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J A N U A R Y 2 9 , 2 0 1 9 | H O L Y O K E , M A

Patricio SilvaS E N I O R A N A L Y S T

Environmental Advisory Group

Environmental Regulatory Update

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Presentation Overview• National Trends

• Regional Trends

• Changes in Federal Environmental Regulatory Policy– Major Environmental Rules Related to Coal, Natural Gas, and Nuclear

Generation

• MATS Update

• Load-Weighted Real-time Marginal Unit by Month (2017-2018)

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NATIONAL TRENDS

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• U.S. power generation capacity retirements continued from 2017 (11.5 GW) through 2018 (16.9 GW):

– 11.8 GW in coal-fired capacity retirements (70%)

– 3.78 GW in gas-fired capacity retirements (22.4%)

• Retired fossil capacity tended to have lower capacity factors (53.7% for coal, 10.6% for natural gas in 2017)

• Unfavorable economic conditions driving fossil and nuclear retirements nationwide

• Cumulative coal retirements (74,722 MW 2010-2018) expected to have limited impact on national emission trends

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2018 U.S. Capacity Retirements

Sources: EIA; S&P Global Market Intelligence

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• In 2019, changes expected in U.S. generating capacity include:– 49,420 MW in new capacity

expected to enter service• 22,447 MW of wind• 13,993 MW of natural gas• 11,050 MW of solar

– 8,597 MW expected to retire:• 5,834 MW of coal• 1,801 MW of natural gas• 683 MW of nuclear

– 2,216 MW fuel switching

• In New England 1,572 MW in new natural gas, oil, solar, wind capacity expected, while 683 MW in nuclear capacity retires

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2019 Forecast U.S. Capacity Changes

Sources: EIA; S&P Global Market Intelligence

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EIA Forecasts U.S. Energy-Related Carbon Dioxide Emissions Increased 2.8% in 2018

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-42

145

-63

-40

forecast

-200

-150

-100

-50

0

50

100

150

200

2017 2018 2019 2020

Components of annual changemillion metric tons

natural gaspetroleumcoalnet change

forecast

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

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2016 2017 2018 2019 2020

total energy

petroleum

natural gas

coal

U.S. annual carbon emissions by sourcemillion metric tons

Source: Short-Term Energy Outlook, January 2019

Source: EIA

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1990 2000 2010 2020 2030 2040 2050

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carbon dioxidesulfur dioxidenitrogen oxide

NOx Budget Trading Program

Electric sector emissions (Reference case)

2018history projections

SO2 Phase 1

SO2 Phase 2

MATS

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EIA AEO2019 Reference Case - Electric Sector Emissions

Source: EIA

Projections reflect decreasing coal generation, increasing natural gas generation emissions

EIA forecasts the power sector experiences a notable shift in fuels used to generate electricity, driven in part by historically low natural gas prices. Increased natural gas-fired electricity generation; larger shares of intermittent renewables; and additional retirements of less economic coal and nuclear plants occur during the projection period

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EIA AEO2019 Reference Case – New England Electric Sector Projected Emissions

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SYSTEM GENERATION, EMISSIONS & WATER USE TRENDS

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Fossil Fuel Deliveries to New England Power Plants

0

5,000

10,000

15,000

20,000

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30,000

35,000

40,000

45,000

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Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec

Nat

ural

Gas

Rec

eive

d (M

Mcf

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Coal

(Tho

usan

d Sh

ort T

ons)

, Oil

(Mill

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Barr

els)

Rec

eive

d

2017

Coal (1000 tons) Oil (MBbls) Natural Gas (MMcf)

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20,000

25,000

30,000

35,000

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100

200

300

400

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600

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Nat

ural

Gas

Rec

eive

d (M

Mcf

)

Coal

(Tho

usan

d Sh

ort T

ons,

Oil

(Mill

ion

Barr

els R

ecei

ved

2018

Data Coal (1000 tons) Data Oil (MBbls)Data Natural Gas (MMcf)

Source: EIA

Coal (1000 tons)

Natural Gas (MMcf)

Oil (MBbls)

93.9 243846.6 718.8

Coal (1000 tons)

Natural Gas (MMcf)

Oil (MBbls)

197.687 352097.855 502.148

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Monthly Energy Data (GWh) 2017 2018 ∆Generation 102,564 103,702 1,138Pumping Load 1,717 1,804 87Net Interchange (+ = Import) 20,373 21,409 1,036

Imports 23,260 23,488 228Exports -2,887 -2,080 807

Net Energy for Load (GWh) * 121,220 123,307 2,087

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Annual, Monthly Energy Generation (GWh) for New England

