The New EPA Power Plant Rules Are Out — and Could Change the Calculus for Gas

Utilities all over the country have proposed to build a slew of new natural gas-fired power plants in recent months, citing an anticipated surge in electricity demand from data centers, manufacturing, and electric vehicles. But on Thursday, the Environmental Protection Agency finalized new emissions limits on power plants that throw many of those plans into question.

The rules require that newly built natural gas plants that are designed to help meet the grid’s daily, minimum needs, will have to slash their carbon emissions by 90% by 2032, an amount that can only be achieved with the use of carbon capture equipment. But carbon capture will be cost-prohibitive in many cases — especially in the Southeast, where much of that expected demand growth is concentrated, but which lacks the geology necessary to store captured carbon underground.

“With this rule, it’s kind of back to square one,” Tyler Norris, an electric power systems researcher, told me. “I think most likely, you're gonna see the regulators really push back and call upon them to redo all their modeling.”

This is the first federal mandate to curb carbon from the electricity sector since President Obama’s 2015 Clean Power Plan, which never went into effect. Despite growing investment in renewable energy, power generation is responsible for about a quarter of the country’s greenhouse gas emissions.

The Biden administration is guaranteed to face legal challenges from Republican attorneys general and electric utilities. The Edison Electric Institute, the largest trade group for electric utilities, asserted that carbon capture “is not yet ready for full-scale, economy-wide deployment” and expressed worry over the timelines for permitting and financing. Duke Energy, one of the Southeast’s largest utilities, issued a statement after the rule came out saying that it “presents significant challenges to customer reliability and affordability – as well as limits the potential of our ability to be a global leader in chips, artificial intelligence and advanced manufacturing,” echoing concerns from the National Rural Electric Cooperative Association. The EPA, however, maintains that recent federal investments in carbon capture — including an $85 tax credit for every ton of CO2 captured and stored — render it both “technically feasible and cost-reasonable.”

As part of the same announcement on Thursday, the Environmental Protection Agency finalized several additional regulations to rein in air and water pollution from coal-fired power plants, including mercury and toxic metals, wastewater, and coal ash, in addition to carbon emissions. During a call with reporters on Wednesday, EPA administrator Michael Regan argued that by finalizing all of these rules at once, the agency was providing the highest degree of regulatory certainty for the power industry. “This approach is both strategic and innovative,” he said. “We are ensuring that the power sector has the information needed to prepare for the future with confidence, enabling strong investment and planning decisions.”

Initially the EPA was going to require emissions cuts at existing natural gas plants, too, but the agency announced in February that it was delaying that rule in order to develop a “stronger, more durable approach.” EPA officials offered no new details on the timeline on Wednesday.

The two other biggest changes the agency made between the proposed and final rules were to push forward and shorten the timeline for coal plant compliance, and to lower the threshold determining how many natural gas plants have to meet the toughest standard — which means more plants will have to control their emissions.

The agency projects the new standards will prevent a total of nearly 1.4 billion metric tons of carbon emissions through 2047, which is about equal to the amount the power sector emits in a year. That’s significant, but it’s far less than the clean car rules the EPA finalized in March, which are expected to avoid 7.2 billion metric tons of carbon between 2027 and 2055. The EPA also estimates that the power plant rules will produce $370 billion in climate and health benefits over the next two decades, in terms of avoided deaths, hospital visits, and asthma cases.

The new emissions limits for coal plants are tied to how much longer a given coal plant is slated to operate. Those that plan to shut down before 2032 are exempt altogether. Those that plan to retire by 2039 have to reduce the amount of CO2 they emit per megawatt hour by replacing some of the coal they burn with natural gas beginning in 2030. Coal plants with no plans to retire before 2039 are subject to the highest standard, requiring a 90% drop in emissions by 2032 — which would require capturing the emissions and storing them underground.

These standards are certain to lead to more plant closures, but coal plants are already shutting down at a rapid pace purely based on economics and the fact that so many of them are so old. Getting the rules in place is less about tackling coal emissions, per se, and more about “getting utilities thinking more proactive about how they are going to replace these coal plants,” Michelle Solomon, a senior policy advisor at the nonprofit think tank Energy Innovation, told me.

Gas, however, is another story. Utilities have been sounding the alarm about a coming surge in electricity demand. Electric companies throughout the Southeast, as well as Texas, Wisconsin, and elsewhere, have proposed building dozens of new natural gas plants, arguing that renewables and batteries aren’t up to the task of providing a reliable, dispatchable source of power.

Whether that coming demand is real or inflated is a matter of debate. But regardless, clean energy researchers and advocates dispute the idea that gas plants are needed for reliability.

“Utilities are seeing an additional need for peak capacity, not an additional need for capacity throughout the day,” Solomon told me, asserting it was possible to meet those peaks with solar and storage, or even by improving efficiency so that the peaks aren’t as high. The trick is making sure we can bring those resources online fast enough. To that end, the Department of Energy also announced a number of initiatives to boost transmission infrastructure on Thursday.

The EPA’s regulations for new gas plants are tied to how frequently they are intended to operate. Plants that are designed to switch on during times of peak demand — a variety called a “simple cycle” combustion turbine plant — won’t have to do anything differently. Plants that run a bit more often — so-called “intermediate” resources that might run daily from mid-morning till the evening, at 20% to 40% of their annual capacity — will be required to install the most efficient equipment available on the market. Any that operate more frequently than that will be subject to the 90% emissions reduction standard by 2032. This primarily affects “combined cycle” plants, which are more efficient than simple cycle but can’t ramp up and down as quickly or easily.

Utilities with recently hatched plans to build simple cycle plants, including Georgia Power, are unlikely to be affected by the rule at all. “I do think that makes sense, given the focus of these rules, which are on carbon emissions,” Amanda Levin, a director of policy analysis at the Natural Resources Defense Council, told me. “Given the frequency and type of operation for [simple cycle], they’re not as significant as sources of CO2.”

But those utilities that are planning to build combined cycle projects — and many of them are — could be forced to go back to the drawing board. Norris noted that Duke Energy, which serves customers in North and South Carolina and has proposed building more than 6 gigawatts of combined cycle capacity, will be especially exposed.

For combined cycle plants, there are essentially two options to comply: Install carbon capture, or plan to run your plant a lot less frequently. In either case, it “dramatically increases the levelized cost of those units,” Norris told me. “So I think any reasonable regulator would say we've got to go back and do a much more rigorous comparative analysis to other least-cost solutions.”

Solomon has a more cynical view of the recent panic over electricity demand and rush to build new gas plants. “We’ve known that demand is growing, is going to grow, for a long time,” she told me. “The fact that there’s quite a lot of news about this just as the rules are coming out is unlikely to be a total coincidence.”

Editor’s note: This story has been updated to reflect statements from Duke Energy and trade groups.