Calpine Corp. is poised to build the first U.S. power plant with federal limits on greenhouse gas emissions in California after clearing a final regulatory hurdle today.

The Bay Area Air Quality Management District granted the Houston-based utility its final air quality permit today, allowing the company to proceed with the planned construction of a 600-megawatt natural gas-fired Russell City Energy Center. The 15-acre project site is in Hayward, just east of the San Francisco Bay.

The Russell City plant will produce 50 percent fewer greenhouse gas emissions than even the most advanced coal-fired plants, Calpine said, and will emit 25 percent fewer heat-trapping gases than the California Public Utilities Commission's standard. Construction on the facility plant is expected to begin later this year.

"We applaud the BAAQMD and Calpine for going beyond existing federal law and being the first in the nation to require an enforceable greenhouse gas limit," said Linda Adams, secretary of the California EPA. "This action furthers efforts at a statewide level to balance our economic needs while meeting our environmental challenges."

The Prevention of Significant Deterioration, or PSD, permit was issued with an eye on greenhouse gas restrictions set to be implemented in California in less than two years. The state's Air Resources Board is still in the process of putting together rules for a cap-and-trade market intended to help cut greenhouse gases to 1990 levels by 2020; that market goes live Jan. 1, 2012.

Utilities like Calpine will most likely be participants in that market, though it is unclear how permits issued before the advent of the market might be counted under a regulated regime. Calpine is also promoting the project as a means to help achieve the state’s 33 percent renewable power standard by 2020, claiming gas-fired plants would back up intermittent sources like wind and solar. So-called peaker plants, which only run when demand is highest, are often older and powered by coal.

Calpine spokeswoman Norma Dunn said the company intends to run the Russell plant as baseload generation, selling its power to Pacific Gas & Electric Co. Terms of that deal were not disclosed.

When asked how a baseload plant could be considered "backup" power to wind and solar, Dunn said PG&E will retain the ability to use gas-fired generation when solar and wind are unavailable.

"They have dispatching rights, and they will balance the supply from Russell City with all of their other energy sources, including power from our own geothermal assets," Dunn said. "When they have contracts for wind or solar, they will need other supply sources to fill in during periods when their renewable supplies are not available."

The Calpine permit is coming against the backdrop of rising political pressure to suspend California's climate law, A.B. 32. Voters will most likely get to decide for themselves this fall whether climate regulations should go forward, as opponents of A.B. 32 are in the process of gathering signatures to place on the November ballot a measure that would tie the law to high unemployment levels. If the measure makes it onto the ballot, and voters approve it, California could see its climate law delayed until unemployment dips below 5.5 percent.

Calpine is an active player in the renewable power industry in California. The company owns and operates the Geysers in Sonoma and Lake counties in Northern California, which is the largest complex of geothermal power plants in the world.


Environmentalists hailed the development as a signal that steep reductions in utilities' greenhouse gas emissions can be made under existing federal air laws, while some opponents insist that the Clean Air Act is an inappropriate tool for tackling global warming emissions.

"It's an example of what is possible," Sierra Club chief climate counsel David Bookbinder said. "Calpine is leading the way and showing how it's possible to generate all the electricity that America needs with half the greenhouse gases."

U.S. EPA is expected to soon begin regulating greenhouse gas emissions from stationary sources under the Clean Air Act. The agency is planning to finalize standards next month to limit automobile emissions of the heat-trapping gases, which would automatically trigger permitting requirements for industrial sources. EPA is planning to require only the largest stationary sources to install greenhouse gas controls but has not yet issued guidance about what pollution controls will be required for those facilities.

"This could become an important precedent," Clean Air Watch President Frank O'Donnell said of the Calpine permit. "It shows that the current Clean Air Act can be used to limit greenhouse gas emissions from power plants."

But Scott Segal, an industry attorney and director of the Electric Reliability Coordinating Council, said existing clean air permitting laws are inappropriate for regulating greenhouse gases.

"As a general proposition, we believe that the use of permitting conditions to advance a CO2 regulatory agenda is an inflexible mechanism that is likely to have a number of unintended consequences," Segal said.

By limiting greenhouse gases through air permits, Segal said, facilities located in other regions of the country -- including coal-rich areas -- would be at a disadvantage. "There is no mechanism to either contain cost or allow for trading if you use permit conditions as a basis for regulating CO2," he said.

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC., 202-628-6500