Source: ISO-NE

-20,000 20,000 60,000 100,000

Generation

Pumping Load

Net Interchange

Imports

Exports

2018 2017

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2000

2001

2002

2003

2004

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Annual Generation by State (GWh)

CT MA ME NH RI VT

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New England Emitting Generation & Estimated CO2 Emissions (MWh, Metric Tons)

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

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70,000,000

2017 2018

Emitting Generation (MWh)

COAL GAS OIL LANDFILL GAS METHANE REFUSE WOOD

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2017 2018

Estimated CO2 Emissions (Metric Tons)

COAL GAS OIL LANDFILL GAS METHANE REFUSE WOOD

Source: ISO-NE

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New England 2017 vs. 2018 SO2 & NOXEmissions (Short Tons)

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500

1000

1500

2000

2500

3000

3500

4000

4500

2017 2018

SO2 Emissions

Coal Diesel Oil Natural Gas Other Oil Residual Oil Wood

0

1000

2000

3000

4000

5000

6000

7000

2017 2018

NOx Emissions

Coal Diesel Oil Natural Gas Other Oil Residual Oil Wood

2018 emission increases attributable in part to changes in weather, economic growth, energy prices, and fuel mix

Sources: ISO-NE; EPA

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Water Withdrawals for Power Generation by Fuel Type in New England (Million Gallons)

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2016 Water Withdrawals (Million Gallons)

Coal Black Liquor Distillate Oil Natural Gas

Nuclear Residual Oil Wood

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2017 Water Withdrawals (Million Gallons)

Coal Black Liquor Distillate Oil Natural Gas

Nuclear Residual Oil Wood

Source: EIA

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Water Consumption for Power Generation by Fuel Type in New England (Million Gallons)

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100

200

300

400

500

600

700

800

2016 Water Consumption (Million Gallons)

Coal Black Liquor Distillate Oil Natural Gas

Nuclear Residual Oil Wood

0

100

200

300

400

500

600

700

800

2017 Water Consumption (Million Gallons)

Coal Black Liquor Distillate Oil Natural Gas

Nuclear Residual Oil Wood

Source: EIA

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CHANGES IN FEDERAL ENVIRONMENTAL REGULATORY POLICY

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Overview of Federal Environmental Rulemakings Impacting Energy Infrastructure

• Clean Air Act– New Source Review Applicability changes– Clean Power Plan Repeal, Affordable Clean Energy Rule Replacement

• Clean Water Act– Proposed jurisdictional limit to affected water bodies– Wastewater discharge compliance deadlines deferred

• Endangered Species Act/Migratory Bird Treaty Act– Protections limited for threatened and endangered species and habitats– Protections limited for migratory birds

• Most actions intended to either rollback or streamline permitting, licensing, or compliance rules for a range of energy infrastructure– Uncertain regional impact, developers see potential adverse impact on

levelized costs for various types of energy infrastructure

Sources: EPA; MJ Bradley & Associates LLC

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Overview of Federal Environmental Rulemakings Impacting Energy Infrastructure

• Extended federal government shutdown creating uncertainty for the power sector as closure of various departments and agencies stalls rulemakings, permitting and information gathering and reporting functions– Increasing risk of regulatory ‘snapback’ as delays in permitting,

rulemaking, guidance or adverse litigation outcomes leave developers with uncertain or conflicting regulatory obligations

– Bureau of Ocean Management, Environmental Protection Agency unable to mover forward during federal shutdown on siting or permitting matters directly impacting development of energy infrastructure in the region

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Major Environmental Rules Related to Coal, Natural Gas, and Nuclear Generation

Title YearFinalized

YearsImplemented

AuthorizingStatute Major Provisions

GenerationSources Affected

Cooling Water Intake Rule

2001 (Phase 1)2003 (revised Phase 1)2014 (Phase 2)

Phase 2: 2014-2018;2018 litigation upholds 316(b) rule

CleanWater

Act

• Promulgated under 316(b) of the Clean Water Act. New sources regulated under Phase I and existing sources regulated under Phase II.

