EAB Upholds Determination that EGU GHG BACT Does Not Require Energy Storage

In In re Arizona Public Service, Ocotillo Power Plant, PSD Appeal No. 16-01, issued September 1, 2016, EPA’s Environmental Appeals Board (EAB) decided an appeal by the Sierra Club contending that GHG BACT for fossil-fuel power plants “must consider” energy storage as a control option. The EAB upheld the permitting authority’s determination that considering storage would “redefine the source” based on the record in the appeal. Accordingly, the EAB dismissed Sierra Club’s appeal, but noted that “the Board’s decision should not be read as an automatic off-ramp for energy storage technology as a consideration in Step 1 of future BACT analyses.”

BACKGROUND

In April 2014, Arizona Public Service (APS) filed a permit application to replace two 1960s-era steam-electric generating units with five natural gas-fired simple-cycle combustion turbines, each rated at 100 megawatts (MW). MCAQD administers the PSD program in Maricopa County pursuant to a delegation agreement from EPA Region 9.

In its application, APS stated that the project was needed generate energy that may be “quickly and reliably dispatched” for periods when the growing solar component of the Phoenix market was unavailable, to bridge production gaps and maintain system reliability. APS also noted its power market was now characterized by “multiple peaks” during the day, requiring both intermittent and sustained operation. MCAQD prepared a proposed permit for the requested plant and requested public comment. Sierra Club commented that MCAQD’s BACT analysis was inadequate because it did not consider use of energy storage technologies, such as battery storage, compressed air storage, or liquid air energy storage, as an add-on or as a lower emitting control technology. Sierra Club contended that one or more of APS’ proposed five turbines could be replaced by or paired with such technologies, reducing total emissions.

In response to Sierra Club’s comments, APS prepared an updated BACT analysis that re-emphasized the need for peaking, rapid start and escalation, and quick ramp down. APS also stated that a power ramp rate of 50 MW per minute per turbine was “critical for the project to meet its purpose” because that rate would enable it to bring on 375 MW of ramping capacity in less than 2 minutes. MCAQD then released a revised draft permit for public comment that lowered the GHG emission rate from 1690 to 1460 pounds CO2/MWh. A public hearing was held, but MCAQD received no comments, including from the Sierra Club, and thereafter issued the permit. Sierra Club petitioned the EAB for review.

ANALYSIS

In its petition, Sierra Club argued that MCAQD erred when it did not require consideration of pairing energy storage with the combustion turbines because that would “redefine the source.” MCAQD and APS defend MCAQD’s position and challenged Sierra Club’s right to petition because it had not commented on the revised draft permit.

The EAB started with APS’ and MCAQD’s contention that Sierra Club could not challenge the permit because it had not filed comments on the revised draft permit. The EAB noted that only public comments filed during the public comment period and not comments filed before or after the period are required to be considered. Given possible problems with MCAQD’s emailing notification system (Sierra Club counsel apparently was not on the list of individuals notified about the revised draft permit), the fact that MCAQD did not state comments must be refiled in its public notice on the revised draft permit, and the full discussion of the issue in the administrative record, the EAB exercised discretion to review Sierra Club’s petition. Slip op. at 12.

Turning to the merits, the EAB stated that it typically defers to the permit issuers’ expertise and, where there is a delegated program, to the views of EPA’s program offices. The EAB stated that it follows the 1990 NSR Manual, which allows a permitting authority to exclude a proposed control alternative if, in the view of the permitting authority, it would redefine the source. The EAB stated that the permitting authority should look to how the application and supporting materials defined the “facility’s end, object, aim or purpose,” but also should take a “hard look” to ensure that these elements are “inherent” to the source design and “derived for reasons independent of air quality permitting.” Notwithstanding this duty, the EAB agreed that base load versus peaking use has been accepted as “central to the fundamental business purpose” of generating units. Slip op. at 13-14. The EAB cautioned that “previous permitting decisions for similar sources are instructive but not controlling.”

Turning to the record, the EAB highlighted APS’ conclusion that it needed power within approximately 10 minutes and that other technologies, such as combined cycle or reciprocating engines, could not achieve the needed ramp rate. APS also noted that its system had seen “rapid load changes from renewable energy sources of 25 to 300 MW in very short time periods” ranging from one-minute to one-hour intervals. MCAQD had concluded that these concerns required use of combustion turbines:

APS, in order to assure reliability, must build a system that can meet not only a short peak demand, but also several short peak demands in a row, an extended peak demand, or even several extended peak demands. If the utility is reliant upon stored energy for some or all of its peaking power, be it battery * * * or other storage technologies, at some point the stored energy may run out before it can be recharged, making the solution unreliable for meeting the full demand. Accordingly, energy storage is not compatible with the purpose and design of a true peaking facility such as the Project to provide rapid, reliable power.

MCAQD had thus excluded paired storage.

Sierra Club challenged this characterization, urging that APS and MCAQD had not justified the need for the turbines to operate in low idle mode (i.e., about 25% capacity). The EAB held otherwise, explaining that the difference in ramp time from cold start and the additional delay while air pollution control technology caught up made the idle mode necessary to the project purpose. The EAB thus held that the record supported MCAQD’s determination that the rapid ramp rate from idle was central to the business purpose. Slip op. at 16-21.

Sierra Club next argued that MCAQD should have considered alternative configurations of energy storage and turbine usage to achieve the same result. The EAB demurred, holding that “permit issuers are not required to conduct independent alternative analyses when issuing PSD permits.” Slip op. at 21-22. The EAB found that MCAQD had adequately considered Sierra Club’s comments on this issue and that MCAQD had reasonably relied upon the concern that “at some point the stored energy may run out before it can be recharged, making the solution unreliable for meeting full demand” as a basis for rejecting turbine replacement and turbine pairing with storage. The Board therefore denied Sierra Club’s petition for review.

COMMENTARY

The Ocotillo decision is important in several aspects. First and foremost, it emphasizes the importance of the initial permit application and the description of the project’s central purpose. In this case, APS’ detailed description of the purpose, which it built out in subsequent comments, provided a strong base for responding to Sierra Club’s criticisms. Absent the strong administrative record built by APS and MCAQD, the outcome could have been different. Second, Ocotillo is important because it demonstrates Sierra Club’s continuing commitment (1) to replacing fossil-fuel power with a combination of renewable and storage solutions and (2) using the PSD permitting and appeals process as an integral part of a technology-forcing agenda. Industries with green energy alternatives should consider the possible involvement of green energy advocates in the permitting process. Third, Ocotillo is important because the EAB stated that the decision is not an “automatic off-ramp” for considering energy storage. This caveat suggests that EPA’s headquarters staff remains convinced that green energy forcing is appropriate for some BACT analyses. Companies ignore this viewpoint at their peril. Finally, Ocotillo is important because the EAB reserved judgment on whether substitution of energy storage is a “change in fuel” traditionally regarded as “redefining the source.” This means that there may yet be more to the saga.