PJM Interconnection has done a good job so far ensuring grid reliability as thousands of MWs of mostly coal-fired capacity is retired, with more challenges on the way if and when the U.S. Environmental Protection Agency’s proposed Clean Power Plan goes into effect, said a study from the Analysis Group filed March 23 at the Federal Energy Regulatory Commission.
The report provides an assessment of various reliability issues facing the PJM Regional Transmission Organization, as it looks ahead to implementation of the Clean Power Plan. The report is the second in a series of reports, and supplements analyses that the Analysis Group presented in a first report (in February 2015) on the Clean Power Plan. In that report, it assessed the readiness of the nation to ensure a reliable electric system while moving to reduce carbon pollution from existing power plants.
This is an independent report by the authors at the Analysis Group, supported by funding from the Energy Foundation. Analysis Group provides economic, financial, and business strategy consulting to leading law firms, corporations, and government agencies. It has more than 600 professionals, with offices in Boston, Chicago, Dallas, Denver, Los Angeles, Menlo Park, New York, San Francisco, Washington, D.C., Montreal, and Beijing.
The company’s review concludes that:
- PJM is already adapting to changes underway in the electric industry, and doing so successfully from a reliability point of view. As a region with electric capacity totaling approximately 200 GW, PJM has seen some 12.5 GW of mostly aging, coal-fired resources retire during the 2010-2014 period, due largely to economic and regulatory factors. Another 7.6 GW is expected to be retired over the next 3-4 years. These plants are being replaced with new resources – primarily natural gas-fired and wind projects – and there is a deep queue of additional new proposed projects in line to meet future needs. PJM has effectively administered processes to manage this transition in a way that meets both reliability and efficiency objectives.
- PJM’s analysis of compliance options demonstrates that regional, market-based approaches can meet Clean Power Plan goals across PJM states at lowest cost, with retirements likely spread out over a number of years. PJM’s recent modeling, performed at the request of the Organization of PJM States (OPSI), evaluates a wide array of potential compliance approaches and identifies capacity at risk of retirement. In addition to stressing the benefits of a flexible and collaborative approach, the results indicate that expansion of energy efficiency and renewable resources can reduce the quantity of existing coal-fired units at risk of retirement. Also important, PJM’s analysis only reflects adding capacity from proposed projects already in PJM’s interconnection queue (totaling 14.5 GW); the total quantity of new projects is likely to be much higher over the full time frame of Clean Power Plan implementation.
- PJM and the PJM states have extensive authorities and experience with administrative mechanisms to address – and successfully resolve – potential reliability violations associated with the retirement of power plants. These mechanisms include extending unit operations through “reliability must run” contracts, accelerated procurements of demand and supply resources, temporary waivers of regulatory requirements if or when reliability is an issue, and fast-tracking resource siting and permitting when needed to meet short-run reliability challenges.
- PJM has demonstrated success with reliability challenges in the past, including retirements related to low natural gas prices and the Mercury and Air Toxics Standards (MATS), and stresses on the fleet during the winter 2014 Polar Vortex. In the case of the Polar Vortex, some stakeholders have claimed that operating conditions during early 2014 prove that the Clean Power Plan could be a threat to reliability. In fact, for PJM, the Polar Vortex is a case study of how numerous planning, operational, and market tools can be (and are) deployed to ensure reliability in response to unexpected events, said the study. Moreover, during the more recent harsh 2015 winter when new recordbreaking peak loads occurred, it noted that PJM’s “reliability tool kit” has functioned nicely and possibly even improved over the past year.
- Given the robustness of existing reliability tools and the flexibility in the Clean Power Plan, the Analysis Group is not convinced that a Reliability Safety Valve, as proposed by PJM, is either needed or practically workable. If EPA wishes, however, to include some sort of reliability “back stop” mechanism in the final carbon rule, it thinks EPA should design it in a way that creates appropriate incentives for reliance upon normal reliability tools and thus makes it unlikely that a waiver will need to be called upon.
- PJM is well positioned to lower carbon pollution from existing power plants while relying on the reliability tools and operating procedures it uses with great success.