Pa. push to back efficient energy draws heat
Shell says cracker could fact $7 million hit
The Wolf administration’s plan to put a price on power plants’ carbon dioxide emissions gives special treatment to a highly efficient form of generating energy from fossil fuels.
The technology, known as combined heat and power, creates both electricity and useful heat, increasing energy efficiency for manufacturers, hospitals, university campuses, and urban heating and cooling systems.
It is embraced as a vital tool for driving down energy demand in the industrial and building sectors and as a way to mitigate — and build resilienceto — climate change.
But advocates for the technology say the administration’s draft regulations do not do enough to protect combined heat and power plants from new costs that could discourage broader adoption of the systems — and, in one case, could force an existing plant offline periodically in favor of cheaper power from plants with higher carbon emissions.
The state Department of Environmental Protection noted the value of combined heat and power when it crafted a plan to create a carbon emissions cap and pricing program, saying the systems both reduce emissions and benefit the economy.
The proposal is part of Gov. Tom Wolf’s controversial plan to join the Regional Greenhouse Gas Initiative, a multistate pact for cutting climate warming emissions.
How Shell Chemical’s cracker plant fits in
In combined heat and power
systems, also known as cogeneration, exhaust heat that would be wasted after turning a turbine to create electricity is instead captured and used nearby, erasing the need to build a separate heating or cooling system that would require more fuel. Most new combined heat and power systems in Pennsylvania run on natural gas.
DEP drafted two protections: a set-aside that will reduce the amount of carbon emissions credits a plant has to buy based on how much of its output is consumed onsite, and a limited exemption for plants that send less than 15% of their total useful energy to the electric grid in a year.
The vast majority of Pennsylvania combined heat and power plants are already exempt from the rules because they are too small to qualify.
DEP expects the rules will apply to just three plants in three corners of the state in 2022, the year the rules are supposed to take effect: Shell Chemical Appalachia’s petrochemical plant in Beaver County, which is still under construction; a large district heating and cooling system in Philadelphia owned by Vicinity Energy; and a Procter & Gamble plant in northeastern Pennsylvania that makes paper towels, napkins and toilet paper.
One challenge for regulators is that the primary use of two of those facilities is fundamentally different than that of the third.
When combined heat and power is used in large industrial applications — to make plastic or paper towels — the plants are sized to meet the power and heat needs of the factory with a modest cushion that is generally sold back to the grid.
But when the systems are designed to feed steam to a large urban district, as in Philadelphia, the power plants are sized to meet the cooling and heating needs of customers across many million square feet of building space. All of the electricity is sold to the grid.
Public commenters on the plan have proposed various fixes, from exempting all combined heat and power facilities from the rules to making the limited exclusions more generous so facilities can sell more of their electricity to the grid without having to pay for carbon allowances.
Shell, which said allowances could cost it $7 million a year at current prices once its power plant comes online, asked regulators to give it until 2024 before having to comply.
Vicinity Energy, which owns the 163-megawatt Grays Ferry district energy system in Philadelphia, said the current draft would treat it more like a conventional natural gas power plant without giving it any of the benefits of a combined heat and power system.
The company said that error is likely unintentional, but the consequence will be that its power plant will lose out to competition from less efficient, higher-emitting plants and will force it to use boilers to create steam. A Vicinity consultant calculated that would result in unnecessary emissions of between 53,000 and 148,000 tons of carbon dioxide each year -— equivalent to the emissions of upto 29,000 passenger cars.
Vicinity suggested that DEP tighten the regulation’s definition of a cogeneration unit so that it would encompass systems like Grays Ferry but exclude power plants that might try to exploit loopholes. The agency should then create a full setaside for cogeneration plants so their owners do not have to pay for allowances, the company said.
Michael Krancer, a former DEP secretary who is representing Vicinity, said regulators are rightly concerned that only legitimate combined heat and power facilities should qualify for favorable treatment.
Otherwise, he said, “A combined-cycle plant could put a tomato hothouse in the backyard, send some heat in there and claim it’s a cogeneration facility — which is, of course, totally bogus.”
Already, Tenaska Pennsylvania Partners, which owns a 940-megawatt, gasfired power plant in Westmoreland County, called the set-aside for combined heat and power plants “discriminatory” and argued that modern, combined-cycle natural gas power plants are just as deserving of a break.
Mr. Krancer said Vicinity’s proposed remedy would effectively cover industrial combined heat and power uses, as well as district energy facilities, without opening loopholes.
Facing some headwinds
Some groups with a focus on sustainable energy suggested the rules should be tailored to account for the benefits of combined heat and power, and they had differing ideas about how generous the treatment should be.
The Philadelphia Energy Authority asked regulators to take care to ensure that the Grays Ferry system and others like it “are considered appropriately to properly incent low-carbon power generation.”
The Center for Coalfield Justice recommended that combined heat and power plants should not receive exemptions but should have to pay a quarter of the cost of regular carbon allowances for their emissions, in recognition of their efficiency.
DEP has not yet released a final draft of the carbon pricing rules, but observers expect an exceptionally quick turnaround. Otherwise, the state’s regulatory review requirements will make it difficult to finalize the rules in time for Pennsylvania to join the Regional Greenhouse Gas Initiative on Jan .1 as planned.
The agency faces headwinds to achieving that goal, including strong opposition from the Republican-led General Assembly.
Earlier this month, the state’s Independent Regulatory Review Commission asked the agency to consider delaying the implementation of the rules for a year to give affected power plants time to adjust to potential increased costs.