Report details tools to ensure reliability during transition to a cleaner generation fleet

Boston, December 1, 2011 – A new report released today details the planning tools and policy mechanisms that are available to ensure that the electric industry can comply with the Environmental Protection Agency’s air pollution rules without threatening electric system reliability.

The report, by M.J. Bradley Associates LLC and the Analysis Group, suggests that proper planning and implementation will secure important public health benefits, reliable electric service and efficient market outcomes.

The report: “Ensuring a Clean, Modern Electric Generating Fleet while Maintaining Electric System Reliability — Fall 2011 Update,” is the third installment in a series of reports focusing on the reliability implications of two EPA clean air rules affecting the electric power sector: the Cross-State Air Pollution Rule (Transport Rule) and the Utility Mercury and Air Toxics Rule (Utility MACT).

The report explains that:

* The electric power sector relies on a wide range of planning and operational tools to maintain the reliability of the nation’s electric power grid

* Options are available under existing law to manage electric system reliability as the industry makes the pollution control investments necessary to comply with EPA’s clean air rules

* The electric utility industry is well positioned to comply with the rules on time

“Despite some of the claims we are hearing, the country can absolutely have clean air and a reliable electric system,” said Michael J. Bradley, president and founder of M.J. Bradley & Associates LLC and executive director of The Clean Energy Group. “Existing legal authority allows EPA to address potential reliability concerns associated with the retirement of power plants, although most companies have indicated that they are prepared to comply. In fact, 11 of the top 15 largest coal fleet owners in the U.S. – representing half of the nation’s coal capacity – have indicated that they are well positioned to comply with the rules.”

Several options are available under existing law to manage electric system reliability as the industry makes the investments necessary to comply with EPA’s clean air rules:

First, the EPA has the authority to make unit-by-unit determinations that allow for an additional 12 months for the installation of pollution control systems where appropriate, beyond the three years allowed under the Clean Air Act.

Second, if four years does not allow enough time to install the necessary pollution controls while also ensuring reliability, EPA has the statutory authority to enter into administrative orders of consent or consent decrees with power plant operators, allowing additional time for the installation of pollution controls.

Third, several of the nation’s regional transmission organizations have proposed a “targeted backstop reliability safeguard” to address situations where additional time is required for a unit retirement but also stated in their comments to EPA that they anticipate the safeguard “would not need to be invoked often, if at all.”

Market dynamics also suggest that the industry is well positioned to comply. Reserve margins around the country have been well above the minimum target levels, due not only to new power plant additions, but also to reduced demand and increasingly robust load management programs.

According to NERC, the projected reserve margins in 2014 range from 28 percent to over 40 percent nationwide, or almost 150 GW of extra capacity above the recommended target levels. Also, new generating facilities are under construction.

For example, at present, there are 18 GWs of natural gas-fired generating capacity under construction and another 12 GWs in advanced stages of development.

“System planners and operators are working all the time to maintain a reliable energy system, and regulators have–and should use–available tools to encourage early action and economic investments. I have no doubt that we can manage electric system reliability as the industry makes the investments necessary to comply with EPA’s clean air rules,” said Susan F. Tierney, managing principal at Analysis Group and a former Assistant Secretary for Policy at the U.S. Department of Energy. “As a nation, we have abundant natural gas supplies, which will facilitate the transition to a more efficient and modern fleet of electric generating facilities.”

Previous articleBusiness Intelligence– Noise or Nirvana?
Next articleRural Electric AMI Serves as Smart Grid Platform

Report details tools to ensure reliability during transition to a cleaner generation fleet

Boston, December 1, 2011 – A new report released today details the planning tools and policy mechanisms that are available to ensure that the electric industry can comply with the Environmental Protection Agency’s air pollution rules without threatening electric system reliability.

The report, by M.J. Bradley Associates LLC and the Analysis Group, suggests that proper planning and implementation will secure important public health benefits, reliable electric service and efficient market outcomes.

The report: “Ensuring a Clean, Modern Electric Generating Fleet while Maintaining Electric System Reliability — Fall 2011 Update,” is the third installment in a series of reports focusing on the reliability implications of two EPA clean air rules affecting the electric power sector: the Cross-State Air Pollution Rule (Transport Rule) and the Utility Mercury and Air Toxics Rule (Utility MACT).

The report explains that:

* The electric power sector relies on a wide range of planning and operational tools to maintain the reliability of the nation’s electric power grid

* Options are available under existing law to manage electric system reliability as the industry makes the pollution control investments necessary to comply with EPA’s clean air rules

* The electric utility industry is well positioned to comply with the rules on time

“Despite some of the claims we are hearing, the country can absolutely have clean air and a reliable electric system,” said Michael J. Bradley, president and founder of M.J. Bradley & Associates LLC and executive director of The Clean Energy Group. “Existing legal authority allows EPA to address potential reliability concerns associated with the retirement of power plants, although most companies have indicated that they are prepared to comply. In fact, 11 of the top 15 largest coal fleet owners in the U.S. – representing half of the nation’s coal capacity – have indicated that they are well positioned to comply with the rules.”

Several options are available under existing law to manage electric system reliability as the industry makes the investments necessary to comply with EPA’s clean air rules:

First, the EPA has the authority to make unit-by-unit determinations that allow for an additional 12 months for the installation of pollution control systems where appropriate, beyond the three years allowed under the Clean Air Act.

Second, if four years does not allow enough time to install the necessary pollution controls while also ensuring reliability, EPA has the statutory authority to enter into administrative orders of consent or consent decrees with power plant operators, allowing additional time for the installation of pollution controls.

Third, several of the nation’s regional transmission organizations have proposed a “targeted backstop reliability safeguard” to address situations where additional time is required for a unit retirement but also stated in their comments to EPA that they anticipate the safeguard “would not need to be invoked often, if at all.”

Market dynamics also suggest that the industry is well positioned to comply. Reserve margins around the country have been well above the minimum target levels, due not only to new power plant additions, but also to reduced demand and increasingly robust load management programs.

According to NERC, the projected reserve margins in 2014 range from 28 percent to over 40 percent nationwide, or almost 150 GW of extra capacity above the recommended target levels. Also, new generating facilities are under construction.

For example, at present, there are 18 GWs of natural gas-fired generating capacity under construction and another 12 GWs in advanced stages of development.

“System planners and operators are working all the time to maintain a reliable energy system, and regulators have–and should use–available tools to encourage early action and economic investments. I have no doubt that we can manage electric system reliability as the industry makes the investments necessary to comply with EPA’s clean air rules,” said Susan F. Tierney, managing principal at Analysis Group and a former Assistant Secretary for Policy at the U.S. Department of Energy. “As a nation, we have abundant natural gas supplies, which will facilitate the transition to a more efficient and modern fleet of electric generating facilities.”