resulting in suspension of deliveries for a period. Under the post-Proposed Rule, significant reliability issues would be likely in the event of a pipeline failure, given the much greater reliance on NGCC resources that would be required.

“Pace reviewed the new construction requirements necessary to meet service and reserve requirements and concluded that Arizona will need to install approximately $1.9 billion in additional natural gas generation capacity.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.