Wednesday, October 27, 2010

Impacts On Bulk-Power System From EPA Air Regulations

Oct 26: The North American Electric Reliability Corporation (NERC) released a special assessment -- – Potential Resource Adequacy Impacts of U.S. Environmental Regulations -- examining the possible impacts of four potential U.S. EPA regulationsNERC is the electric reliability organization (ERO) certified by the Federal Energy Regulatory Commission to establish and enforce reliability standards for the bulk-power system.
    According to NERC's assessment, several regulations currently being proposed by the EPA directly affect the electric utility industry. The assessment scenario was designed to evaluate the potential impacts of the four potential EPA regulations on Planning Reserve Margins to identify the need for additional resources to maintain bulk power system reliability. To accommodate the studied scenarios, industry may need more resources, beyond those identified in existing plans, in order to maintain bulk power system reliability. Gerry Cauley, president and CEO of NERC said, "The results of this assessment show a significant potential impact to reliability should the four EPA rules be implemented as proposed. To ensure bulk power system reliability, the proposed rules should provide sufficient time to acquire replacement resources, offsetting the reductions in capacity from unit retirements and deratings from environmental control retrofits."
    NERC's assessment reviews four EPA proposed rulemaking proceedings that could result in unit retirements or forced retrofits between 2015 and 2018. Specifically, the rules included in NERC's assessment under development were: • Clean Water Act – Section 316(b), Cooling Water Intake Structures; • Title I of the Clean Air Act – National Emission Standards for Hazardous Air Pollutants (NESHAP) for the electric power industry (referred to as Maximum Achievable Control Technology (MACT) Standard); • Clean Air Transport Rule (CATR); and • Coal Combustion Residuals (CCR) Disposal Regulations.
    The assessment evaluates the potential impacts on Planning Reserve Margins, assuming that there would be no industry actions in the near term to address compliance issues or market response, and identifies the need for additional resources that may arise in light of industry responses to each of these environmental regulations individually and in the aggregate. Mark Lauby, director of Reliability Assessment and Performance Analysis at NERC said, "The combination of the proposed rules shows Planning Reserve Margins may be significantly impacted with deteriorating resource adequacy in a majority of the NERC regions/subregions. Additionally, considerable operational challenges to manage, coordinate and schedule the resulting industry-wide environmental control retrofit effort will occur if all these rules are enacted as currently proposed."
    Some findings from the NERC assessment are: • EPA's proposed regulations may have significant impacts on Planning Reserve Margins; • Capacity impacts will vary by region; • Section 316 (b) cooling water intake structures rule has the greatest potential for impact on Planning Reserve Margins; • The MACT, CATR and CCR rules also contribute to reductions in generating capacity; and • If implemented as proposed, the EPA regulations create a need for prompt industry response and action; 
    The Clean Air Task Force (CATF)a nonprofit organization with staff including senior engineers, MBAs, scientists, attorneys, and communications specialists issued a release commenting on the NERC assessment. CAFT said the "industry-funded group charged with keeping the lights on" released "a long-awaited and much anticipated report on the impact of a number of potential EPA regulations for the power sector. 'And guess what?' 'It's good news -- the lights will stay on. Moreover, the proposed regulations ensure that the lights will remain on with minimal disruption to the grid and to consumer electric bills, and will also improve the nation's air quality and protect public health.'"
    CATF said the NERC report analyzes four sets of potential regulations -- only two of which have even been proposed, and none finalized -- which will control emissions of toxic air pollutants, sulfur dioxide (SO2) and nitrogen oxides (NOx), coal ash disposal and cooling water intake. CATF said, "Since the content of most of these rules is still unknown, NERC had to estimate what they would cover and how stringent they would be. The coal industry and segments of the utility industry have been claiming for some time that the expected Clean Air Act regulations will cause a regulatory 'train wreck' that will strain electric system reliability. However, NERC found that even the strictest possible formulation of these air regulations will not materially erode reserve margins.
    Conrad Schneider, CATF Advocacy Director said, "Congress should take note that even the analysis of the power industry's own reliability organization undercuts claims that clean air regulations will turn off the lights." Schneider indicated that of the four potential regulations, NERC finds that only the cooling water intake rule has the potential to impact generation reserve margins. CATF said ironically, EPA has the most discretion in both timing and implementation of the cooling water intake rule. NERC however assumed that EPA would not use any of its discretion or authorities to reduce cost and decrease the regulatory burden.
    Schneider said, "It's disappointing that NERC's analysis assumes a static regulatory system incapable of system response, something the power sector has proved wrong time and time again simply by complying with regulations. So if EPA is again poised to issue intelligent regulations that will provide cleaner air and water and that leave the lights on, that sounds like a win-win to me."
    Access a release from NERC and link to the complete assessment (click here). Access an Executive Summary of the NERC assessment (click here). Access the release from CATF (click here).