REGULATION

Grid operators push for more time on EPA plan

Achieving the Obama administration's Clean Power Plan requires more time, more regional cooperation and a "carbon price" -- a de facto economic penalty for power plant carbon emissions -- state utility commissioners were told yesterday.

Four senior power grid executives offered assessments of key engineering and political challenges confronting U.S. EPA's proposed climate policy amendments to the Clean Air Act at the winter meeting of the National Association of Regulatory Utility Commissioners (NARUC). It is not clear which set of obstacles loomed larger.

The grid officials pressed hard on their organizations' prior appeals for a pushback against EPA's initial front-loaded compliance deadline of 2020, a concession that EPA has signaled it is considering. EPA's overall goal is to reduce power plant carbon emissions by 30 percent from 2005 levels by 2030.

"The sharp cliff on the front end is very difficult," said Gerry Cauley, CEO of the North American Electric Reliability Corp., the federally certified grid monitor. He suggested a gradual, 10-year ramp-up of carbon emissions requirements. Cauley said NERC's reliability objections are "not intended to be an indictment of the proposed rule." But, he added, "We need more time."

NERC expects to issue a follow-up report on reliability issues in April, he said.

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Michael Kormos, executive vice president of the PJM Interconnection, operating the high-voltage grid between New Jersey and Illinois, said initial planning studies have identified anywhere from 6,000 to 25,000 megawatts of fossil-fuel power plant capacity that might have to be shut down to comply with EPA carbon rules.

The choice of deadlines "ultimately could be a very big deal for us," Kormos said, noting that the impacts of plant requirements are being studied for three deadlines, 2020, 2025 and 2029. "Given enough time ... we don't necessarily foresee a reliability problem."

The issue is whether there is enough time to replace the shutdown of coal generation plants, he added.

Jim Robb, chief operating officer of the Western Electricity Coordinating Council (WECC), operations overseer for power flows west of the Rocky Mountains, said a planning study for demand and resources in 2024 comes "within spitting distance" of meeting EPA's carbon reduction goals overall. But Colorado, and even more so, Arizona, could face reliability challenges.

Hitting EPA targets would require the entire region to match California's investments in renewable energy output, and WECC doesn't know whether its long-distance transmission network can handle that, he said. California is able to manage high levels of variable renewable power because it can shift excess solar power to its neighbors when necessary, and import power when clouds cover Los Angeles. What happens when the entire region "looks like California?" he asked.

"When we look at EPA scenarios, we see some very unusual activities" on the Western transmission network, he said.

"New things we hadn't seen," he said. "I'm not saying it's not possible, but it's not tested, either."

Clair Moeller, chief operating officer of the Midcontinent Independent System Operator in the central United States, said 14,000 MW of generation within MISO is at risk from EPA's proposed rule. "Given enough time, we can make those transitions," he said.

"There is not going to be very much time [between] when a rule is final and when the initial compliance period begins," he said. "To replace that much generation in that amount of time looks to us to be a difficult task for the utilities."

Hard pitch for regional solutions

The grid operators' comments outlined a series of internal dilemmas on timing.

As officials of multi-state grid organizations, they advocated the efficiency and flexibility of regional solutions to rebalancing supplies and replacing shuttered coal plants.

"In the West, because of the interdependency of the states, it is very hard for one state in isolation to take a set of actions that won't have some derivative implications for the other states," Robb said.

"We're asking for as much time as possible to look at the plans the states are developing, hopefully before they are finalized," Robb added, "to look at them in the aggregate and to assess whether there are issues ... before they hit."

"We're not terribly interested in re-Balkanizing the grid," MISO's Moeller said.

For example, today, a wind farm in south-central Minnesota might have an off-take agreement with a utility in Indiana that receives its power. Under the Clean Power Plan, questions remain about which state gets the credit for that carbon-free power. "We'd better figure that out," Moeller told state regulators.

MISO's sprawling system includes states where governors strongly oppose the Obama administration's plan for tackling power plant emissions. It also includes states that support it, illustrating another regional hurdle. "Any kind of state reciprocity agreement has to be voluntary," Moeller said, given that some states don't want to participate.

"For states that are already working together with energy plans for their region, it might be an easy transition. For a state like Georgia that's independent, it might be more difficult," said Georgia Public Safety Commissioner Tim Echols. Georgia and neighboring states could consider a regional pact because they have a common utility, he said. "It might be more natural, easier for them because they're used to talking about their plans in front of each other."

But, he added, "We are pushing back against the EPA plan on its face. I don't want to start talking about compliance yet because I'm still hoping that the thing will go down in flames."

Modeling a carbon price

Choosing a regional plan tightens EPA's proposed timetable, but could help states. State plans are due between mid-2016 and 2017, depending on whether states receive extensions. If states join in regional compliance plans, they have until 2018 to submit them, two years before the initial deadline, if that holds.

"We really need to understand what the states want to do, how the states are ultimately going to implement the plans," Kormos said. That detail is essential to understanding reliability issues, he said.

"Until we get a sense of state implementation plans," Robb added, "it is very hard to say exactly which units might be compromised."

Some state opponents of the EPA plan insist the agency should not go ahead until electric reliability issues are resolved.

Still, grid operators and regulators returned to the so-called price on carbon, a mechanism that could fit neatly into the existing process for dispatching electric power across the grid. A price or tax based on the volume of carbon emissions would push coal generators' market prices above those of efficient gas-fired generators, while gas plants would have higher prices than carbon-free nuclear or renewable power.

PJM's Kormos said that adding an assumed price on carbon in PJM's analysis of the EPA plan makes for the most efficient choices among competing generating plants in organized power markets like PJM's.

Asim Haque, an Ohio commissioner and moderator of yesterday's NARUC panel, wondered how might that come about.

"It's up to the states, how do you come to that price," Kormos said. "What is the mechanism, whether it's cap and trade or a carbon tax, is sort of irrelevant to our model."

Yet it's not politically irrelevant, Haque added in an interview following the session.

"Utilizing the current dispatch system and placing a regional price on carbon, if doing that within the existing [power plant] dispatch system results in lower costs for consumers in my state, then we want to make sure we are taking a really, really hard look at that," Haque said.

"Where does this concept of a carbon price fall on the spectrum of what state utility commissions can do? How you logistically get there is an authority-based question I think we'll need to work out," Haque said.

"You're not going to make a move until you consult with all of the various branches within your state," he said.

Every state's internal politics are different, Haque noted. "The Public Utility Commission of Ohio is not going to do anything without consulting with Ohio EPA, and then any other entity that we deem should be in the loop on these things," he said.

"I'm not exactly sure what the path would be to get there." he concluded.

Reporters Emily Holden and Rod Kuckro contributed.

Twitter: @pbehrcw | Email: pbehr@eenews.net

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