NERC: EPA Rules Could Stress the Nation's Grid

The cumulative impact of rules proposed and finalized by the Environmental Protection Agency (EPA) could, over the next six years, stress the nation’s power grid "in ways never before experienced," the North American Electric Reliability Corporation (NERC) warns in a new report.

NERC’s “2011 Long-Term Reliability Assessment,” released on Monday, is an annual report that evaluates key bulk power system reliability indicators over a 10-year period. Indicators include: peak demand, energy forecasts, resource adequacy, transmission development, changes in overall system characteristics and operating behavior.

The report says that as currently drafted, EPA rules such as the proposed Coal Combustion Residuals rule, the proposed Mercury and Air Toxics Standards for Utilities, the proposed Cooling Water Intake Structures rule -316(b), and the final Cross-State Air Pollution rule would "directly impact" the U.S. power industry.

"Depending on the outcome of any or all of these potential regulations, the results could accelerate the retirement of a significant number of fossil-fired power plants," the report claims.

NERC’s analysis shows 36 GW of projected accelerated retirements and de-rates in the 2018 moderate case—an amount significantly lower than the organization’s projection last year of 78 GW. The lowered projection was because "25 GW of retirements have been announced since then and are no longer included in the projected retirement numbers," NERC says.

The Utility MACT rule, proposed in March 2011 and which will require the reduction of hazardous air pollutant emissions from boilers at "major" sources, could most prominently pose a risk to reliability. "If the EPA intends to move forward with the implementation of the MACT rule … the electric industry will need time to comply," NERC warns. The EPA can grant extensions beyond the one-year compliance extension, and even the President can grant compliance extensions (in cases where technology to implement standards are not available, or in cases that threated national security interests), NERC notes. "These authorities should be used to provide extensions, where justified, to ensure the system remains reliable," it says.

Stressing Margins
The organization warns that the "significant amount of generation retirements and de-rates associated with environmental controls may severely impact Planning Reserve Margins," NERC says, noting that most regulatory bodies and planning entities maintain a reserve margin of 10% to 20% of peak demand.

"Early retirement of multiple units in the short-run could stress the bulk power system if plans are not in place to add additional resources to cover the loss of generation from facilities affected by EPA regulations," it warns.

An event like this could affect short- and long-term planning strategies, and load pocket areas—or major metropolitan areas—will be the most affected by the loss of "critical" bulk power resources, the organization says.

To support reliability goals, new power plant builds, or upgrades to existing generation may be necessary. "Each situation will have unique characteristics that determine how long the siting and permitting process may last," the report says. "This is of particular importance to the resource assessment due to the constricted compliance timelines associated with the potential rules."

Construction of replacement generation could require new transmission infrastructure—but even these will need to be assessed and given ample time for preventative measures to be put in place, NERC says. While new transmission facilities are being built, the organization warns that grid operators may see "reduced system stability, tighter flexibility margins, and  problems with deliverability of resources."

Another major effect of the proposed and final environmental rules is that they could change the overall generation fuel mix. If North America sees increased gas-fired generation over coal-fired generation for baseload power, it must more soundly assess the interdependency of gas and electric supply, transport, and delivery to ensure "reliability is not degraded," NERC warns.

Variable Generation and Uncertainty
Gas-electric interdependency, EPA rules, and shrinking reserve margins are just some issues and risks identified that could affect system reliability. NERC also says that variable generation—particularly wind and solar—are expected to grow significantly, so that they will surpass on-peak growth forecasts of all other types of generation.

Another major concern is the lack of certainty on both the generating supply side and from the EPA, which has yet to finalize key rules, NERC says.

The organization recommended that regulators assess "time and scope of regulation and [effects] on bulk power system reliability." It also urged federal agencies to coordinate and ensure the industry is not forced to violate one regulation in order to meet another. Industry should, meanwhile, "employ available tools to mitigate potential reliability concerns through any resource transition," it says.

McCarthy: Rules Will Not Affect Reliability
At a technical conference at the Federal Energy Regulatory Commission (FERC), Gina McCarthy, EPA Assistant Administrator for the EPA’s Office of Air and Radiation, refuted claims that new federal environmental rules would jeopardize reliability. “In the 40-year history of the Clean Air Act, EPA rules have not caused the lights to go out, and we won’t let it happen going forward,” The Hill quoted McCarthy today.

The EPA was paying “careful attention” to reliability issues, she said. “EPA’s analysis projects that these clean air rules, combined, will result in only a modest level of retirements and will not have an adverse effect on generation resource adequacy in any region of the country.”

Studies suggesting the rules would result in substantial power plant retirements and threaten reliability generally shared a “number of serious flaws,” she said. Many assumed the regulations were more expensive than they were and included aging, inefficient plants that would be shut down regardless of the new rules. “These types of worst-case assumptions, when not clearly described as more stringent than EPA’s rules, can generate more confusion than insight,” she said.

NERC’s new report, specifically, assumed that “every uncontrolled coal unit will install the most expensive controls available to meet the Mercury and Air Toxics Standards requirements,” McCarthy said. “I think we all know that this isn’t what will happen.”

Sources: POWERnews, NERC, EPA, The Hill

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