EPA coal ruling: how will it impact Arizona’s solar potential?
By imposing the first ever CO2 emission reduction requirements in the US, requiring 30 percent cuts by 2030, the EPA is likely to trigger a shift towards cleaner electricity that will increase the deployment of wind and solar. Some states are likely to see more change than others.
In one of the rare cases where the Obama administration has been able to forge a climate policy directly through the EPA - the US Environmental Protection Agency - without depending on action from the Republican opposition in congress, the EPA has just put forth the much-awaited “coal plant ruling” that forces every state to implement carbon dioxide limits that will result in total power sector emission reductions of 30 per cent from 2005 levels by 2030.
How each state achieves the overall goal is largely up to each one to decide.
States can use any or all of four "building block" approaches to achieve the Plan's objectives, including improved power plant efficiency, increased use of lower-emitting fossil fuel-fired power plants, increased use of non-emitting generation resources like solar and wind, and increased end-user efficiency.
Because the Plan is implemented by the EPA under Section 111(d) of the long established Clean Air Act - that has already withstood litigation - it has a compelling advantage in that it can be implemented regardless of opposition from the conventional energy sector and those who represent their interests in congress.
The very sharp divide align along geological divisions between the fossil energy producing and the remaining states.
The US has very sharp political divisions between the clean and “dirty” states, that corresponds with the resource curse of oil and coal deposits, with both fossil energy sources being discovered and exploited beginning in previous centuries in Pennsylvania.
Five US states still get over 90 per cent of their electricity from coal. Most of the dirty states align along the Eastern coal seam of the Appalachian Mountains that stretches from Pennsylvania to Alabama in the South.
The clean states comprise the twenty eight states that have enacted state level mandates - mostly over the last ten years - requiring utilities to procure more clean energy, or the fifteen states that have committed to regional cap and trade plans. These clean states now get as much as 32 percent of their non-hydro electricity from clean resources like solar and wind.
While such achievements are good news for the climate, the downside of such high renewables numbers for the solar industry is that these states have achieved these high percentages of renewables by meeting their renewable energy mandates, and despite an accelerated beginning, these mandates are in some cases petering out; mission accomplished.
Policy drivers: which way will they go?
Where the EPA rule will have the greatest effect will be in those states that traditionally have had weak policy drivers for moving to renewable energy.
One state that stands out in this respect is Arizona, with the highest insolation of any state in the US - but policy that is heavily influenced by the far right American Legislative Exchange Council (ALEC) which is committed to advancing fossil energy.
Arizona is one of the sunniest states in the nation. While it is not sited in a coal producing region, the state gets 40% of its electricity from coal.
"And Arizona's emissions are actually worse than the EPA number," says Nancy LaPlaca, former Policy Advisor to former Democratic Commissioner Paul Newman at the ACC. "The EPA map cites 36 million tons a year. But actually they export a third of their output. So if you look at their total, between their domestic use and their exports, Arizona's CO2 emissions actually come to 53 million tons."
Arizona is unusual in that its utility regulatory body, the ACC, is not an elected body, but is appointed by the governor. Four of the five members appointed by the Republican Brewer administration are in fact Republicans.
“Now the regulators are mostly affiliated with ALEC, so they don’t care about solar,” LaPlaca relates. “The utilities contribute heavily to elections, and they make a lot more money from coal than solar,” she adds.
The state is dominated by two utilities, of these; Arizona Public Service is already close to the 2025 target.
But the state’s second largest utility; Salt River Project has only 200 MW of solar out of a total of 6-7GW of total generation. “Arizona is very much at risk of losing half its water supply from the Colorado River in about 10 years, and would need to run coal plants on groundwater,” she says. “Arizona is literally running out of water, yet they run coal plants on groundwater. It’s beyond foolish.”
Some coal plants that supply Arizona with dirty power will get exemptions from the rule, as the EPA has said the rule will not affect power plants on Native American Lands, such as the 1GW Cholla power plant.
“The EPA is providing a really good opportunity for utilities to go in a different direction and use energy efficiency and renewable resources,” says Amanda Ormond, Managing Director of the Western Grid Group. “Opening up the box and having efficiency and renewables is a nice new opportunity.”
Rather than a game changer, Ormond sees the new rule as just one in a series of environmental rulings that have been gradually eroding the appeal of coal over several decades of EPA regulation of mercury, soot and other toxics. But she does see it as likely the straw that broke the camel’s back.
“A lot of times we’ll look at one emissions cost and then here comes the next rule and then let’s look at that,” she remarks. “I think we have to do them holistically. And when we do that, we find that renewables are a better deal” says Ormond.
The largest solar PV installation in the world is sited in Arizona, NRG Energy’s 290MW Agua Caliente project.
“Projects like Agua Caliente represent giant leaps forward in supporting renewable power generation goals in the states where we do business,” says NRG spokesman Jeff Holland.
The project is an example of how Arizona could lead the nation in solar. But the electricity from the project is contracted to be sent to California’s PG&E, which needs to meet a much higher RPS of 33% by 2020.
“Arizona’s renewable energy standard is one of the lowest in the West at just 15% by 2025,” LaPlaca asserts. And unlike Arizona, California does not even include rooftop solar in tallying its requirement.
Under the new EPA rule, states are free to act on their own or to join in multi-state plans to achieve the emission reduction targets, building on plans like the RGGI cap and trade plan in the Northeast, or California’s cap and trade plan.
As a ‘dirtier’ state, a possible advantage to joining with California in a regional emissions plan would be that Arizona would benefit by teaming up with a cleaner state, since its average emissions would be tallied as lower if they were combined with those of California.
“If you average out the two grids; they stand to benefit, because our carbon intensity is lower,” muses Stanley Young, spokesman for the California Air Resources Board that formulated AB32, California’s cap and trade plans in collaboration with Oregon and Washington. “States that join with California would benefit because we already have a fairly low carbon intensity electricity grid.”
How Arizona will respond to the EPA ruling is anyone’s guess. But it is telling that it is proposing a 4GW natural gas investment over the next 15 years, locking the sunniest state in the union into the next worst fossil fuel in line.