Bioenergy Projects in South Coast AQMD

Meeting the Need for Reliable Electricity Post-SONGS1Mohsen Nazemi P.E.Deputy Executive OfficerSouth Coast Air Quality Management DistrictCalifornia Desert Air Working Group 2014 Conference Pala, California

October 8 & 9, 2014

What is South Coast Air Quality Management District?Local Air Pollution Control Agency in Southern California (All of Orange & Non-Desert Portions of LA, Riverside & San Bernardino Counties)Population of 16.4 million (about half of States population)Worst air quality in the nation (Ozone & PM 2.5)Receives and Processes about 9,000 permit applications annuallyRegulates over 27,000 stationary sources

2SCAQMDs Role/ Responsibility in Permitting Power GenerationLocal Air Quality Permitting AgencyPrimary Permitting Authority for Power Generation for less than 50 Megawatts (MW)Co-Permitting Authority for thermalPower Generation projects of 50MW or greaterCEC has Primary Licensing and CEQA Lead Agency Authority/ Responsibility (AFC Process)SCAQMD has Authority/ Responsibility to issue Federal Permits (Title V/ PSD Permits)Small Distributed Generation Exempt from Permits/ Must meet CARB Certification3

San Onofre Nuclear Generating Stations (SONGS) Shutdown4Since Jan. 2012, SCE has shutdown both SONGS Units 2 & 3 due to leaks in radioactive steam tubesTotal of 2,200 MW lost Shortfalls in South Orange County & San DiegoSCE announced permanent shutdown of SONGS on June 7, 2013

4Actions Post SONGS ShutdownRetirement of SONGS on June 7, 2013Governors Office called upon energy agencies, utilities and others to develop a planMulti-agency review of options to assure reliabilityPreliminary Reliability Plan for LA Basin and San Diego developed by multi-agency team was reviewed in September 2013 and updated in August 2014 at CEC workshops held at UCLA, as part of IEPR proceedingCPUC and CAISO made policy decisions in March 2014 that partially implements the Preliminary Reliability PlanSCAQMD is proposing to implement contingency measures5CPUCs Long Term Procurement Plan (LTPP)The LTPP authorizes new infrastructure to maintain system reliabilityLooks forward 10 years to identify system and local needsConsiders alternative futures (renewable portfolio, demand and supply, and transmission scenarios)6CPUCs 2012 LTPPTrack 1 D.13-02-015 authorized SCE to procure electrical capacity in the West LA Basin & Moorpark sub-areas to meet long term local capacity requirementsTrack 4 D.14-03-004 authorized additional procurement for SCE and SDG&E to meet local capacity needs as a result of the retirement of SONGS7CPUC Procurement Authorization andRequirements for SCE*Resource TypeTrack 1 LCR Resources (D.13-02-015)Additional Track 4(D.14-03-004)TotalAuthorizationPreferred ResourcesMinimumRequirement150 MW400 MW550 MWEnergy StorageMinimumRequirement50 MW--50 MWGas-fired GenerationMinimumRequirement1000 MW--1000 MWOptional Additional From Preferred Resources/Energy Storage OnlyUp to 400MWUp to 400 MWAdditional from anyResource200 MW100 to 300 MW300 to 500 MWTotal ProcurementAuthorization1400 to 1800MW500 to 700 MW1900 to 2500 MWMaximum Gas Fired Generation1200 MW300 MW1500 MW* Source: CPUC Decision Authorizing Long Term Procurement to Replace Permanent Shutdown of San Onofre Nuclear Station March 14, 2014 8CPUC Procurement Authorization and Requirements for SDG&E*Resource TypePrior AuthorizationsD.13-03-029/ D.14-02-016Additional Track 4D.14-03-004TotalAuthorizationPreferredResources (including energy storage)MinimumRequirement---175 MW175 MWEnergy StorageMinimumRequirement---25 MW25 MWAdditional from any resource300 (Pio Pico)300 to 600 MW600 to 900 MWTotal ProcurementAuthorization300 MW500 to 800 MW800 to 1100 MWMaximum Gas Fired Generation300 MW600 MW900 MW* Source: CPUC Decision Authorizing Long Term Procurement to Replace Permanent Shutdown of San Onofre Nuclear Station March 14, 2014 9Other Requirements / ActionsOTC policy was adopted by SWRCB in May 2010 with compliance dates linked to known replacement projectsJanuary 2013, SONGS units shutdownSummer 2012, HB Units 3-4 brought backSummer 2013, HB Units 3-4 converted to synchronous condensers and ISO/utilities begin installation of reactive power equipment at selected substations

