Legal & Regulatory

New Wave of Coal Retirements Coming, ERCOT Warns

The Clean Power Plan could force the retirement of up to 4 GW of coal-fired capacity in the region served by the Electric Reliability Council of Texas (ERCOT) starting as soon as 2022, an updated analysis suggests. 

The independent system operator that manages about 90% of Texas’ electric load acknowledged that fewer coal units are at risk for retirement by 2030 under the Environmental Protection Agency’s (EPA’s) August-released final plan, compared to its June 2014–issued proposal. However, retirements could increase to about 4.7 GW when federal regional haze requirements are taken into consideration, it said in an Oct. 16-released study, “ERCOT Analysis of the Impacts of the Clean Power Plan: Final Rule Update.”

“This amount of unit retirements could pose challenges for maintaining grid reliability, and these impacts are likely to intensify and occur earlier when the effects of the [Clean Power Plan] are combined with other environmental regulations, particularly EPA’s proposed Regional Haze Federal Implementation Plan (FIP) for Texas,” it said.

“If ERCOT does not receive adequate notification of these retirements, and if multiple unit retirements occur within a short timeframe, there could be periods of reduced system-wide resource adequacy and localized transmission reliability issues,” it warned.

While “there is uncertainty regarding the implementation of the Clean Power Plan in Texas,” the plan could result in increased wholesale and retail energy costs in the ERCOT region, the study says. It says costs could surge 16% by 2030, without accounting for associated costs of transmission upgrades, higher natural gas prices caused by increased gas demand, new ancillary services, and other retirement or balancing costs.

Under the proposed Clean Power Plan, Texas would have been required to meet an interim CO2 emissions limit of 853 lb CO2/MWh on average during the period from 2020 to 2029, and a final limit of 791 lb CO2/MWh on average from 2030 onward. Under the final rule, Texas will be required to meet a final CO2 emissions rate limit of 1,042 lb CO2/MWh on average from 2030 onwards.

The study modeled four scenarios over the timeframe 2016 to 2030: a baseline scenario of the ERCOT system under current market trends, a CO2 limit scenario that applies the limits without a price, a CO2 limit with an emission price, and a CO2 price and regional haze scenario.

It shows that under a CO2 limit scenario—even without a CO2 price—800 MW of gas steam capacity and 1.5 GW of coal units will need to be retired by 2030. Under a CO2 price and regional haze scenario, ERCOT would see 7 GW of gas steam and coal capacity retired, but it would add 9.1 GW of new wind, 14 GW of solar, and 2.9 GW of combustion turbine capacity—at a capital cost of $29 billion (2016 dollars).

According to the Environmental Defense Fund, a U.S.-based environmental advocacy group, the solid growth of renewables is a “bright spot” not highlighted by ERCOT’s press materials. Renewable energy is projected to grow to 21% of installed capacity in 2030, “regardless of carbon standards,” the environmental group said in an Oct. 16 statement. “Only a [2%] increase of renewables—coupled with an additional [8%] of generation fired by Texas-produced natural gas—is needed to meet the requirements of the Clean Power Plan,” it claimed.

“When looking at ERCOT’s scenario that includes energy efficiency, which was not mentioned in the release, it is clear the Clean Power Plan is within Texas’ reach through multiple paths,” the group’s Texas state director, John Hall said.

Balanced Energy for Texas (BET), a coalition of energy consumers, producers, and providers, meanwhile, underscored its long-advocated principles that ERCOT has “no megawatts to spare” and that the state should “let the markets work.”

“BET believes that if the market is allowed to work, older fossil units will be retired as investments and outstanding obligations are paid off and ratepayers will not be exposed to drastic rate increases often triggered by premature retirements and stranded investments,” it said.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)





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