EPA's hint to coal generators (shhh...it's natural gas!)

As a newlywed 10 months into marriage, I’m still learning that dropping hints is not always the strongest form of communication. I might mention to my husband all week long things like, “Doesn’t queso from such-and-such restaurant sound good?” Then the weekend rolls around, and he still innocently asks, “What kind of restaurant should we try?”

Sometimes hints aren’t picked up on. Or even if they are, they aren’t always acted upon. But still, it's often more comfortable, less abrasive to use hints in place of direct communication.

It seems to me that the Environmental Protection Agency is a hint-dropper. The Administration doesn’t come out and force conversions from coal to natural gas or renewables. But through nagging mechanisms even more powerful than those possessed by the cast of Desperate Housewives, the EPA can make life tough on coal-fired generators.

On April 14, I attended an EPA hearing in Tulsa, Okla. concerning an ongoing debate over three coal-fired plants that are not under compliance of EPA’s Clean Air Visibility Rule. The plants are Oklahoma Gas and Electric (OG&E) Company’s Muskogee and Sooner Stations, and AEP-Public Service Company of Oklahoma’s Red Rock Station. According to the rule, the stations must achieve EPA’s emission limit for SO2 – 0.15 lb/mmBtu, or 95 percent removal. OG&E said it would cost about $10,000 per ton to reduce SO2 emissions to those levels through the use of scrubber technology at its two plants.

The Oklahoma Department of Environmental Quality (ODEQ) has submitted a State Implementation Plan (SIP), recommending Best Available Retrofit Technology (BART) switches for the plants. However, the EPA identified the SIP as one that “does not meet one or more of the required elements.”

Why doesn’t it meet the requirements? Steve Thompson, executive director of ODEQ, said the BART alternative in the SIP “reduces SO2 emissions more than the primary requirements in EPA’s Federal Implementation Plan.”

So what about that is unacceptable to the EPA?

Coal is still being burned. Visibility could still be affected to some degree in federal wildlife areas – the heart of the issue.

EPA states that “switches to natural gas are an acceptable method,” as a spokesperson from Oklahoma natural gas producer Chesapeake Energy pointed out at the hearing.

Oklahoma has an abundant supply of natural gas. Larry Nichols, CEO of Devon Energy, told me during a March interview that the company’s work in the Cana shale in western Oklahoma which has already netted 11 trillion cubic feet – larger than Devon’s four discoveries in the Gulf of Mexico. So a shortage of a natural gas supply would be close to impossible if these power companies were to do a partial or total switch.

It’s not just these Oklahoma coal plants that will soon be replaced by natural gas or another form of “cleaner” energy. On April 14, Tennessee Valley Authority announced the retirement of 18 coal-fired units. In many cases, it’s easier to retire a plant than to retrofit it, especially older plants.

Barney Racine, software development manger for the environmental solutions group of Honeywell Process Solutions, said the EPA’s focus is not so much on SO2 control, but rather a complete retreat from coal. “They’re not necessarily driving legislation from the emissions monitoring standpoint, but from the incentive side – the cost to burn coal vs. natural gas.”

Some coal will undoubtedly remain in the generation mix in the coming decades, but EPA will continue to drop hints that other forms of generation are preferable. While natural gas prices are low, many coal-fired generators will, reluctantly or not, make the switch. EPA’s hint will be taken with a grain of salt, or perhaps in some cases, enforced.

And hopefully through tactful hints rather than a means of force even more powerful than the EPA's, I’ll get my chips and queso this weekend.

What stands in the way of California’s 33 percent renewables goal?

On April 12, California Governor Jerry Brown signed Senate Bill 2X into law, requiring that 33 percent of the state’s electric generation come from renewable sources by 2020.

Under S.B. 2X, all load-serving entities must meet a 20 percent renewables target by Dec. 31, 2013, a 25 percent target by the end of 2016, and achieve the 33 percent criterion by the end of 2020.

S.B. 2X applies to all electricity retailers in the state – investor-owned utilities, municipal utilities and independent sellers. The current 20 percent renewable energy requirement applies only to investor-owned utilities and independent power producers.

One municipal utility, the Los Angeles Department of Water and Power, has already reached the 2013 goal of generating 20 percent of its power from renewables. Smaller municipal utilities like Glendale, Anaheim, Pasadena and Burbank, are behind at this stage in terms of how much renewable power they have in their portfolios, said Dario Frommer, partner at Mayer Brown law firm.

Most investor-owned utilities in California are hovering just under 20 percent renewables now. While it may seem that investor-owned utilities are close to meeting the 2013 goal, many of these projects are in litigation over siting issues and may not be completed in time to meet the 2013 target, Frommer said.

