Cross-State Air Pollution Rule Could Cause Power Shortages, ERCOT, Texas Agencies Warn

Backlash against the U.S. Environmental Protection Agency’s (EPA’s) newly finalized Cross-State Air Pollution Rule (CSAPR) mounted in the past week as Texas state agencies, utilities, and regional grid operator the Electric Reliability Council of Texas separately warned that the state could face a generation shortage if the federal pollution rules were implemented as written.

The rule finalized by the agency last week would require, by January 2012, 3,632 electric generating units at 1,074 coal-, gas-, and oil-fired facilities in 28 states to reduce nitrogen oxide (NOx), sulfur dioxide (SO2), and particulate emissions that cross state lines and contribute to ground-level ozone and fine particle pollution in other states. The rule replaces the 2005 Clean Air Interstate Rule and will cost $800 million a year. About $800 million will be spent annually on this rule, according to EPA projections for 2014—but the nation will see $120 billion to $280 billion in annual benefits, the EPA claims.

But the Texas Commission on Environmental Quality (TCEQ), in a joint statement with the state’s Public Utility Commission, said the rule would have “adverse economic effects, without demonstrable environmental and health benefits.” In the latest battle between the state and the EPA, the state bodies decried the EPA’s inclusion of Texas in the particulate (PM2.5) portion of rule, alleging that the EPA’s own data showed Texas power plant emissions have no negative impact on downwind states.

The EPA’s decision was “not based on sound science and will result in additional federally mandated regulation of Texas’ SO2 emissions that are not necessary for public health protection, and only result in negative consequences," said TCEQ Chairman Bryan Shaw.

These consequences include a “significant increase” in the cost of power as well as “curtailment or shutdowns of existing coal-fired plants in Texas,” the TCEQ said, adding that other sources of electricity would not compensate for these shutdowns, “especially in light of the Jan. 2012 compliance date.”

One reason for the widespread coal-plant shutdowns is because “a large percentage of Texas coal fired generation is lignite or lignite blended with Wyoming coal,” said Texas PUC Chairman Barry Smitherman. “In fact, we have approximately 18 plants, totaling over 11,000 MW of generation, that could be forced to add expensive equipment, further blend with more expensive out of state coal, or worse case, prematurely shut down."

ERCOT: CSAPR to Have a Significant Impact on Coal Generation
ERCOT, the independent system operator for the Texas grid, in a separate statement said it had not had time to fully analyze the entire 1.323-page rule or talk to generators about their intentions following the rule’s finalization. “However, initial implications are that the SO2 requirements for Texas added at the last stage of the rule development will have a significant impact on coal generation, which provided 40 percent of the electricity consumed in ERCOT in 2010,” it said.

“We are a non-profit organization; we don’t own generation or transmission; nor do we advocate for or against policy positions—except in cases where electric grid reliability may be affected,” the grid operator added. “This is one of those cases where we believe it is our role to voice our concern that Texas could face a shortage of generation necessary to keep the lights on in Texas within a few years, if the EPA’s Cross-State Rule is implemented as written.”

ERCOT in a May report to the PUC warned that EPA regulations (pending and final, but not including the CSAPR, because restrictions on Texas were not included as part of an earlier EPA rule proposal) could reduce generation reserve margins in the state to below 2% in 2015.

“Our concern is that the timing of the new requirements – effective Jan. 1, 2012 – is unreasonable because it does not allow enough time to implement operational responses to ensure reliability,” ERCOT said. “We fear that many of the coal plants in ERCOT will be forced to limit or shut down operations in order to maintain compliance with the new rule, possibly leading to inadequate operating reserve margins with insufficient time to reliably retrofit existing generation or build new, replacement generation.”

It was not clear how ERCOT would replace the large amount of existing baseload generation lost as a result of the regulations in such a short period of time, the operator said.

Luminant: Rule to Have Disproportionate Impact on Texas
On Friday, EPA Assistant Administrator Gina McCarthy issued a response. "Texas power plants will be able to cut their pollution without jeopardizing reliable electricity service for Texans," McCarthy said. "Nearly half … of the emissions of soot-forming sulfur dioxide covered by the rule are produced by just three plants, which, in turn account for only about one-tenth … of the state’s electricity generation. The balance of Texas power generation is already relatively clean and will not face a heavy compliance burden under this rule."

But Dallas-based Luminant—a company that operates 12 coal units in Texas, a total capacity of 8,000 MW, disagreed, and in a statement echoed concerns by the contingent of Texas agencies about the lack of notice and insufficient time for analysis and modeling, and the adverse effects on jobs, prices, and reliability in Texas. The company said that the EPA did not include the state in its draft rule because the agency’s modeling did not show significant downwind impacts from Texas emissions.

“The rule will have a highly disproportionate impact on Texas. For example, 26 percent of the nationwide SO2 emissions reductions required to be achieved by 2012 are to be made in Texas. EPAs new 2012 limits for Texas require a 47 percent reduction relative to Texas actual 2010 SO2 emissions levels.”

The late decision to apply the rule to Texas and the modeling for the rule have “resulted in wholly unreasonable mandates and unrealistic timelines for Texas. The industry standard timeframe for permitting, constructing and installing major new emissions controls is several years, yet the rule unrealistically requires compliance in six months,” Luminant said.

Sources: POWERnews, EPA, TCEQ, PUC, ERCOT, Luminant