EPA finalizes utility air emission regulations

New federal environmental regulations on utility air emissions have been finalized, but their impact on electricity costs and grid reliability remains to be seen.  The US Environmental Protection Agency has released its final rule for power plant air emissions.  (Here's EPA's Final Rule, a 1,117-page PDF.)  These rules, formally known as the Mercury and Air Toxics Standards or MATS, are also known as "utility MACT" because they require many utility generation units to use "maximum achievable control technology".  The rule gives utility electric generation plants three years to comply with tighter air pollution control requirements.

Even before the rule was finalized, it provoked controversy over how it could impact electricity prices and the reliability of the US electric grid.  According to the US Energy Information Administration, in 2010 coal was used to generate about 45% of the electricity consumed in the United States.  The nation's electric reliability organization, NERC, released a report suggesting the new rules would force the early retirement of a significant portion of the nation's coal-fired generating stations.  In NERC's analysis, if EPA's air rules force needed generators to shut down, the reliability of the electric grid could be at risk.

EPA and the Department of Energy disputed NERC's assumptions.  Ultimately, EPA issued its final rule on December 21, 2011.

President Obama expressed his support for EPA's new rule.  In a Presidential Memorandum, President Obama described how the new rules would improve air quality and public health.  President Obama also explicitly addressed the linkage between these rules and grid reliability:

These new standards will promote the transition to a cleaner and more efficient U.S. electric power system. This system as a whole is critical infrastructure that plays a key role in the functioning of all facets of the U.S. economy, and maintaining its stability and reliability is of critical importance. It is therefore crucial that implementation of the MATS Rule proceed in a cost-effective manner that ensures electric reliability.

Analyses conducted by the EPA and the Department of Energy (DOE) indicate that the MATS Rule is not anticipated to compromise electric generating resource adequacy in any region of the country. The Clean Air Act offers a number of implementation flexibilities, and the EPA has a long and successful history of using those flexibilities to ensure a smooth transition to cleaner technologies.

The President also directed a coordinated process to plan and execute measures needed to implement the rule while maintaining the reliability of the electric power system.  This process should be designed to "promote predictability and reduce uncertainty," and should include engagement and coordination with a broad array of stakeholders including the DOE, the Federal Energy Regulatory Commission, state utility regulators, regional transmission organizations, the North American Electric Reliability Corporation and regional electric reliability organizations, other grid planning authorities, and electric utilities.