DOE Says QER May Not Aid Industry’s Transmission Concerns Over ESPS

Source: By John Siciliano, Inside EPA • Posted: Thursday, February 5, 2015

Energy Department (DOE) officials say that the administration’s upcoming energy roadmap, known as the Quadrennial Energy Review (QER), is unlikely to address transmission industry concerns that states may not have adequate transmission for new clean energy sources to comply with EPA’s proposed greenhouse gas (GHG) rules for existing power plants.

Energy Secretary Ernest Moniz told reporters Feb. 4 that the QER, the first part of which is slated for release at the end of the month, will not directly address EPA’s proposed existing source performance standards (ESPS). “The QER is not about supply, it’s about infrastructure and system reliability, system resilience . . . . The focus is on the infrastructure,” not the impacts of climate regulations, he said.

He added, however, that “the extent to which infrastructure is needed to meet our objectives, a major one of which is clearly [GHG] reduction, is in there.” For example, Moniz said the report will discuss how to integrate large-scale renewable energy onto the grid. “All of that is directly or indirectly related to both the supply and the demand side of the equation. But the focus is on the infrastructure and how it enables us to achieve environmental, economic and security goals,” he said.

One senior DOE official adds that the QER does not account for the ESPS in its modeling, but only weighs market projections and other information to shape its recommendations. The official says that the department’s modeling suggests there will not be as great a need for the new, large-scale interstate transmission projects that the industry is seeking to aid compliance with EPA’s rule, but will instead back shorter transmission to help distributed, renewable generation that are built closer to demand.

The administration’s approach appears to be a setback for the transmission industry, which is urging DOE to use the QER to address the reliability hurdles posed by EPA’s GHG rules for existing power plants.

Industry proponents argue that EPA “ignored” the crucial role that interstate transmission projects will play in meeting the GHG rule’s targets as states turn to natural gas and renewables to comply, requiring major new transmission upgrades under the rule.

To address their concerns, WIRES, a group that represents transmission owners, investors, and customers, late last year filed comments on EPA’s proposed rule that urged the agency to extend the planned 2020 interim compliance deadlines to account for the infrastructure upgrades that will be needed.

An industry source says the group recently resubmitted its comments to DOE in an effort to press the department to address their concerns as it completes the QER. The source says it is germane to address the climate rule impacts in the QER because the first of its four reports address the nation’s energy infrastructure, including electric power distribution and transmission facilities and pipelines that industry officials say will be critical to meet the GHG reduction targets proposed by EPA.

DOE would be wise to eventually address these concerns in the QER, the source says. EPA’s rule “has direct implications for everything they want to do on the QER,” the source says.

The QER is a first-of-its kind effort intended to “provide a multiyear roadmap that outlines Federal energy policy objectives, legislative proposals to Congress, Executive actions, and financing and incentive programs,” DOE says.

Climate Action Plan

President Obama first called for the QER as part of his 2013 Climate Action Plan, which also launched EPA’s rulemaking process. The QER’s first round is slated to focus on “infrastructure challenges, and [identify] the threats, risks, and opportunities for U.S. energy and climate security, enabling the federal government to translate policy goals into a set of analytically based, clearly articulated, sequenced and integrated actions, and proposed investments over a four-year planning horizon.”

“Innovation and new sources of domestic energy supply are transforming the nation’s energy marketplace, creating economic opportunities at the same time they raise environmental challenges,” the plan says. “To ensure that federal energy policy meets our economic, environmental, and security goals in this changing landscape, the Administration will conduct a [QER].”

The high-level review is being led by the White House Domestic Policy Council and Office of Science and Technology Policy, with DOE providing a key supporting role.

A draft of the QER is currently undergoing White House review with the first report expected to be issued by the end of the month. Subsequent reports will be done over the next 4 years. Some of the supporting studies are expected to be released as soon as this week.

Under EPA’s proposed ESPS, the agency sets state-specific GHG reduction targets that states are required to meet beginning in 2020 by way of four building blocks — or compliance flexibilities — that include heat-rate improvements at coal plants, increased use of existing natural gas power plants, renewables and energy efficiency.

But advocates for the multi-billion dollar electric transmission industry say EPA ignored the importance of new transmission facilities under the ESPS to help states comply with the climate goals while maintaining reliability. The industry is now pressing EPA and the administration to rectify the omission by acknowledging the role of large interstate power line projects in the final rule.

Although WIRES, the industry group, is not opposing the legal basis of the ESPS, it does want EPA to factor transmission planning into states’ compliance obligations to meet the GHG goals. EPA “should not ignore the challenges facing infrastructure development, the need for coordinated and effective planning and ratemaking policies, or the resources and time required for siting and permitting processes,” according to the WIRES’ comments.

The industry source says EPA also should recognize the Federal Energy Regulatory Commission’s (FERC) role in transmission planning under the rule through its landmark Order 1000 rulmaking that creates a regional process for siting and establishing cost allocation mechanisms for transmission projects. The source says Order 1000 will be key to state compliance planning under the ESPS.

WIRES recommend that ESPS planning “Piggy-back on, or coordinate with, the regional and inter-regional planning processes developing under FERC Order No. 1000, as a way to employ transmission infrastructure to ameliorate constraints, expand the access of resources to markets, and address reliability issues, and to account for the impacts.”

The comments also urge EPA to revise the timeline of the rule to account for new transmission planning and construction, pushing back the interim targets that begin in 2020.

But the senior DOE official says the department’s modeling out to 2030 showed little need for new large scale interstate transmission projects as renewable power sources are distributed and are being built closer to load centers.

“We looked at scenarios . . . and what you might need in 2030, and if you look at renewable generation and the need for transmission, you might need shorter transmission [lines] as you have more distributed energy resources. You might not need as much long-distance transmission as you otherwise” may have required, the official said, while reiterating that these trends are occurring outside of the climate rule — including the switch to natural gas for power generation and the need for more pipelines. “We’re not looking at the rule, we’re looking at trends.”