While the battle over coal generated electricity rages on, the future of Arizona Public Service Company’s (APS) Cholla Power Plant remains undecided.
Proposed Environmental Protection Agency (EPA) regulations, which were unveiled on June 2, would require the state of Arizona to reduce carbon emissions by 52 percent, one of the highest reductions under the proposal. Only Washington State is required to reduce a higher percentage, at 72 percent, but that state had already planned to close its only coal-powered plant. South Carolina is the only other state required to reduce carbon emissions by more than 50 percent.
Arizona Department of Environmental Quality (ADEQ) officials have already started forming a stakeholder group to address the proposed regulations. The group may decide how the state will achieve the reduction levels set by the EPA, or it may challenge the EPA’s authority to set regulations for the state.
“ADEQ will be reaching out to those most affected by these proposed rules,” said ADEQ Director Henry Darwin. “We need a healthy discussion about creating a sustainable energy future for Arizona at the same time we consider all of our other potential responses, including challenging EPA’s legal authority to set the standards if the proposed rule goes final.”
This would not be the first time ADEQ challenged the EPA’s authority to establish rules, or override existing state regulations. In a case that also involved Cholla Power Plant, ADEQ and APS questioned whether the federal government could negate regional haze rules established by the state. APS spent $324 million to retrofit the Cholla plant to reduce emissions and meet regional haze rules only to have those rules later disapproved by the EPA. The company estimated it would need to spend $425 million to meet the regional haze rules proposed by the EPA.
In anticipation of the EPA’s pressure to end coal-power generation, APS is already evaluating several options for producing power statewide and at the Cholla plant. As part of a 15-year “integrated resource plan,” APS plans a company-wide shift toward natural gas and solar power generation.
“Natural gas will be the new energy source of choice,” a summary of the plan notes. “Because renewable energy can’t supply customers with steady, predictable energy around the clock, Arizona will need more generation from natural gas, which can start and ramp up quickly, and can provide energy reliably day or night. Over the next 15 years, natural gas is projected to surpass coal and nuclear as the largest source of electricity generation for APS customers.”
The plan outlines several potential options for the Cholla plant, one of which includes converting at least one of the Cholla units to a natural gas facility. According to the report, a final decision regarding the plant may not be made until 2016.
“…APS will be continuing its evaluation of coal by examining the merits of further investment in the Cholla and Navajo units. Key to this analysis will be penetration of solar PV (photovoltaic) and its impacts on the need for operational flexibility, natural gas prices and the impacts of environmental regulations. Completion of analysis and a decision regarding Cholla is expected by 2016, followed by Navajo before 2019,” the plan states.
The plan notes that APS has four different scenarios to consider, but under the currently selected scenario the company will shift to a power generation portfolio that includes 28.5 percent natural gas, 24.5 percent coal, 18.1 percent nuclear, 13.6 percent renewable, and will rely on a 15.3 percent shift in energy usage due to “energy efficiency and demand response.”
A summary of the currently preferred scenario notes, “By 2029, the contribution of coal and nuclear in this portfolio would be reduced to about 43 percent due to the fact that load is increasing while the amount of coal and nuclear generation is assumed to stay constant. This resource mix provides customers with greater protection from price volatility associated with a single fuel source, however, maintaining coal resources may expose customers to other uncertainties and additional compliance cost obligations not factored into this plan.”
Arizona has until 2016 to submit a plan to the EPA to meet the newly proposed regulations, and until 2030 to comply. ADEQ notes, however, that the EPA proposal is not final. A 120-day public comment period is underway. Public hearings are planned on the proposal, but none are scheduled in Arizona.