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Once-Through-Cooling Generating Units11Operator Facility Units Total MW OTC Replacement Date AES Alamitos Boilers 1-6 1,9502020AES Huntington Beach1 Boilers 1-4 8802020AES Redondo Beach Boilers 5-8 1,3102020NRG El Segundo2 Boilers 3-4 6702015LADWP Haynes3Boilers 1,2,5,6 Turbines 9,10 1,6542029LADWP Harbor Turbines 1,2 3642029LADWP Scattergood4Boilers 1-3 8182024Total7,6461 Huntington Beach Boilers 3 & 4 (450MW) shutdown Nov. 20122 El Segundo Boiler 3 (135MW) shutdown July 2013State Water Resources Control Board Policy

3 Haynes Boilers 5&6 (573 MW) shutdown June 20134 Scattergood Boilers 3 (460 MW) shutdown Dec 2015

11SCAQMDs Major Source Thresholds & Offset Requirements12PollutantOffset RequirementMajor Source PTE Threshold (tons/yr)SCAQMD Offset PTE Threshold (tons/yr)VOCERCs*/ Offsets Required104NOxRTCs**/ Offsets Required104SOxERCs/ Offsets Required1004CO*Attainment, No Offsets Required5029PM10ERCs/ Offsets Required704PM2.5ERCs/ Offsets Required100100*Emission Reduction Credits**Reclaim Trading CreditsPM10 ERC Supply & Cost2000 2014**Thru May 201413Rule 1304.1 - Electrical Generating Facility Fee For Use Of Offset ExemptionRule 1304(a)(2) exempts electric utility boiler replacements from offsets, however SCAQMD still has to provide offsets from SCAQMDs Internal BankRule 1304.1 adopted on September 6, 2013 to require fees for use of this exemption & SCAQMD offsetsGoverning Board directed staff to work with stakeholders to develop guidelines for use of funds. . .priority will be placed on the use of the funds to improve air quality consistent with the AQMP in the impacted, surrounding communities

14Rule 1304.1 OverviewRule 1304.1 applicable to Repowering of electric utility boiler units at Existing power plantsProvides PM10, NOx, SOx and VOC Offsets to repowering projects for a feeCurrent lack of PM10, SOx and NOx ERCs in the open market

1515Proposed Guidelines for Use of Rule 1304.1 Mitigation FeesImpacted Surrounding Communities consistent with AQMP with Emphasis on: Preferred ResourcesEnergy EfficiencyDemand ResponseEnergy StorageRenewablesMeeting AQMP Reduction NeedsNear Zero- or Zero-Emission Vehicles & Charging Infrastructure

16Proposed Rule 1304.2 PurposeImplement the Contingency Measure in the Governors Multi-agencys Preliminary Reliability PlanPromote preferred resourcesCPUC Loading OrderCARB AB32 Scoping PlanSCAQMD Energy PolicyFacilitate grid reliabilityAssist in implementation of attainment strategy

1717Proposed Rule 1304.2OverviewRequire a Fee for SOx/PM10 Offsets obtained from SCAQMD offset accounts for New Greenfield Electrical Generating FacilityNot mandatory to obtain offsets from SCAQMD accountsFee proceeds to be invested in air pollution improvement strategies consistent with the Air Quality Management Plan and/or local impacts

1818Use of Proposed Rule 1304.2 FeesImpacted Surrounding Communities, consistent with AQMP with Emphasis on:Preferred ResourcesEnergy EfficiencyDemand ResponseEnergy StorageRenewablesLow- or Zero-Emission Vehicles & Charging InfrastructureConsistent with Proposed Rule 1304.1 Guidelines

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PSD/T-V GHG Tailoring RulePSD PermittingNew projects with emissions of >100,000 tpy of CO2eModifications at an existing Major source with increase of >75,000 tpy of CO2e

Title V PermittingAll new and existing sources with PTE >100,000 tpy CO2eModifications at an existing Major source with increase of >75,000 tpy of CO2e