• States consider requirements for power plants on a case-by-case basis

• Requires controls to reduce mortality to fish and other aquatic organisms

CoalNatural GasNuclear

Cross-State Air Pollution Rule

2011 Phase 1: 2015 Phase 2: 2017

Clean Air Act

• The Cross-State Air Pollution Rule replaced the Clean Air Interstate Rule starting on January 1, 2015, and requires states to reduce power plant emissions of SO2 and NOx that contribute to ozone emissions and fine particle pollution in other states

CoalNatural Gas

Steam Electric Effluent Limitation Guidelines

1974; policy updates in 1977, 1978, 1980, 1982, and 2015

1982; 2015-;2017EPA suspends 2015 rule for reviewLitigation suspended

CleanWater

Act (40 CFR 423)

• Established limitations on the discharge of toxic and other chemical pollutants and thermal discharges from existing and new steam electric power plants, as well as pretreatment standards.

• The 2015 update sets the first Federal limits on levels of toxic metals that can be discharged

CoalNatural Gas

Source: DOE

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Major Environmental Rules Related to Coal, Natural Gas, and Nuclear Generation

Title YearFinalized

YearsImplemented

AuthorizingStatute Major Provisions

GenerationSources Affected

New Source Review

1980; policy updates in 1996 and 2002

1980; 2002 updates2018 EPA revises applicability

Clean Air Act

• Affects stationary sources of air pollutants. Requires that a new or modified power plant obtain a pre-construction permit to ensure, among other things, that modern pollution control equipment is installed.

• Requirements differ depending on whether or not the plant is located in an area that meets the requirements under the National Ambient Air Quality Standards

CoalNatural Gas

Mercury and Air Toxics Standards

2012 2015-2016Implemented2017Litigationsuspended2018 EPA proposes rollback

Clean Air Act

• Set mercury, arsenic, acid gases, and other toxic pollutants emissions limits for coal-and oil-fired power plants

• Operators had until April 2015 to comply with many plants receiving additional multi-year extensions

CoalOil

Coal Combustion Residuals Rule

2015 2015-2018;2018 rule revised, court overrules changes

Resource Conservation and Recovery

Act

• Addresses groundwater contamination risks from coal combustion residuals (i.e., “coal ash”) disposal in unlined landfills and surface impoundments by establishing national standards for disposal

Coal

Source: DOE

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Major Environmental Rules Related to Coal, Natural Gas, and Nuclear Generation

Title YearFinalized

YearsImplemented

AuthorizingStatute Major Provisions

GenerationSources Affected

Regional Haze Rule

1999; policy

revisions in 2017

ImplementedRevised state plans due in 2021, some plans underreview

Clean Air Act

• Requires states to develop long-term strategies, including enforceable measures to improve visibility in 156 national parks and wilderness areas

• Aims at returning visibility to natural conditions by 2064

CoalOilNatural Gas

Carbon New Source PerformanceStandards

2015 2016Litigationsuspended pending EPA review2018 EPA proposes changes

Clean Air Act

• Carbon New Source Pollution Standards established CO2 emission standards for new fossil fuel-fired generators under Clean Air Act section 111(b)

CoalOilNatural Gas

Clean Power Plan

2015 2018 EPA proposes repeal

Clean Air Act

• The Clean Power Plan, establishes CO2emission standards for existing power plants under section 111(d) of the Clean Air Act

CoalOilNatural Gas

Source: DOE

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MERCURY AND AIR TOXICS STANDARDS (MATS)

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EPA proposes changes to Mercury and Air Toxics Standards (MATS)• December 2018: EPA proposes changes to Mercury and Air Toxics

Standards (MATS) which limited mercury and other toxic pollutant emissions from existing coal- and oil-fired steam thermal generators– MATS imposed hazardous air pollutants (HAPs) emissions from coal- and

oil-fired generators, requiring reductions of 90% in mercury emissions and reductions in acid gases and particulate matter emissions

– Any modification or reversal of the 2016 Supplemental Notice could undermine the MATS requirements and jeopardize some affected generators’ ability to recover capital costs incurred with the required pollution control retrofits

– Any modifications to the cost benefit analyses for this rulemaking will likely establish a precedent for other rulemakings

• No regional impact expected, affected generators remain subject to independent state air toxics limits

• EPA scheduled to propose the MATS Residual Risk and Technology Review and Cost Review for public comment late in 2019

Sources: EPA; MJ Bradley & Associates LLC

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LOAD-WEIGHTED REAL TIME MARGINAL UNIT FUEL DATA BY MONTH (2017-2018)

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Load-Weighted Real time Marginal Unit Fuel Data by Month (2017-2018)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2017 2018

Gas Externals Pumped Storage Coal Oil Wind Hydro Other

In this time period, on average, the marginal unit was: natural gas (75%); pumped storage (17%); oil (2%); coal (1.9%); hydro (1.9%); wind (1.1%); and, other (1%)

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