House seeks FERC fact check on grid reliability under EPA proposed carbon rule
The House Energy and Commerce Subcommittee on Energy and Power is turning to the Federal Energy Regulatory Commission for answers in a hearing tomorrow as to whether U.S. electricity will still be safe, reliable and affordable if the recently proposed U.S. EPA regulations on carbon emissions at existing power plants are enacted.
The fact that EPA announced a change of venues Friday for a public hearing tomorrow and Wednesday on the proposed carbon rule in Atlanta because of a “large-scale power outage” is unlikely to escape the notice or comments by the subcommittee members.
The committee is expecting all four sitting commissioners to testify, as well as Norman Bay, who was recently confirmed by the Senate but has not been sworn in as a commissioner by the White House yet, a committee spokeswoman confirmed (E&E Daily, July 24).
The focus of the hearing is finding out just how much input FERC — and the nation’s electric reliability organization, the North American Electric Reliability Corp. — had into EPA’s analysis claiming that the proposed rules would have minimal impact on reliability. The lawmakers also intend to probe whether the agency has done an independent analysis verifying that, according to a four-page list of questions sent to FERC by the subcommittee in anticipation of the hearing.
The subcommittee is also interested in how the proposal could affect the decision and order of power supply by regional electric markets under environmental considerations compared with the current procedure that mainly looks at prices.
Acting EPA Air Administrator Janet McCabe in a hearing last month testified that FERC was consulted and provided input on electric reliability, noting that it “was paramount in our minds as we worked through the proposal” (Greenwire, June 19).
The proposed rule “will maintain an affordable, reliable energy system, while cutting pollution and protecting our health and environment now and for future generations,” EPA said in a press release in June.
The proposal would place national limits on carbon emissions at existing power plants for the first time, collectively reducing CO2 emissions intensity by 30 percent below 2005 levels by 2030 through state plans developed individually and with resource flexibility to meet designated state CO2 emission limits.
The EPA power plant rule relies on four categories to reach its emission reduction goals — coal plant efficiency, switching to natural gas, building more renewable energy and improving energy efficiency — as well as the expansion of transmission and pipelines to support these changes as necessary.
Cutting carbon emissions means minimizing the use of coal-fired power plants, which currently make up 37 percent of the nation’s generation fuel mix — only slightly more than natural gas. Its dominance reflects the fact that it provides a low-cost fuel, day or night — also known as baseload generation, which is a key part of a reliable electric grid.
But bargain prices for natural gas fueled by a surge in unconventional resources, as well as growing concerns over coal’s environmental impacts, have started a wave of coal plant retirements that have raised concerns among some analysts. The EPA proposal would likely accelerate this trend (EnergyWire, July 25).
The key question is whether the growing sophistication in technology can enable operators to successfully rely on energy efficiency, voluntary electric demand reduction and intermittent renewable energy to create “virtual power plants” and other adaptations to fill the vacuum that baseload power from coal provides — without relying too much on natural gas, which could increase the risk of price volatility and is still a source, albeit smaller, of carbon emissions.
That is doable, according to EPA’s analysis. The agency relied on its Integrated Planning Model (IPM), developed by ICF Consulting, which is a dynamic linear programming model EPA has used for two decades to project U.S. power sector behavior under future business-as-usual conditions and examine prospective air pollution control policies, EPA said in its regulatory impact analysis.
“It provides forecasts of least-cost capacity expansion, electricity dispatch, and emission control strategies while meeting energy demand and environmental, transmission, dispatch, and reliability constraints,” EPA said.
It is the same model used to analyze the impacts of the Clean Air Interstate Rule, the Cross-State Air Pollution Rule, the Mercury and Air Toxics Standards, and the proposed Carbon Pollution Standards for New Power Plants, according to EPA.
But EPA’s analysis has its share of skeptics, including Energy and Commerce Chairman Fred Upton (R-Mich.) and Energy and Power Subcommittee Chairman Ed Whitfield (R-Ky.). Critics of EPA are pushing FERC and the Energy Department — which have energy as their focus — to act as a counterbalance to the environmental agency.
In remarks on the Senate floor shortly after EPA released its proposal, Sen. Lisa Murkowski (R-Alaska), ranking member of the Senate Energy and Natural Resources Committee, called for FERC and DOE “to step up and go toe to toe with EPA to protect the reliability and affordability of our power supply.”
Echoing the sentiments of many of her Republican colleagues and industry, Murkowski said, according to a transcript of her remarks, “We still do not have an accurate accounting of the cumulative costs associated with all of EPA’s rules, but we do know not to trust their math — because EPA has dramatically underestimated power plant retirements in the very recent past.”
FERC has not addressed the EPA proposal outright, but it has had an ongoing review of the impacts of retiring coal plants — and to some extent the early retirement of nuclear plants — from lower gas prices, as well as easing the incorporation of renewable energy into the grid.
FERC last month announced a technical conference in September to examine pricing practices in regional power markets to ensure there is incentive to attract investments in new resources to maintain grid reliability.
“At a time when the nation is undergoing significant changes in its resource mix, it is crucial that energy and ancillary services markets send the appropriate signals to attract investments needed to sustain reliability,” acting FERC Chairwoman Cheryl LaFleur said in a statement.
Even without the EPA proposal, the current forecast of coal plant retirements and increase in renewable energy and demand-response programs are likely to make power supply unpredictable and, if regional grids are not prepared, would drive up the demand for last-minute power at higher prices that would depress market prices further (EnergyWire, June 20).
While FERC has authority over interstate electricity, ultimately the EPA plan relies on state regulators and governments to develop and implement electricity plans to meet the new emission targets. At a summer gathering of the National Association of Regulatory Utility Commissioners (NARUC) in Dallas last week, the main concern expressed by regulators was the tight timeline EPA laid out for states to develop the plans (EnergyWire, July 14).
Paul Sotkiewicz, chief economist for the PJM Interconnection — the grid operator for the Mid-Atlantic — has suggested the need for a reliability safety valve and said it would be something regional transmission operators would ask EPA to include in any final rule.
“There’s so much flexibility that’s been given that it almost makes it impossible for us to understand what we could be facing,” Sotkiewicz said at the NARUC meeting.
Schedule: The hearing is Tuesday, July 29, at 10 a.m. in 2123 Rayburn.
Witnesses: TBA. Invited: Cheryl LaFleur, acting chairwoman of FERC; Philip Moeller, FERC commissioner; John Norris, FERC commissioner; Tony Clark, FERC commissioner; and Norman Bay, nominated and confirmed to be a FERC commissioner.