PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

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PacifiCorp – 2007 IRPChapter 3 – The Planning Environmentregulated air emissions. The potential for future regulation of CO 2 emissions due to climatechange concerns and PacifiCorp’s climate change strategy are then discussed in detail.Currently Regulated EmissionsCurrently, PacifiCorp’s generation units must comply with the federal Clean Air Act (CAA)which is implemented by the States subject to Environmental Protection Agency (EPA) approvaland oversight. The Clean Air Act directs EPA to establish air quality standards to protect publichealth and the environment. PacifiCorp’s plants must comply with air permit requirements designedto ensure attainment of air quality standards as well as the new source review (NSR) provisionsof the CAA. NSR requires existing sources to obtain a permit for physical and operationalchanges accompanied by a significant increase in emissions.Within the current federal political environment there exists a contentious debate over establishinga new energy policy and revising the CAA in order to reduce overall emissions from thecombustion of fossil fuels. Currently, the debate focuses on emission standards and compliancemeasures for sulfur dioxide (SO 2 ), nitrogen oxides (NO X ), mercury (Hg), particulate matter(PM), and regulation of carbon dioxide emissions. Several proposals to amend the Clean Air Actto limit air pollution emissions from the electric industry are being discussed at the nationallevel. Specifically, a number of alternative proposals for federal multi-pollutant legislation wouldrequire significant reductions in emissions of SO 2 , and NO X , and establish new definitive standardsfor mercury. Some proposals also contain measures to limit CO 2 and to revise certain otherregulatory requirements such as NSR.Within existing law, EPA’s Regional Haze Rule and the related efforts of the Western RegionalAir Partnership will require emissions reductions to improve visibility in scenic areas. Additionally,newly proposed administrative rulemakings by EPA, including the Clean Air Interstate Ruleand the Clean Air Mercury Rule will require significant reductions in emissions from electricalgenerating units. The outcome of the current debate, manifested in new legislation or rulemakings,will shape PacifiCorp’s emission requirements over the coming decade. Compliance costsassociated with anticipated future emissions reductions will largely depend on the levels of requiredreductions, the allowed compliance mechanisms, and the compliance time frame.PacifiCorp is committed to responding to environmental concerns and investing in higher levelsof protection for its coal-fired plants. PacifiCorp and MEHC anticipate spending $1.2 billionover the next ten years to install necessary equipment under future emissions control scenarios tothe extent that it’s cost-effective. The company has started its clean air projects, such as the installationof a baghouse, flue gas desulfurization and low nitrogen-oxide burners at the Huntington2 plant.Climate ChangeClimate change has emerged as an issue that requires attention from the energy sector, includingutilities. Because of its contribution to United States and global carbon dioxide emissions, theU.S. electricity industry is expected to play a critical role in reducing greenhouse gas emissions.In addition, the electricity industry is composed of large stationary sources of emissions that arethought to be often easier and more cost-effective to control than from numerous smallersources. PacifiCorp and parent company MidAmerican Energy Holdings Company recognize32
PacifiCorp – 2007 IRPChapter 3 – The Planning Environmentthese issues and have taken voluntary actions to reduce their respective CO 2 emission rates.PacifiCorp’s efforts to achieve this goal include adding zero-emitting renewable resources to itsgeneration portfolio such as wind, landfill gas, combined heat and power (CHP) and investing inon-system and customer-based energy efficiency and conservation programs. PacifiCorp alsocontinues to examine risk associated with future CO 2 emissions costs. The section below summarizesissues surrounding climate change policies.Impacts and SourcesAs far as sources of emissions are concerned, according to the U.S. Energy Information Administration,CO 2 emissions from the combustion of fossil fuels are proportional to fuel consumption.Among fossil fuel types, coal has the highest carbon content, natural gas the lowest, and petroleumin-between. In the Administration’s Annual Energy Outlook 2006 reference case, the sharesof these fuels change slightly from 2004 to 2030, with more coal and less petroleum and naturalgas. The combined share of carbon-neutral renewable and nuclear energy is stable from 2004 to2030 at 14 percent. As a result, CO 2 emissions increase by a moderate average of 1.2 percent peryear over the period – 5,900 million metric tons in 2004 to 8,114 million metric tons by 2030,slightly higher than the average annual increase in total energy use. At the same time, the economybecomes less carbon intensive: the percentage increase in CO 2 emissions is one-third theincrease in GDP, and emissions per capita increase by only 11 percent over the 26-year period.According to the Administration’s Annual Energy Outlook 2006 report, the factors that influencegrowth in CO 2 emissions are the same as those that drive increases in energy demand. Amongthe most significant are population growth; increased penetration of computers, electronics, appliances,and office equipment; increases in commercial floor space; growth in industrial output;increases in highway, rail, and air travel; and continued reliance on coal and natural gas for electricpower generation. The increases in demand for energy services are partially offset by efficiencyimprovements and shifts toward less energy-intensive industries. New CO 2 mitigationprograms, more rapid improvements in technology, or more rapid adoption of voluntary programscould result in lower CO 2 emissions levels than projected here.PacifiCorp carefully tracks CO 2 emissions from operations and reports them in its annual emissionsfiling with the California Climate Action Registry.International and Federal PoliciesNumerous policy activities have taken place and continue to develop. At the global level, most ofthe world’s leading greenhouse gas (GHG) emitters, including the European Union (EU), Japan,China, and Canada, have ratified the Kyoto Protocol. The Protocol sets an absolute cap on GHGemissions from industrialized nations from 2008 to 2012 at 7% below 1990 levels. The Protocolcalls for both on-system and off-system emissions reductions. While the U.S. has thus far rejectedthe Kyoto Protocol, numerous proposals to reduce greenhouse gas emissions have beenoffered at the federal level. The proposals differ in their stringency and choice of policy tools.The Bush Administration has proposed an 18% voluntary carbon intensity reduction target, i.e.,emissions per unit of economic output. Such an approach could translate into a tons/MWh approachin the electricity sector.Democratic victories on November 7, 2006 in the House and Senate appear likely to boost effortsto strengthen U.S. global warming policy, but it is far from certain whether the 110 th Congress33
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PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

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