EPA regs and electric grid reliability

Wednesday, November 30, 2011

Debate is ongoing about the effect of new environmental regulations on the U.S. electric grid.  Some worry that tighter environmental controls will force certain electric generators to shut down, driving up the cost of electricity or putting electric reliability at risk.  Others believe that the grid's integrity can be maintained, and that the new regulations are necessary to protect human health and the environment.

Support for the concerned side of the equation comes from a recent report by the North American Electric Reliability Corporation.  NERC is the nation's electric reliability organization, charged with ensuring the reliability of the North American bulk power system.  In NERC's 2011 Long-Term Reliability Assessment (559 page PDF), NERC notes that recent and future environmental regulations may force the early retirement of a significant portion of the nation's coal-fired generating plants.  These regulations include the recently-finalized Cross-State Air Pollution Rule, plus rules under development governing utility plants' water intakes and air emissions.  According to NERC's report, EPA's new cooling water intake structures and mercury and air toxics standards rules "may significantly affect bulk power system reliability depending on the scope and timing of the rule implementation and the mechanisms in place to preserve reliability."

At the same time, others observe that NERC's report assumes multiple worst-case scenarios and ignored the health and environmental benefits of the rules.  After reviewing a near-final draft of the NERC report, EPA itself wrote NERC a letter (4 page PDF), stating "it appears likely your report may contain ... faulty characterizations of our rules."  EPA pointed to several flaws in NERC's analysis, including that NERC assumed generators would be forced to adopt the most expensive solutions immediately, rather than selecting the most cost-effective technologies for each facility.  EPA noted that the bulk of threatened plant retirements suggested in NERC's report would come from the cooling water intake regulations -- regulations which are still under development.  Finally, EPA pointed out that NERC's analysis appears to assume that no one tries to preserve grid reliability as the regulations begin to take effect, "an outcome that flies in the face of our 40 years of implementing the Clean Air Act and Clean Water Act."  Given the positive impacts of the regulations -- with the Cross-State Air Pollution Rule alone projected to prevent 34,000 premature deaths and 400,000 cases of aggravated asthma per year -- EPA defended their value and refuted NERC's analysis.

Reliability of the grid is important, enough so that the Federal Energy Regulatory Commission convened a technical conference yesterday and today to discuss grid reliability and policy.  While that proceeding may result in interim orders or changes to policy, it may take years for the environmental regulations to both take effect and to impact generating plants.  At the same time, generators are keeping a close watch on federal environmental regulation as it develops.

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