Clean Power Plan to Shutter 4,000 MW of Texas Coal Output

Source: By Harry Weber, Bloomberg News • Posted: Monday, October 19, 2015

President Barack Obama’s plan to fight climate change will force at least 4,000 megawatts of coal-fired power in Texas offline, pushing energy prices higher and increasing the risk of blackouts, according to the state’s grid operator.

Electricity bills may jump by as much as 16 percent by 2030 as a result of the Environmental Protection Agency’s Clean Power Plan, grid operator Electric Reliability Council of Texas Inc. said in a report posted on its website Friday. Texas joins other grid managers and utilities that have warned of higher prices and reliability issues from plant closures if the plan is finalized.

“This amount of unit retirements could pose challenges for maintaining grid reliability,” Ercot said. “Impacts are likely to intensify and occur earlier when the effects of the CPP are combined with other environmental regulations.”

The expected closures in Texas represent about 6 percent of Ercot’s current installed capacity. The grid operator requires generators to give 90 days notice before shutting a plant, Warren Lasher, Ercot’s director of system planning, said in a conference call with reporters.

Ercot said its price forecasts don’t account for transmission upgrades, more expensive natural gas caused by increased demand and costs associated with the retirement or scaled-back use of coal-fired plants. Those factors could lead to even higher power costs.

The analysis assumes that the price of natural gas, a key fuel in power generation, will jump to over $6 per million British thermal units by 2030, from the current price of about $2.40. Replacing units, building new transmission lines and installing energy efficiency technology would cost tens of billions of dollars, Ercot said.

The EPA rule, finalized in August, includes a provision that eases compliance with pollution restrictions if they threaten to shut power plants needed to keep the lights on. The EPA also delayed the first compliance date by two years to 2022 and instituted a carbon trading system as an option to meet the mandates.

Blackout Risks

The rule would cut carbon emissions by 32 percent below 2005 levels by 2030. It gives states credit for solar or wind projects that break ground in the next few years and will also force utilities to run natural-gas plants more or encourage customers to use less electricity.

The Midcontinent Independent System Operator Inc., which stretches across the Midwest to the Gulf Coast, warned last year of plant shutdowns and a greater risk of service interruptions. At the time, MISO said the proposal may add as much as 14,000 megawatts of coal capacity to earlier estimates of plant closings due to other regulations.

Atlanta-based Southern Co., one of the nation’s biggest coal-burning utilities, said the final rule amounts to an overreach that “impedes states’ authority to act in the best interest of customers.” Companies that own coal plants in competitive markets where costs can’t be recovered may also suffer.