MEMORANDUM

To: Carbon Power Plan for Existing Power Plants; Docket id: OAR-2013-0602

From: Region 5, EPA

Summary: The following questions were submitted to EPA prior to a 7/21/14 conference call between EPA and Minnesota Pollution Control Agency about the proposed carbon power plan for existing power plants.



Questions for EPA, July 21, 2014

   1. Will EPA consider comments on proposals that can better account for early action?

As we have pointed out to EPA in the past, Minnesota embarked on a CO2 reduction program awhile ago.  NGCC plants Xcel Energy were built with the expectation that Minnesota would be better positioned for upcoming carbon regulation. These actions are not credited in EPA's proposed rule due to the 2012 baseline. Further, the NGCCs installed under this program, which is cited in EPA's rule as a success, also give MN a more stringent target due to the effect of Block 2. Overall, the treatment of these NGCCs under the proposal is a potential double penalty for proactive actions by the MN Legislature, MN Public Utility Commission, and Xcel Energy to seek out coal plants for retirement and replace them with much lower-emitting NGCCs.

Beyond this, the NGCCs have also had lower capacity factors due to the integration of wind and use of DSM programs in Minnesota. A simple back-of-the-envelope calculation illustrates this impact. Minnesota had about 2733 MW of wind at the end of 2011, which would have generated about 7,900,000 MWH in 2012.  If Minnesota had not built this wind, and half of that generation were instead sourced from the state's existing NGCCs (which may be a conservative assumption), then Minnesota's NGCCs might have operated at about a 40% capacity factor rather than 23.5% in 2012. Our utilities are looking further at this question and also at whether and how much DSM may have further decreased NGCC capacity factors. 

How can Minnesota account for customer conservation improvements that occurred before 2012 if EPA chooses to not set the baseline used for determining State targets at a date early enough to credit early action?  

   2. Is EPA open to comment concerning methods to fix anomalous data for specific units such as Sherco 3?

Sherburne County Generating Station Unit 3 was down for all of 2012 due to an unplanned outage, making the starting point of Minnesota's goal calculation atypical. This should be corrected, as Minnesota will continue to rely on this generating unit (approximately 900 MW) for the duration of the planning period, and likely beyond.

This points to the broader issue that basing state goals on a single base year cannot capture all sorts of variability of outages, fuel prices, weather, etc. that may affect generation and emissions. Would EPA consider a multi-year baseline period as the starting point for goal computation?
   
What is the preferred reference period, 2012 or June 2, 2014?  EPA suggested that only those measures implemented after the proposed Clean Power Plan was released would count as "new" renewables or otherwise as new activity.  Yet, EPA has determined EPA targets for a State while giving reference to 2012 State generation and emissions statistics, including the use of renewable generation.  What is EPA's reference point for separating new from existing action?  


   3. How can hydro power be accounted for in a state plan?

Minnesota utilities are entering into agreements with hydro generation in Manitoba or other parts of Canada as a means to reduce their emissions or replace other, more carbon-intensive forms of generation. EPA is clear that existing (pre-2012) hydro was not included in the denominator when setting state goals. However,
   * Under what conditions would EPA consider counting generation from hydro installed pre-2012 (or pre-proposal) toward goal compliance after 2020? 
   * We understand new hydro acquired after 2012 (or after date of proposal) does in general count toward goal compliance. However could EPA please clarify whether a state that increases its RE generation portfolio by adding new hydro in Canada may count this toward goal compliance?
   * What if a utility adds hydro to its generation portfolio by signing a new (post-proposal) power purchase agreement, but this does not represent newly built hydro capacity, only a new PPA with existing facilities. Do the incremental MW count toward goal compliance?

