Monday, September 01, 2014

Utility Group Projects Fewer Closures Over Longer Period From EPA Rules

Posted: November 29, 2011

A key utility group's comprehensive internal list of coal-fired power plant shutdowns shows fewer planned closures than industry critics claim, and also finds that the closures will occur over a decade -- a much longer time period than EPA opponents say will occur with shutdowns due to the rules.

The findings by investor-owned utility group Edison Electric Institute (EEI) come as EPA in a letter to the North American Electric Reliability Corporation (NERC) questions NERC's predictions of adverse electric grid reliability impacts due power plants shutting down to avoid complying with the rules or going offline temporarily in order to retrofit to meet EPA's utility air toxics rule and other regulations.

Together, the EEI list and EPA's push-back on the NERC findings could strengthen claims from the agency's supporters that industry warnings of widespread, immediate closures are overstated. EPA officials have said at public events that predictions of major adverse grid reliability impacts due to the rules are overly pessimistic.

Critics of EPA's pending maximum achievable control technology (MACT) air toxics rule for power plants and its Cross-State Air Pollution Rule utility cap-and-trade program argue that they will be so expensive to comply with -- and on such a strict timeline -- that some companies will simply choose to shutter their facilities.

The EEI list predicts 48,000 megawatts (MW) of closures over a decade -- far less than some industry and other predictions of massive shutdowns and harm to the grid. The list shows the closures will result in about 14 percent of current coal capacity being shut down, or about 5 percent of total electric generation in 2022, according to former Pennsylvania environment secretary John Hanger, who publicly released the list in a Nov. 28 blog post.

Hanger told Inside EPA Nov. 29 that the list "demonstrates that low gas prices and plain old age are causing closures" regardless of industry's claims that the rules will force plant closures in lieu of expensive upgrades.

Hanger noted most of "the closures take place over at least 10 years," which is on an expected rather than accelerated pace as some of EPA's critics claim. He said this counters industry arguments that the compliance deadlines in the EPA rules -- particularly the three-year deadline to meet the MACT -- are overly stringent. Some industry groups and lawmakers are pushing EPA to significantly extend the MACT's compliance deadlines.

The fact that EEI's investor-owned power companies will retire less than 5 percent of the nation's electricity generation capacity by 2022 "shows no systemic reliability problem. . . . The U.S. will build much more than 48,000 MW of new generation capacity over the next 10 years," Hanger said, noting 20,000 MW of new generation per year is standard. Demand response alone could increase by an amount equal to the 48,000 MW, he said.

Hanger noted that EEI might not support his interpretation of what the list shows, but says it "clearly states itself the plants are closing for a range of reasons and not just because of EPA rules."

EEI did not respond to requests for comment by press time. The group has been trying to negotiate a deal with the Obama administration to extend compliance deadlines for the MACT including a categorical fourth year extension and a presidential national security exemption for a longer extension.

A footnote to the EEI list says, "Retirements are taking place for a variety of reasons, including plant age, fuel prices (i.e. low natural gas prices), decreased demand, consent decrees and the settlement of EPA complaints, the projected cost of complying with the pending EPA regulations, etc." Other units are retiring to comply with state emission rules.

For example,"In August 2010, FirstEnergy announced that it would retire all or part of two coal-fired peaking plants . . . and reduce operations at two other plants . . . due to decreased demand, plant age, etc. The units comprised 7 percent of total production in 2009. [FirstEnergy] is retiring two other units . . . under a consent decree with EPA," the list says.

American Electric Power, Dominion, Luminant and Southern Company are the only companies to state they are closing units due to the EPA rules, according to the list.

'Extreme Outcome'

Meanwhile, Deputy EPA Administrator Bob Perciasepe sent a Nov. 25 letter to NERC President and CEO Gerry Cauley questioning a then-draft report from the group, which is certified by the Federal Energy Regulatory Commission (FERC) to ensure the reliability of the electricity grid. The Nov. 28 NERC report shows lower capacity losses from EPA rules than the group's previous estimates.

NERC's report "describes an extreme outcome that arises from a scenario where the most stringent and costly rules imaginable took effect, and no one at the federal, state or local level took any steps to ensure the continued reliability of the grid," an assumption that "flies in the face" of EPA's successful regulatory track record, Perciasepe writes.

NERC decreases the number of plants expected to shutter due to EPA rules and in fact finds that reliability impacts from taking plants offline to retrofit them with pollution controls to comply with the rules "far surpasses" the challenges presented by retirements. The report, "2011 Long Term Reliability Assessment," updates NERC's 2010 report, which predicted higher retirements from EPA's power sector rules.

Perciasepe's letter notes that EPA and others have analyzed the rules' impacts and have found they "do not threaten capacity reserve margin targets either nationally or regionally." The letter also criticizes NERC for incorrectly assuming the final MACT will require reductions stricter than what the agency proposed, as well as assuming companies will use the most expensive, rather than the most cost-effective, technology options.

Further, EPA says the analysis "simply assumes that the federal and state governments would let facilities that are critical to grid reliability close and that no one would step in to pick up the shortfall -- an outcome that flies in the face of our 40 years of implementing" environmental statutes. -- Dawn Reeves (This e-mail address is being protected from spambots. You need JavaScript enabled to view it )
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