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GHG Tailoring Rule Actions Completed to DateStep 1Established GHG applicability criteria for anyway sourcesAnyway sources must address GHG emissions increases of 75,000 tons per year (tpy) CO2e or moreWent into effect on January 2, 2011Step 2Retains anyway sources applicability criteria and established GHG applicability criteria for large air emissions sourcesPSD Permits for New facilities with GHG emissions of at least 100,000 tons per year (tpy) CO2e and existing facilities with at least 100,000 tpy CO2e making changes that would increase GHG emissions by at least 75,000 tpy CO2e Title V Permits for New and existing sources with GHG emissions above 100,000 tpy CO2e Went into effect on July 1, 2011

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U.S. Court of Appeals DecisionOn June 26, 2012, The U.S. Court of Appeals for the D.C. Circuit ruled on cases for GHG RegulationsThe Court of Appeals upheld four of EPAs GHG rulemakings. Upheld EPAs Endangerment Finding and the Tailpipe Rule on the merits, and Dismissed the petitions for review of the Triggering/Timing Rule and the Tailoring Rule on standing grounds

22Fine PM Subpart 4 (no additional info to include)

SILs and SMCs While the court vacated the PM2.5 SMC, the reasoning of the court may also impact the SMCs for other pollutants. The Court concluded that the Act did not give the EPA the authority to waive the PSD pre-construction monitoring requirements through establishing SMCs. However, this has not historically been an issue in CA where there is a vast monitoring network. Representative background data is usually available.

The PM2.5 SILs were vacated at EPAs request so EPA can correct an error with the SIL provisions.

This decision potentially effects the approvability of PSD rules recently submitted to EPA for SIP approval.

Source Aggregation This decision only applies to Kentucky, Michigan, Ohio and Tennessee. Business as usual everywhere else.

GHG Regulations In upholding EPAs Endangerment Finding for GHGs the court stated: This is how science works. EPA is not required to re-prove the existence of the atom every time it approaches a scientific question.

GHG Tailoring Rule Actions Completed to Date (contd)Step 3Did not lower the applicability thresholds under Steps 1 and 2; these thresholds still applyEstablishes GHG PALs for GHG-only sources on a CO2e basis in addition to the already available mass-basisFinalized in July 2012

June 23, 2014 Supreme Court split decision (5-4) struck down the PSD & Title V permit requirements for GHG only sources, but withheld BACT for GHG for Anyway PSD Sources

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U.S. Supreme Court Decision in Utility Air Regulatory Group vs. EPAOn June 23, 2014 U.S. Supreme Court ruled in the case of UARG vs. EPATo Sum Up: We hold that EPA exceeded its statutory authority when it interpreted the CAA to require PSD and TV permitting for stationary sources based on their GHG emissions. Specifically, EPA may not treat GHG as a pollutant for purposes of defining a major emitting facility (or a modification thereof) in the PSD context or a major source in the TV context. To the extent its regulations purport to do so, they are invalid.

24U.S. Supreme Court Decision in Utility Air Regulatory Group vs. EPATo Sum Up (continued):EPA may, however, continue to treat GHG as a pollutant subject to regulations under this chapter for purposes of requiring BACT for Anyway sources. The judgment of the Court of Appeals is affirmed in part and reversed in part.The Anyway sources account for about 83% of stationary sources GHG emissions, compared to only 3% for the Non-Anyway sources under Steps 2 & 3 of Tailoring Rule

25Future Actions Tailoring Rule Step 45-Year study will be used to support a Step 4 rule that might phase-in GHG permitting for smaller sourcesDetermination to consideration same criteria used in Tailoring rule:The time that permitting authorities need [or needed] to ramp up their resources, including developing permitting infrastructure as well as hiring and training staffSources abilities to meet the requirements of the PSD program and permitting authorities abilities to issue timely permits, including gaining experience with GHG permittingWhether the EPA and the states could develop [or developed] streamlining measuresRule is due on April 30, 2016, but may not be pursued due to the Supreme Court decision

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Step 1 ImplementationStep 2 Implementation201520142012201120132016Step 3 Implementation5-Year StudyStep 4 Phase-in RuleGHG Tailoring Rule Implementation Timeline27EPAs New Power Plants GHG RULE Proposed Rule - 111(b)EPA released proposed rule for GHG emissions from new electric generating units(EGUs) in Sept. 2013Applies to units built/operated after January 8, 2014CO2 limits based solely on fuel type and sizeFor natural gas-fired units: 1,000 lbs CO2/MW-hr for EGUs > 850 MMBtu/hr 1,100 lbs CO2/MW-hr for EGUs