NERC: EPA Regulations Could Impact System Reliability

Regulations being proposed by the U.S. Environmental Protection Agency (EPA) could significantly affect the bulk power system’s reliability, a new report from the North American Electric Reliability Corp. (NERC) shows. The quasi-public agency recommends that the proposed rules provide sufficient time to procure replacement resources that would offset capacity reductions expected as a result of unit retirements and deratings from environmental control retrofits.

The report, “Potential Resource Adequacy Impacts of U.S. Environmental Regulations” (pdf, executive summary), presents an assessment scenario, which NERC said was designed to evaluate the potential impacts of the four potential EPA regulations on planning reserve margins. The assessment was “conducted to identify the need for additional resources to maintain bulk power system reliability,” the agency said.

The EPA rules include the Clean Water Act—Section 316(b) Cooling Water Intake Structures; Title I of the Clean Air Act—National Emission Standards for Hazardous Air Pollutants (NESHAP) for the electric power industry (referred to as Maximum Achievable Control Technology [MACT] Standard); the Clean Air Transport Rule (CATR); and Coal Combustion Residuals (CCR) Disposal regulations.

The assessment evaluates the potential impacts on planning reserve margins with “moderate” and “strict” case scenarios, the latter incorporating stringent rule assumptions and higher compliance costs. It also assumes that “there would be no industry actions in the near term to address compliance issues or market response,” NERC said in a statement introducing the report.

Among the key findings is that if all four of the regulations were applied, up to a 78-GW reduction of coal, oil, and gas-fired generating capacity could be retired. For the moderate case, this occurs in 2018, but in the strict case, the reduction could occur as soon as 2015. As a result, for the U.S. as a whole, the planning reserve margin could drop 9.3 percentage points, which could “significantly [deteriorate] future bulk power system reliability,” NERC said.

“The combination of the proposed rules shows Planning Reserve Margins may be significantly impacted with deteriorating resource adequacy in a majority of the NERC regions/subregions,” said Mark Lauby, director of Reliability Assessment and Performance Analysis at NERC. “Additionally, considerable operational challenges to manage, coordinate and schedule the resulting industry-wide environmental control retrofit effort will occur if all these rules are enacted as currently proposed.”

The report also finds that the Section 316(b) cooling water intake structures rule could have the greatest potential impact on reliability of the four regulations. As NERC notes, “Implementation of this rule will apply to 252 GW (1,201 units) of coal, oil steam, and gas steam generating units across the United States, as well as approximately 60 GW of nuclear capacity (approximately a third of all resources in the U.S.).” Reasons that the rule could have such a major impact are that smaller units will likely be retired as a result of high retrofitting costs and all nuclear generation will require retrofits, which could result in up to a 3.5% capacity derate.

The MACT rule could also affect reliability. NERC estimates that the rule could trigger retirement of 2 to 15 GW of existing coal capacity. “To comply, owners of the remaining capacity need to retrofit from 277 to 753 units with added environmental controls. The “hard stop” 2015 compliance deadline proposed by the MACT Rule makes retrofit timing a significant issue and potentially problematic,” the agency said.

The agency’s recommendations include urging regulators, system operators, and industry participants to employ “available tools” to ensure that reserve margins are maintained. “The pace and aggressiveness of these environmental regulations should be adjusted to reflect and consider the overall risk to the bulk power system,” the report concludes.
The report’s findings have been refuted by the EPA, which pointed out that scenarios are based on rules that haven’t even been proposed yet.

“By NERC’s own admission, its projections about electricity supply impacts rest on its own fortune-telling about future regulations that have not even been proposed yet. Despite the fact that the substance of those rules remains open to a range of possible outcomes, this report only assumes the worst-case scenarios,” EPA spokesman Brendan Gilfillan told the Hill. “In reality, EPA has some discretion and will be more sensitive to reliability than NERC gives us credit for.”
Sources: POWERnews, NERC, EPA, The Hill


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