The power sector represents a mounting stressor to the challenge of mitigating climate change; electricity demand — relatively flat over the last two decades — is now expected to grow significantly due to new manufacturing, data centers, and widespread electrification. The Inflation Reduction Act (IRA) provides incentives to deploy clean energy and reduce emissions, but more action is needed to decarbonize one of the largest sources of U.S. emissions, particularly from existing natural gas-fired power plants.

Notably, power plant carbon dioxide emissions have fallen nearly 41 percent since 2005, but they are still significant — representing 29 percent of total U.S. energy-related carbon dioxide emissions in 2023. By conservative estimates, more than 30 GW of new electricity load is expected to be added to the grid in the next five years–about the same amount of new solar capacity was added in 2023 (a record year).  But if new clean electricity deployments are only keeping pace with demand growth, we’ll be unable to displace existing, emitting generation, making the EPA’s new rules greatly consequential and timely.

The EPA rules finalized this week represent a practical approach to reduce emissions from existing coal and new gas-fired electricity generating units, while protecting community health and the economy.

The rule for existing coal-fired steam generating units considers the varying operational life of units and provides these compliance pathways:

• For units that plan to operate beyond 2038 (i.e., “long-term” units), the rule will effectively require installation and operation of carbon capture and storage (CCS) technology to achieve emission rate limits.
• For units that plan to retire before the end of 2038 (i.e., “medium-term” units), the rule recognizes that CCS would be less cost-effective and will have an emission rate limit based on co-firing with 40 percent natural gas, beginning in 2030.
• Units that plan to retire before 2032 are unaffected.

The rule for new gas-fired combustion turbines considers the ways they are used and provides the following compliance pathways:

• Base load turbines (units generating at least 40 percent of their maximum capacity on an annual basis) are subject to an initial “phase one” standard based on the efficient design and operations of combined cycle turbines; and “phase two” standards based on 90 percent CCS starting in 2032.
• Intermediate turbines (units generating between 20 and 40 percent of their maximum capacity on an annual basis) are subject to a standard based on the efficient design and operation of simple cycle turbines.
• Low load turbines (units generating less than 20 percent of their maximum capacity on an annual basis) are subject to a standard based on a low-emitting fuel.

Importantly, these best systems of emission reduction (BSER) are based on proven technologies. For the longest running coal and natural gas plants, BSER is CCS. CCS has been adequately demonstrated on a large scale and is applicable to these sources, and CCS seems reasonable given recent cost declines and the 45Q tax incentive. While the final rules are focused on reducing emissions from specific covered sources, more broadly, there are additional ways to decarbonize the power sector. There are many sources of clean and reliable electricity that can be deployed including solar and wind, which can be even more reliable when used in conjunction with energy storage. Additionally, nuclear, hydropower, and geothermal electricity can provide baseload (i.e., 24/7) clean energy.

It cannot be stated strongly enough that in addition to EPA’s power plant standards, federal permitting reform is essential to connect new clean electricity to the grid at the speed and scale necessary to replace emitting sources, when their emissions cannot be economically captured. Reforms speeding up construction of new transmission lines as well as construction of other needed clean energy infrastructure (e.g., carbon dioxide pipelines, hydrogen pipelines, geological storage repositories, critical mineral mines and processing facilities, and so on) are bolstered by legislative proposals and federal actions such as DOE’s recently announced Coordinated Interagency Transmission Authorization and Permits.

The EPA estimates that their standards would cut 1.38 billion metric tons across the power sector through 2047, along with thousands of tons of other harmful air pollutants. Notably, the standards are expected to avoid 1,200 premature deaths in 2035.

Furthermore, the rule takes a significant step towards achieving President Biden’s goal of 100 percent clean electricity by 2035. In terms of next steps, EPA is taking more time to finalize the greenhouse gas standard for existing gas plants; natural gas plants comprise the largest share of the U.S. electricity mix (about 43 percent) and are critically important for maintaining grid reliability as coal plants retire and with increasing quantities of variable renewable generation coming online. Additionally, we’re likely to see legal challenges to the rules, which could impact the timeline and effectiveness of these standards.

Still, the trend line for the power sector is toward decarbonization. The rules are an important piece in helping to accelerate the energy transition. Combined with IRA incentives, permitting reform, and grid upgrades, we can build all the infrastructure that we need to successfully complete the energy transition.