With the June deadline for the Environmental Protection Agency (EPA) to finalize its clean power plan rules quickly approaching, state officials are still searching for solutions to keep coal-fired power plants operating.
Arizona Department of Environmental Quality (ADEQ) Director Henry Darwin recently pointed out during a bipartisan policy center meeting that during the hot summer months the state relies on every available method of electricity production to meet residents’ needs. He noted that he believes the EPA is pushing for too many changes too quickly.
A study unveiled Jan. 30 by Fitch Ratings of New York listed Arizona among the top five states that will struggle with the new EPA ratings. Arizona must reduce carbon emissions by 52 percent, one of the highest reductions requirements in the nation, within 15 years under the current version of the EPA rules.
Although the EPA has allowed each state to come up with an individual plan for reducing emissions, and has not set specific methods for achieving the reduction, state officials generally agree that the intention is to eliminate coal-fired power plants. Darwin has stated that Arizona cannot meet the federal requirements while coal-based plants are still in operation, but it also cannot retire enough plants and still produce enough energy to meet the first deadline set for 2020.
The stringent requirements have already caused Arizona Public Service Co. officials to announce the closure of Unit 2 of Cholla Power Plant at Joseph City by 2016. The remaining units are also in jeopardy and could close if the plant is not converted to natural gas.
In September of last year, APS Vice President of Environmental and Chief Sustainability Officer Ann Becker explained that the company is working with the EPA to try to keep Units 1 and 3 open as long as possible.
“We are in discussions with the EPA around the future of those units,” she said. “The discussion centers around a compromise that would include closing Unit 2, and allow the continued operation of those units (Units 1 and 3). It would allow them to continue operating through the mid-2020s.”
Under the current version of the rules, APS would have to spend at least another $350 million in upgrades to continue operating the plant using coal in the long-term. The company has already spent $350 million installing state-of-the-art emission controls in anticipation of stricter regulations. The units could also be converted to natural gas or shut down completely. According to APS Vice President of Fossil Generation David Hansen, the final decision will come down to economics. If it is financially beneficial, they will be converted.
According to the Fitch report, costs created by the new rules will be high in Arizona and other high-reduction states, both for the state government and ratepayers.
“Carbon reduction related costs are expected to be high in these states due to sizable reduction requirements, high-cost alternatives, or both. Further, these states will be challenged to maintain financial margins, given the need to impose significant rate increases on end users already burdened by high electric costs,” the report notes.
Of the 50 states, Arizona is ranked 47th in terms of ease of meeting the challenges presented by the new regulations. In terms of the percentage of required reductions in relation to energy production, Arizona is ranked third. In terms of cost, however, Arizona ranks fifth, with West Virginia, Utah, Mississippi and Colorado expected to face higher costs of meeting the federal regulations.
In the meantime, APS officials are already looking to purchase additional power for peak capacity beginning in 2018 or 2019. The company recently issued a request for proposals in order to compare options for producing more electricity to meet the state’s needs.
