Regulatory Reform

NERC Report Highlights Potential Reliability Impacts of EPA’s Clean Power Plan

The North American Electric Reliability Corporation (NERC) is a non-profit international regulatory authority whose mission is to ensure the reliability of the electric grid and power supply in North America. Earlier this month, NERC released its preliminary review of the potential electric grid reliability concerns that may arise as a result of states complying with EPA’s Clean Power Plan as proposed.

The report specifically evaluates the (faulty) underlying assumptions the U.S. Environmental Protection Agency (EPA) made when developing their four “building blocks” that are used to determine each state’s proposed mandatory emission reductions.

Building Block 1 strives to improve the thermal efficiency of each fossil fuel-fired power plant by an average of 6 percent. EPA’s analysis did not account for variations in plant design, the size or age of each plant and fuel variability. Coal units are typically designed to run as continuous baseload power generators. As a result of Building Block 2, coal units would run less often but would be forced to constantly—and inefficiently—cycle up and down. This cycling would make EPA’s expected heat rate improvements extremely unlikely to achieve.

Building Block 2 calls for the increased use of low-emitting power sources. This will mostly entail dispatching combined cycle natural gas plants before older coal units. EPA specifically calls for the capacity factor of these natural gas plants to increase to 70 percent, a number never before reached despite the recent historically low natural gas prices. Typically, natural gas plants follow the load of energy throughout the day because they are better suited than coal units to provide fluctuating amounts of electricity depending on daily variations in consumer demand. Furthermore, since natural gas is often used as a heating fuel in some parts of the country, extended periods of extremely cold weather often puts strain on the natural gas supply. Last year’s polar vortex also saw a higher than normal number of natural gas plant outages and freezing equipment. Furthermore, the existing pipeline infrastructure in some regions of the country is not sufficient to accommodate the increased reliance on natural gas. It takes three to five years to permit, finance and build additional pipeline capacity, a small amount of time before the first interim emission reduction goals must be achieved in 2020.

Building Block 3 would increase the use of zero-emitting power sources such as non-hydro renewables and nuclear power. NERC’s review says that there are significant regional differences in the availability of renewable resources and their costs across the country. EPA did not take these variations into account before assigning a de facto renewable portfolio standard for each state within a given region. Similarly, they did not consider that some states’ existing renewable mandates credit certain types of renewable resources in ways that actually reduce the absolute amount of renewable generation needed to satisfy a mandate. For example, Delaware offers a 3.0 credit multiplier for in-state renewable generation while Colorado offers a 1.5 credit multiplier for renewable generation at a “community-based project.” An increased reliance on renewable energy—which is oftentimes generated far away from population centers—will also require construction of additional transmission lines which, like natural gas pipelines, takes years to ultimately build.

Building Block 4 calls for increased end-use consumer energy efficiency that would reduce energy consumption by an average of 1.5 percent annually. These energy efficiency goals do not count efficiency improvements already made voluntarily by individuals and businesses. Since many states already have energy efficiency programs, many of the easy, low-cost efficiency options have already been employed, leaving the larger, more expensive options to meet EPA’s goals. Significantly, NERC also notes that this rate of energy efficiency is not supported by any peer-reviewed or technical study of energy efficiency potential.

The reason why these faulty assumptions are problematic is that grid reliability will suffer as a result. If, for instance, coal units cannot improve their thermal efficiency by an average of 6 percent, or pipeline and transmission infrastructure cannot be constructed in time, or EPA’s energy efficiency goals prove to be too optimistic, states will have to rely upon other means to meet their emission reductions target. Namely, additional coal units will be retired prematurely, before the end of their engineering lifetime. Already, EPA expects roughly 120 gigawatts of installed capacity–the amount of electricity needed to power approximately 60 million homes under normal conditions—to be retired by 2020 as a result of the Clean Power Plan and other EPA regulations, especially the recently imposed Mercury and Air Toxic Standards (MATS).

When we flip a switch, we expect the lights to turn on. We also expect our refrigerators to keep our food and medicine cold daily without interruption. Unfortunately, there are real-world consequences to eliminating unreasonably high amounts of baseload electric generation. If unchanged, EPA’s Clean Power Plan may just push grid reliability to the limit.

In Depth: Regulatory Reform

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