According to critics, at least eight proposed or final EPA rules (air, water, and waste) may force the retirement of up to 81 gigawatts (GW) of coal-fired generating capacity. (The Energy Information Administration says the total installed generating capacity of the U.S. electric power grid is about 1,119 GW with approximately 330 GW coal-fired.) About half of those retirements have already been announced by utility companies. EPA has not analyzed the cumulative impact of the rules, but the Agency has estimated that the utility maximum achievable control technology (Utility MACT), probably the upcoming rule most dreaded by the power sector, will result in the retirement of about 11 GW. Disagreements over the scope of retirements have produced varying opinions on how the rules will affect reliability.
The utility industry is specifically concerned about how capacity may be compromised by the Utility MACT and seven other rules:
- Industrial Boiler MACT
- Cross-State Air Pollution Rule (CSAPR)
- Coal Combustion Residuals Rule
- Steam Effluent Guidelines for water discharges from ash ponds and scrubbers
- National Ambient Air Quality Standards for ozone, sulfur oxides, nitrogen dioxide, and particulate matter
- Cooling Water Intake Structure regulations
- Regulation of GHGs from power plants
FERC Says ‘No’
At a September 14, 2011, hearing at the House Subcommittee on Energy and Power, five members of the Federal Energy Regulatory Commission (FERC) refused to concede that EPA’s regulations would threaten reliability of the national grid. FERC is an independent agency that bears the primary responsibility in the federal government for protecting the reliability of the high voltage interstate transmission system through mandatory reliability standards.
“I believe that we as a nation can ensure that the EPA’s proposed air and water regulations do not adversely affect reliability, provided we ensure that there is coordination and flexibility in their implementation,” testified FERC commissioner Cheryl LaFleur.
FERC is not empowered by law to require the construction of new power plants to protect grid reliability. However, as noted by FERC commissioner John Norris, FERC has several tools to ensure that reliability is not jeopardized by heavy environmental regulations. Primarily, FERC regulates competition in wholesale power markets. According to Norris, markets have fostered the development of new capacity resources, demand-side resources, and new technologies such as electric storage. “These market results, and our continuing oversight of those markets and the rules governing them, give me confidence in market solutions to most efficiently address the challenges presented by EPA’s new regulations,” Testified Norris.
Second, FERC regulations require that local and regional power organizations look to and plan for possible disruptions to reliability. “Once EPA’s regulations are finalized and generation owners are able to make their own decisions about the continued economic viability of their plants, these planning processes will be an important tool for addressing specific reliability impacts that may result from specific generator retirements,” said Norris.
What Does This Mean for States?
The FERC commissioners and representatives of state and regional power commissions and power companies agree that the impact of the rules would be felt more keenly within certain states and regions, rather than nationwide. “To be sure, it is possible that individual generation unit retirements may reveal specific local reliability issues that need to be addressed,” said Norris. In general, retirement would focus on many of the smaller and much older power plants that provide reserve capacity.
States such as West Virginia and Missouri, which have a high percentage of coal-fired power plants, may be particularly hard-hit by the EPA rules. Jeff Davis, a member of the Missouri Public Service Commission, noted that his state has 50 coal-fired plants and that more than 80 percent of the electricity consumed in Missouri comes from coal. “I can tell you that if all these regulations come to pass, they are going to have a devastating effect on Missouri’s economy and our people,” said Davis. He cites one study that predicts a 3 to 5 percent annual rise in electric rates accompanying stagnant wages.
Jon McKinney, a commissioner with the Public Service Commission of West Virginia, points out that operators of the largest plants in his state have installed pollution control equipment that can meet or can be modified to meet EPA’s air standards. “But there are many smaller plants throughout West Virginia and other states that not only provide generation, but also assure that we have a stable electric grid,” said McKinney. “As a result of EPA’s proposed and final rules, many of these plants are expected to retire, quite abruptly, over the next few years.”