   4. Will EPA consider adjusting downwards Minnesota's EE assumptions due to the age of the current program?

EPA's proposal uses a final goal of 1.5% per year annual growth rate in new energy efficiency (aka DSM aka Conservation Improvement Program) measures.  Minnesota has achieved similar levels of DSM performance in recent years.  However, DSM programs face challenges in achieving similar levels of performance as ever-more efficient technologies enter the marketplace, or are required by federal standards, and thus become part of normal activities and not eligible for participation in a DSM program. We further note that EPA recognizes Minnesota's ongoing achievements in DSM in Table 5-4 of the GHG Abatement Measures TSD, page 5-18, where Minnesota ranks fourth nationally in cumulative DSM performance at 13.10%. This achievement is based on significant DSM program activity since the 1980s in Minnesota. 

What evidence does EPA offer that a state like Minnesota, which has been driving the DSM market for so long, can continue to achieve 1.5% per year performance on a sustained level from 2020-2030? 

   5. Minnesota is very interested in receiving proper credit for its generation located in North Dakota.  
EPA has included the renewables in other States that the Minnesota RPS "counts" as counting in EPA's tally of those other State Clean Power Plan emission rate targets. 

How, specifically, can a Minnesota based RPS get incorporated into an EPA enforceable SIP?  

How can Minnesota exercise "claims" to renewables built for Minnesota RPS requirements if EPA has structured that doing so will increase the burden for renewables in those other States?  Shouldn't EPA be giving relief to States by allowing recalculation of State targets if EPA's basis for target setting is being modified by such matters?  

Minnesota's 2012 renewable percentage is 18% according to Table 6 in the proposed rule, and its target is 15% for the purposes of emissions reduction targets per the same table. We believe that the state received a target based on the 15% target.  
   * Can you please confirm that all of the existing and planned renewables are eligible toward compliance? 
   * Also, can you confirm that Minnesota's above-target renewables help the state for compliance even beyond the target levels? 
   * Can you explain how this compliance step works in the rule? 
   * Do entities or generators that are used to reduce fossil generation meet the same provisions as those defined as "affected units"?  That is, do they have to be 25 MW and provide 1/3 power to the grid, for example, can we use landfill gas-to-energy plants as part of our RE? 

Credit for out-of-state renewable generation
   * Assuming for the moment that states do not collaborate and submit regional plans, which state would be allowed to count newly built (post-proposal) renewable generation towards its compliance demonstration  -  the state where the renewable generation is located, or the state where the load it serves is located?
   * The State Plan Considerations TSD indicates that a "state that implements the measure  -   i.e., end-use energy efficiency and renewable energy regulations or programs, or an emission limit that addresses out-of-state generation  -  claims the avoided CO2 emissions, regardless of where they occur."  What happens if two states disagree on who gets to claim the emissions reductions benefits of a particular state action?  

   6. Are RECs like that provided by M-RETs going to be good enough to track renewable generation?

   7. Minnesota is interested in accepting EPA's offer to host a discussion focused solely on converting the rate-based goals to their equivalent mass-based goals. 

We look forward to a discussion with EPA as soon as EPA is able to schedule it.  

   8. At-Risk Nuclear Power Capacity:
      
We are unclear about how EPA's approach of accounting for at risk nuclear either improves or impedes overall CO2 reductions in the United States.  Minnesota has two nuclear generating stations which have recently received approvals for uprates and operation extensions until 2030, at which time they are scheduled for shutdown.  Can U.S. EPA provide a sample calculation of how preserved nuclear generation is accounted for in back-end compliance calculations? 

   9. State Plan preparation

What type of documentation is necessary for supporting a state's projection of future CO2 emissions?  Should we choose to use a mass based approach, can this mass be adjusted to account for changes in generation/demand?  

If Minnesota was to create an in-state type of trading program between EGUs, are we able to include in the plan more EGUs than are currently defined in the rule as affected units (e.g. opt-in provisions).

   10.  Will EPA consider releasing a NODA?

Minnesota believes it would be really useful if EPA were to prepare a NODA that contains the state's final goal and possibly a rate to mass conversion method prior to rule finalization. This is similar to how EPA acted with CSAPR.



