NERC report says Clean Power Plan may be too much, too fast

The North American Electric Reliability Corp. on Nov. 5 released a report saying that the EPA’s CO2-reducing Clean Power Plan, as currently proposed, is a danger to grid reliability in terms of implementation schedule.

The proposed Clean Power Plan is under Section 111(d) of the Clean Air Act. The NERC assessment – “Potential Reliability Impacts of EPA’s Proposed Clean Power Plan” – examines the potential reliability aspects resulting from its anticipated implementation. This assessment provides the foundation for future reliability analyses and evaluations required by the electric reliability organization, stakeholders and federal and state policy makers to ensure the system maintains reliability.

“The bulk power system is undergoing a fundamental transformation toward increasing dependency on natural gas, wind and solar resources. The Clean Power Plan substantially accelerates that shift and proposes a very different mix of power resources than we have today,” said Gerry Cauley, president and chief executive officer at NERC. “Our role, through our reliability assessments, is to identify emerging reliability issues that must be adequately addressed to ensure future reliability of the electricity supply. Based on our preliminary assessment of the proposed rule, we believe there must be further detailed engineering analysis to demonstrate whether the assumptions and targets are feasible in the timeframe proposed.”

The Clean Power Plan, which seeks to reduce CO2 emissions from existing power plants by 30% below 2005 levels by 2030, calls for states to begin submitting implementation plans as early as June 30, 2016, and regional implementation plans by June 30, 2018.

Based on projections in NERC’s 2014 Long-Term Reliability Assessment (to be released later in November), power plant retirements and limited capacity additions are contributing to diminishing reserve margins in New York, the Midwest and Texas. Since 2011, more than 30 GW of conventional fossil-fueled generation has been retired, primarily due to existing environmental policies and low natural gas prices. Industry projections indicate an additional 44.2 GW across the NERC footprint.

By 2020, the EPA assumes that impacts of existing environmental regulations, combined with the proposed Clean Power Plan, will reduce coal-fired generation by up to 69.8 GW beyond NERC’s 2014 LTRA reference case projections.

“EPA’s estimated generation retirements may be conservative if the assumptions incorporated into the building blocks in the Clean Power Plan prove to be unachievable,” said Thomas Burgess, vice president and director of Reliability Assessment and Performance Assessment at NERC. “Some areas may require significant infrastructure enhancements and industry may require additional time to ensure reliability.”

NERC will add further analysis later on

NERC said it will provide additional information on the proposed Clean Power Plan in the NERC 2014 Long-Term Reliability Assessment to be released later this month, which provides a forward looking and independent perspective on the adequacy of generation, demand-side resources and transmission systems needed to maintain and enhance reliability over the next 10 years.

NERC also plans to conduct three additional assessments as the rule is finalized and implemented, including: an analysis that provides a more detailed examination of generation and transmission adequacy and reliability impacts in 2015; a comprehensive assessment of the final rule prior to the state implementation plan deadline; and an assessment that examines the final state implementation plans in 2016.

Under the EPA proposal, substantial CO2 reductions are required under the State Implementation Plans (SIPs) as early as 2020. According to the EPA’s Regulatory Impact Assessment, generation capacity would be reduced by between 108 and 134 GW by 2020 (depending on state or regional implementations of Option 1 or 2). “The number of estimated retirements identified in the EPA’s proposed rule may be conservative if the assumptions prove to be unachievable,” the NERC report said. “Developing suitable replacement generation resources to maintain adequate reserve margin levels may represent a significant reliability challenge, given the constrained time period for implementation.”

NERC is also concerned that the assumed heat rate improvements may not be realized across the entire generation fleet since many plant efficiencies have already been realized and economic heat rate improvements have been achieved. Multiple incentives are in place to operate units at peak efficiency, and periodic turbine overhauls are already a best practice. Site-specific engineering analyses would be required to determine any remaining opportunities for economic heat rate improvement measures

Greater reliance on variable resources and gas-fired generation is expected under the plan. “The CPP will accelerate the ongoing shift toward greater use of natural-gas-fired generation and variable energy resources (VERs) (renewable generation),” said the report. “Increased dependence on renewable energy generation will require additional transmission to access areas that have higher-grade wind and solar resources (generally located in remote areas). Increased natural gas use will require pipeline expansion to maintain a reliable source of fuel, particularly during the peak winter heating season. Pipeline constraints and growing gas and electric interdependency challenges impede the electric industry’s ability to obtain needed natural gas services, especially during high-use horizons.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.