On April 25, 2024, the U.S. Environmental Protection Agency (EPA) introduced a comprehensive suite of final environmental regulations significantly affecting the landscape of energy production in the United States. Targeting both new and existing fossil fuel-fired power plants, these environmental regulations – notably the GHG Rule, ELG Rule, and an update to the MATS Rule, aim to reshape the U.S. electric power system over the coming decade. This overview explores each regulation’s intricacies and the required strategic response, emphasizing how Energy Ventures Analysis (EVA) can guide stakeholders through these transformative changes.

Greenhouse Gas (GHG) Rule Update

The finalized GHG Rule is a cornerstone of the EPA’s strategy to mitigate climate change impacts from the power sector. Notably, EPA has decided to exclude all existing combustion turbines from the final rule and plans to address these resources in a separate rulemaking process. This rule imposes several critical mandates:

• Covered Entities: The rule addresses new or reconstructed combustion turbines (simple and combined cycle) and existing fossil fuel steam-electric generators (i.e., coal, natural gas, and oil steam generators).
• Compliance Standards For New Combustion Turbines: Compliance requirements for new combustion turbines include dividing the turbines into three load categories depending upon their capacity factor (low, intermediate, and base load), for which different compliance standards and timelines are specified. Emission limits are specified for the low and intermediate load categories, and a phased approach is used for base load. For this last category of units, they can emit 800-900 lbs CO₂/MWh-gross based on highly efficient combined cycle technology running on natural gas and 100 lbs CO₂/MWh-gross starting on January 1, 2032, based on capturing 90% of CO₂ using CCS technology. This reduction in emissions can be achieved using different technologies as well.
• Compliance Standards For Existing Fossil Steam Turbines: Compliance standards differ for natural gas, oil, and coal-fired steam generators. For natural gas and oil-fueled steam generators, specific emission limits are set based on load categories, all set to come into effect by January 1, 2030. For coal-fired steam generators, units retiring before January 1, 2032, are exempt from the rule. Units operating on or after January 1, 2032, and planning to cease operations before January 1, 2039, need to achieve a 16% CO₂ emission rate reduction (lbs CO₂/MWh-gross basis) requirement based on a 40% natural gas co-firing best system of emission reduction (BSER) from January 1, 2030. Units operating on or after January 1, 2039, need to implement CCS with 90% CO₂ capture (88.4% reduction in emission rate lbs/MWh-gross) by January 1, 2032.
• Categorization depends on the state of the source on January 1, 2030, and thereafter. Should a source not be able to fully convert to natural gas by this date, it would be treated as a coal-fired EGU (e.g., if a coal unit chooses to co-fire 40% natural gas through 2038, it cannot convert to 100% natural gas in 2039 and continue to operate but will have to close)
• States have 24 months (~May 2026) after the final rule’s publication in the Federal Register to submit State Implementation Plans (SIP), establishing the expected compliance mechanism/pathway for each affected EGU within the state. Therefore, all affected existing EGUs will have less than 24 months to decide on their preferred compliance strategy.

The GHG Rule’s extensive reach demands robust strategic planning from power producers, who must evaluate compliance costs and operational impacts versus potential conversion or retirement options.

2. Effluent Limitation Guidelines (ELG) Update

The 2024 ELG Update imposes stringent water pollution controls on power plants, explicitly targeting wastewater management from coal-fired power plants. By revising water pollution control requirements for plants, the rule creates a financial disincentive for the continued use of coal. The rule targets flue gas desulfurization (FGD) wastewater, bottom ash (BA) transport water, legacy wastewater at existing sources, and combustion residual leachate (CRL) at new and existing sources.

Here’s an overview of how these changes are structured:

• Compliance for Existing Facilities: Facilities previously regulated under the 2020 rule must now adhere to the updated 2024 standards by January 1, 2030.
• Compliance for Facilities planning to retire by the end of 2028 or 2034: Facilities planning to end coal combustion by 2028 are permitted to operate under the standards of the 2015 ELG until their closure. Similarly, facilities that intend to cease coal combustion by 2034 can continue operations until then, provided they comply with the 2015 and 2020 ELG rules.
• Exemption for Small Electric Generators: Facilities that operate small electric generating units (50 MW or less) are not subject to the new rule and remain governed by the existing 2015 regulations.
• Zero Liquid Discharge Requirements: For plants continuing operation past 2034, the rule mandates zero liquid discharge (ZLD) technologies to eliminate wastewater discharge from bottom ash and FGD wastewater streams.

These environmental regulations necessitate investments in advanced water treatment technologies and may accelerate the transition from coal-fired power due to the high compliance costs associated with continued operation under new ELG standards.

3. Mercury and Air Toxics Standards (MATS) Update

The MATS Update is focused on reducing emissions of mercury and other air toxics from power plants:

• Updated Compliance Standards: The update introduces more stringent limits for particulate matter and mercury emissions. The final rule significantly tightens the filterable particulate matter (fPM) emission limit for existing coal-fired EGUs, lowering the standard from 0.030 lb/MMBtu (2012 MATS Rule) to 0.010 lb/MMBtu. Lignite-fired units, in particular, are subject to more rigorous mercury emission standards, aligning them with those for other coal types. Notably, lignite-fired units now face a 1.2 lb/TBtu mercury emission standard, the same as their sub-bituminous counterparts.
• Covered Entities: To meet these stricter standards, many power plants will need to improve the operations of their existing air pollution control technologies, such as electrostatic precipitators and fabric filters, or potentially invest in new technologies or upgrades. The final rule anticipates that 33 coal-fired EGUs, or 11.6 GWs of capacity, must improve their particulate matter control technology.
• Compliance Timelines: Affected sources are required to comply with the new fPM and mercury limits within three years from the effective date of the rule (~ May 2027).

Despite the lower relative costs of MATS compliance compared to the GHG and ELG rules, the operational implications can be significant in aggregate. Plants must carefully plan for and implement upgrades to meet the stringent new standards within the compliance timelines.

The implications of these environmental regulations extend beyond compliance. They are expected to influence the power sector’s market dynamics, operational decisions, and strategic planning. As stakeholders navigate this evolving landscape, partnering with an experienced advisor like Energy Ventures Analysis (EVA) can provide crucial insights and strategic guidance. EVA offers deep expertise in both energy and environmental consulting, helping clients understand regulatory impacts, optimize compliance strategies, and make informed decisions amidst these complex changes. As we continue to analyze the likely impacts of these rules, EVA is committed to supporting our clients through expert analysis and strategic advice, ensuring they are well-prepared to meet the challenges and opportunities of the new regulatory environment.