“It’s incumbent on the political leaders to address the siting issues that are creating problems for financing,” Frommer said. “Those issues are an impediment to realizing the 33 percent goal.”

Concerns over siting issues and financing may abound, but S.B. 2X is expected to bring stronger solar and wind markets to the state. During the signing ceremony, U.S. Energy Secretary Steven Chu said he sees the measure as a model for other states. Chu also announced a tentative commitment of $1.2 billion in loan guarantees for a 250 MW solar energy project in San Luis Obispo County.

Jenya Meydbray, CEO of Berkeley-based PV Evolution Labs, said S.B. 2X creates long-term sustainability in the California solar market. “The lack of long-term policy foresight has been one big challenge for solar manufacturers in North America. This new law solidifies California’s dedication to developing a sustainable solar market, which will in turn enhance solar’s viability as a job-creating industry.”

Solar won’t be the only renewable energy form to brighten in the Golden State. According to the American Wind Energy Association (AWEA) Annual Market Report for 2010, California came in third for the most wind capacity installed in 2010, totaling 3,177 MW of total capacity. Wind growth in California is expected to continue with the implementation of S.B. 2X, said Denise Bode, CEO of AWEA.

“California understands the direct link between sound policy and renewable energy’s multiple benefits … California has already seen the jobs and economic development that follow when the right policies are put in place to create a stable business and investment environment,” Bode said.

Since it was passed during a special legislative session, S.B. 2X is not expected to take effect until early July.

Filling the nuclear development void

As Japan and the world pick up the pieces leftover from Fukushima, the looming question is: What form(s) of energy will fill the nuclear void? Some countries, including China and Germany, have already decided to phase out nuclear developments that were underway, looking to solar or energy imports instead.

Our online audience expressed their opinions on how the nuclear development void could be filled in an online poll last week. The results show that 49 percent of poll participants expect natural gas to see the biggest gain if nuclear is suspended or delayed. That’s no surprise, with the current low prices of natural gas and the development of numerous shale gas plays in the U.S. and abroad.

A few days after the Fukushima disaster, I conducted the annual Executive Gas roundtable, which will appear in the May issue of Power Engineering magazine. Five leaders from the gas industry shared their thoughts on the natural gas industry, as well as impacts that Fukushima may have on the U.S. power industry.

John Adams, senior vice president of Power Operations at Calpine, pointed out that the predicted Nuclear Renaissance included 34 nuclear plants being licensed to go forward in the U.S. Yet of those 34, only “a handful looked like they were going to make it or were proceeding on a fast, timely basis.” Even before Fukushima, the Nuclear Renaissance was panning out to be more like a tiny ripple in the energy pond.

“Now we have this tragedy on top of it, which will actually slow it further,” Adams said.

Larry Nichols, CEO of gas exploration and production company Devon Energy, said the Japan tragedy is opening up legislators’ eyes to lower risk forms of energy.

“The nuclear problems in Japan will focus the minds of both the public and policy-makers on why we would provide loan guarantees of $38 billion for new nuclear plants. All the while we have such an abundant, cheap and clean resource like natural gas, which comes with minimal risk,” Nichols said.

Confirmations of those statements are now frequently popping up. A recent study from the Energy Information Administration found that the U.S. has twice the amount of projected recoverable natural gas (827 Tcf) than previously thought.

“Natural gas will take a much more dominant role as we go forward, moving from 20 percent to 40 percent over the next 25 years,” said Ed Walsh, executive vice president for Black & Veatch’s global energy business.

All right, enough about natural gas already. Solar is expected to be another big filler if nuclear growth in the U.S. slows down. Solar growth continues to grow in California, where on March 30 The California Assembly approved a bill that gives utilities until 2020 to have 33 percent of their generation sources come from renewable energy. New Jersey continues to make strides in solar growth as well. According to an April 4 speech by Rhone Resch, president of the Solar Energy Industries Association, the New Jersey solar market grew by 139 percent in 2010 and more than 100 MW was installed.

It is likely that nuclear development in the U.S. will not continue quite as was planned. However, as of March 15, President Barack Obama said that regulators should continue with the approval of construction licenses for new nuclear power plants despite Japan's nuclear crisis.

If a nuclear development slow or halt does occur, it’s likely that all forms of energy will work to fill the void. If natural gas prices reach a place of stability, a large portion of the nuclear development void will likely be filled by gas. Solar will also have its role, as well as hydro, wind, geothermal and biomass. Coal may even play a filler role through the use of supercritical and ultra-supercritical technologies could reduce carbon emissions and boost efficiencies, as well as IGCC plants.