Clean Power Plan vs. Reliability: A False Dilemma for States

Posted by Caitlin Marquis on Feb 19, 2015 11:57:37 AM

Ever since the Environmental Protection Agency (EPA) released its proposed Clean Power Plan last June, critics have raised concerns that the proposed regulation might jeopardize the reliability of our electricity system. Reliability has become a key policy talking-point, and for good reason: Nobody wants to see the lights go off. Reliable electricity is essential to our daily lives, our economy, our health, and our safety. According to a new report by The Brattle Group prepared for the Advanced Energy Economy Institute (AEEI), however, the Clean Power Plan will not come at the expense of reliability. As they continue policy discussions and begin to develop compliance plans, states and system operators should take notice.


Read the full Brattle Group report here.

In the report, The Brattle Group addresses concerns voiced by the North American Electric Reliability Corp. (NERC) in its Initial Reliability Review (IRR) of the Clean Power Plan, and finds that NERC not only overstated the potential problems, but also ignored key solutions.  Accounting for the technologies, operational tools, and market structures available today, the Brattle Group explains that potential problems identified by NERC’s preliminary assessment can be largely avoided. Given the transformation of the power system already underway, the challenges identified by NERC are not new, but rather ongoing trends that system operators are already successfully managing, and which will continue regardless of the Clean Power Plan.

The Brattle report states: “Following a review of the reliability concerns raised and the options for mitigating them, we find that compliance with the CPP is unlikely to materially affect reliability. The combination of the ongoing transformation of the power sector, the steps already taken by system operators, the large and expanding set of technological and operational tools available and the flexibility under the CPP are likely sufficient to ensure that compliance will not come at the cost of reliability.”

How did Brattle and NERC reach such different conclusions? Primarily, NERC raised questions about the four components, or “Building Blocks,” of emission reduction used by EPA to calculate state targets and then assumed that states would have to implement the Clean Power Plan according to EPA’s formula—ignoring the flexibility provided under the Plan for states to choose their own compliance strategies. By overlooking how much the electric power system is already changing, how unambitious EPA’s calculations are relative to what some states are already doing, and the degree of flexibility offered to states in meeting their targets, NERC overestimated the challenge of meeting the EPA targets, nationally and state by state.

Because NERC assumed that states would follow EPA’s Building Blocks, its conservative assumptions about the achievability of the individual Blocks translate to overstated reliability concerns about the Clean Power Plan as a whole. The Brattle Group’s report provides a measured assessment of each Building Block individually, while also offering both solutions and counterarguments to address NERC’s reliability concerns.

Regarding Building Block 1, resource adequacy can be maintained in the face of reduced coal-fired generation by incentivizing coal plants to stay in service while operating less frequently, by co-firing with lower-emitting fuels, and by calling upon new, cost-effective capacity resources such as demand response, energy storage, and new natural gas capacity. Further, retirement of less efficient coal plants due to the Mercury and Air Toxics Standards (MATS) will leave a more efficient fleet in place, achieving approximately half the heat-rate improvements anticipated under the Clean Power Plan. These retirements will occur regardless of the Clean Power Plan, and system operators will have ample time to prepare for these changes well before the start of the compliance period.

Potential natural gas pipeline constraints impeding the greater utilization of existing natural gas power plants (Building Block 2) can be addressed through pipeline construction (at levels below historic rates) in the long term, and by dual fuel, storage, regional coordination, and natural gas demand response in the short term.

When it comes to Building Block 3, the expanded use of non-emitting sources, the Brattle Group explains that because of state Renewable Portfolio Standards (RPS), many states are already preparing for levels of renewable generation that far exceed those anticipated by EPA by 2020, while the final 2029 targets do not exceed 25 percent for any state, with most states expected to meet much lower targets. These levels have already been exceeded without compromising reliability; for example, in 2013, Iowa and South Dakota generated 27 percent and 26 percent, respectively, of their total annual generation with wind power alone.

Finally, The Brattle Group points to opportunities for energy efficiency savings (Building Block 4) not considered by EPA in setting state targets, include building codes and standards and energy service company (ESCO) savings. Furthermore, the report argues that technology improvements, program experience, and existing institutional capacity will help high-performing states achieve continued efficiency savings rather than reach the limit imagined by NERC.

In addition to countering NERC’s conservative and pessimistic assumptions about the reliability implications of each individual Building Block, The Brattle Group also highlights opportunities for states to deploy market-ready, cost-effective technologies and operational practices not included in these Blocks. Many of these technologies and practices can be deployed on a short time frame, and they are all contributing to the ongoing transformation of our electricity system. These include demand response, coal co-firing, biomass generation, combined heat and power, non-utility energy efficiency savings, distributed generation, new natural gas generation, energy storage, advanced transmission, improved forecasting, and non-variable renewable resources such as geothermal and small hydro.

By reducing the need for emission reduction from the four Building Blocks, these technologies will alleviate potential reliability concerns that may otherwise result from the strict application of the Building Blocks. Moreover, as explained in AEE’s Advanced Energy Technologies for Greenhouse Gas Reduction report, these technologies will create and maintain a higher-performing energy system—one that is reliable and resilient, diverse, cost-effective, and clean—while also improving the availability and quality of customer-facing services.

AEEI and The Brattle Group are not the only ones weighing in on reliability and the Clean Power Plan. The American Wind Energy Association (AWEA) recently released a report explaining the reliability contributions of wind energy, and Analysis Group released a study finding that existing tools, past industry experience, and ongoing efforts by system operators will be sufficient to ensure continued reliability under the Clean Power Plan.

Meanwhile, NERC is preparing a second report, expected to come out in April, and FERC will be discussing reliability issues at a series of technical conferences on the Clean Power Plan starting today. We hope the ongoing transformation of the electricity system and the range of compliance options available to states will figure more prominently in NERC’s follow-up report and in policy debates over the Clean Power Plan. States, for their part, should take note of the opportunities to develop compliance plans that meet EPA’s targets while also moving toward a modernized electricity system for the 21st century.

To learn more about the report, attend AEE’s Webinar: Does EPA's Clean Power Plan Threaten Reliability? March 4, 2015 @ 10am PT / 1pm ET, register now by clicking the button below. (Free event, press and industry welcome.)


Register for the Webinar

Topics: Federal Policy