Electric Grid Reliability Problems: The Result of EPA Regulations?

The Obama administration has a long, anti-coal, oil, and natural gas track record. According to the North American Electric Reliability Corporation (NERC), their anti-coal, oil, and natural gas zeal will soon start affecting the reliability of the electric grid. NERC is recognized by the federal government as the leading authority on electric reliability. As the organization that ensures the reliability of the electric grid, NERC recently found that existing and proposed environmental regulations in the United States may significantly affect bulk power system reliability. In fact, according to NERC, "environmental regulations are shown to be the number one risk to reliability over the next one to five years".[ia] Beyond the 38 gigawatts of electricity capacity that has already been announced to retire, NERC estimates that another 36 to 59 gigawatts of capacity will come off-line by 2018, depending on the "scope and timing" of EPA regulations. Together nearly a quarter of our coal-fired capacity could be off-line by 2018, marking the first time in energy history that installed coal-fired capacity has declined.

NERC's 2011 Long Term Reliability Assessment

Four major regulations now being proposed or implemented by the Environmental Protection Agency have been found by NERC to expose the U.S. to significant energy vulnerabilities:

• Section 316(b) of the Clean Water Act-Cooling Water Intake Structures
• Maximum Achievable Control Technology (MACT) Standards (Title 1 of the Clean Air Act)
• Cross State Air Pollution Rule (CSAPR), replacing the Clean Air Transport Rule (CATR)
• Coal Combustion Residuals

NERC's assessment shows there are 4 areas of vulnerability. First, reserve margins, the capacity above what is required to meet normal peak demand, can be severely affected due to either the retirement of plants that do not meet the standards or the de-rating of capacity for plants that add environmental equipment in order to meet the standard. NERC regional planners would like reserve margins to be at 10 to 20 percent of peak demand to meet surges in power demand caused by weather, outages, or other unexpected occurrences. Second, while plants are offline to install environmental equipment required to meet the new EPA guidelines, electricity generation will be lowered. Third, retrofitting the units to meet the standards in the short time frame mandated (2012-2015) will require coordination of plant outages among the industry, requiring a massive effort since it typically takes about 18 months to add environmental equipment to a coal-fired unit. Finally, because there are a limited number of companies that design and install scrubbers, the time for retrofitting may increase beyond the typical 18-month period, which could cause additional generation to be off-line and further lower reserve margins. All told, NERC estimates that as many as 677 coal-fired units (258 gigawatts) will need to be temporarily shut down to install EPA-mandated equipment, which constitutes an impact on over 70 percent of our total coal-fired capacity."

Other Estimates

There are good reasons to believe that EPA's regulations will force more generating units off line. According to the Edison Electric Institute, for example, about 48 gigawatts of coal units at 231 plants will be retired between 2010 and 2022. That capacity represents 14 percent of the 339 gigawatts of coal-fired power capacity in 2010, or about 5 percent of total generating capacity.[ii] Recently, the Institute for Energy Research (IER) compiled a list of all of the generating units that will be closed according to EPA's model and utilities' disclosures because of the transport rule (CSAPR and CATR) and the utility MACT rule. IER found that almost 30 gigawatts of electric generating capacity will be taken offline due to these two rules alone. That amount is about double the number originally predicted by the EPA and represents nearly 10 percent of total coal generating capacity in the U.S. To put it in perspective: this is the equivalent of closing every power plant in the state of North Carolina or Indiana.[iii]

Some Utility Reactions

Southern Company, a utility that covers states from Mississippi to Georgia, does not believe that EPA's timeline can be met and believes that electricity rationing is almost inevitable..American Electric Power, operating in 11 Midwest states, also believes that rationing may result if EPA's standards are not relaxed.[iv] Another company, Michigan-based Consumers Energy, recently announced plans to "mothball" seven coal-fired units at three plants in 2015. According to the company spokesman, the units will be taken offline because of the high cost of upgrades required to meet the new EPA guidelines. Instead, the company is boosting investments in two wind farms with a capacity of 250-megawatts, a fraction of the 830-megawatt capacity of a single coal plant they were planning to build.[v]

What about Air Quality?

So if the U.S. electric grid is made more vulnerable by EPA's latest regulations, what justifies the administration's undeterred drive to close coal-fired plants? Ostensibly, we are told, the new regulations are needed to improve air quality in America. But air quality has already dramatically improved. Even over the past 10 years, air quality has markedly improved, according to the EPA's own data: EPA also provides the following graphic that shows that as population, energy use, and GDP have grown over the past 30 years, pollution emissions have fallen by 67 percent. Clearly, something other than clean air and water are driving the administration's anti-coal policies.

Conclusion

President Obama has made it clear that coal-fired power plants are not wanted and his Environmental Protection Agency is set to ensure their decline.[vi] While estimates vary on how much coal-fired capacity will be affected by EPA regulations, all estimates show that coal-fired capacity in the United States will decrease for the first time in history. In order to ensure reliability, new gas-fired and renewable power plants will need to be built, costing the consumer more for needed electric power to heat, air condition and light our homes and offices, and to run industrial equipment. Higher energy costs only serve to hurt our fragile economy further. Because EPA's three year timeline is so tight, utility companies are not even sure that they can meet the standards and ensure reliability of the electric system without rationing power to American consumers. So the question remains, is meeting the administration's ill-conceived green energy goal worth jeorpardizing the reliability of our electric grid and closing hundreds of plants that employ thousands of American workers? [i][ia] North American Electric Reliability Corporation, 2011 Long Term Reliability Assessment, November 2011 [ii] Politico, Who is killing the coal-fired power plant?, December 6, 2011 [iii] Institute for Energy Research, IER Identifies Coal Fired Power Plants Likely to Close As A Result of EPA Regulations, December 19, 2011 [iv] Wall Street Journal, If the Lights Go Out, December 6, 2011 [v] Politico, Who is killing the coal-fired power plant?, December 6, 2011 [vi] "So if somebody wants to build a coal-fired plant they can. It's just that it will bankrupt them..." -- Barack Obama speaking to San Francisco Chronicle, January 2008