Regulators, operators eye uncertain future as carbon rule looms

Source: Hannah Northey, E&E reporter • Posted: Thursday, November 21, 2013

ORLANDO, Fla. — State regulators, utilities and grid operators already tackling a slew of coal and nuclear plant closures received little information yesterday from U.S. EPA on what its looming carbon emissions limit may look like.

Janet McCabe, EPA’s acting assistant administrator for the Office of Air and Radiation, told them the agency is keeping all options on the table.

“There’s a little chicken-and-egg thing going on here, and some people have said, ‘Just tell us what the target is, and we’ll be able to figure it out and tell you what to do,’” McCabe said to a packed conference room at the National Association of Regulatory Utility Commissioners’ annual meeting here yesterday.

“And we keep pushing back, saying, ‘Well, that is our job, ultimately, but we’re not ready to do that until we … find out what’s going to be reasonable to do here,’” she said.

EPA has held 11 listening sessions to gather public input ahead of writing its guidance to states on curbing heat-trapping emissions from their utility sectors, and is due to propose the guidance next June.

While not providing details, McCabe did reassure attendees that carbon capture and sequestration will not be required for existing plants to meet New Source Performance Standards. “The administrator has said she does not expect CCS to be a technology to be expected on the existing fleet,” McCabe said during an interview.

The lack of clarity has left state regulators and energy companies wondering how much it will cost to shift to carbon-light energy portfolios and what role they will play in meeting President Obama’s climate goals.

NARUC today passed a resolution asking EPA to ensure that its guidelines credit states’ emissions reduction achievements to date and don’t intrude on states’ jurisdiction over decisions about integrated resource planning and generation portfolios, and to avoid reductions that are infeasible.

On a panel today, Len Peters, secretary of the Kentucky Energy and Environment Cabinet, applauded EPA for reaching out to states and said the agency’s recognition of regional diversity is key. Peters also said the Bluegrass State may have double the carbon emissions of other states, but it’s also a leader in making critical products like lightweight vehicles and aluminum and employs more than 13,000 coal miners.

Kentucky is pushing for “mass-based” reductions — such as a statewide average of emissions per year. Under such a system, EPA would set Kentucky an emissions reduction goal and give credit for efficiency and other steps it has taken to reduce carbon emissions. Such an approach would be sensitive to the state’s economy, Peters said.

“It may not make sense for every state, but it makes sense for ours,” he said.

Some regulators warned that costly and difficult conversations lie ahead, while others said new carbon limits offer an opportunity for clean energy to blossom.

In the former camp, Eduardo Balbis, a member of the Florida Public Service Commission, said it may cost the Sunshine State more than $2 billion annually to cut its carbon emissions to meet the president’s goals. He also noted that Florida has had a combative relationship with EPA on water quality standards.

“It was a fight, and that’s really the message I’m trying to get across here,” Balbis said. “It’s great EPA is willing to work with us, but it’s really a fight.”

But David Cash, a member of the Massachusetts Department of Public Utilities, said his state’s clean energy programs are ramping up, bringing in revenue and creating jobs.

“Each of these pieces of growth is keeping energy dollars in Massachusetts and in the region growing jobs,” Cash said.

Summer of 2016

Whatever form EPA’s rule may take, federal and state regulators are aware that it may pinch a system undergoing unprecedented change with large coal and nuclear closures and an influx of wind and solar power.

Grid operators this week said they’re expecting many coal plants to close in 2016 — when generators are retrofitting or retiring plants to comply with EPA regulations — unless those plants are needed for reliability.

“The summer of 2016 is going to have some big challenges for several parts of the country,” said FERC Commissioner Philip Moeller. “Texas, Boston, Southern California, we have to stay on our toes here.”

Policymakers need to recognize the benefits — including stabilizing the grid — that baseload power plants like reactors and coal-fired units provide to the grid, said Gerry Cauley, the North American Electric Reliability Corp.’s president and CEO.

NERC in coming weeks plans to issue a paper about the importance of “larger rotating machines, the synchronous machines” that help stabilize the grid as the amount of renewables on the system grows, he said.

On that note, Peters of Kentucky said EPA’s work to limit carbon is forcing a second look at nuclear power.

“I think it is forcing us to go back and take a very serious look at what we want to do with nuclear in this country,” he said. “[Renewables] aren’t going to be a bulk of the baseload generation.”

Grid operators reviewing plant closures while ensuring reliability say additional issues could crop up in the future.

In the Midwest, grid operators said they may see a shortfall of up to 7 gigawatts of power in 2016 due to coal plant closures, as well as the closure of a large nuclear plant in Wisconsin (Greenwire, Aug. 2).

The Midcontinent Independent System Operator, which operates the grid in 11 Midwest states, is working through high-level data to get a more granular look at how reliability could be affected across its footprint.

But that picture would only be compounded by EPA’s carbon rule and new cooling-water intake rules under Section 316(b) of the Clean Water Act, the operator said.

“Right on the back of this, we’re going to get more regulations, and then you’ve got 316(b), as well,” said John Bear, MISO’s president and CEO.

Among other things, MISO wants to make capacity easier to ship across its border with the natural gas-rich PJM Interconnection, a neighboring grid operator. Easing barriers in the tariff could help lower prices and address the power shortfall in the Midwest and back up a growing amount of wind power, MISO officials said.

“There’s a lot of new capacity being built in Pennsylvania on the Marcellus Shale. It’s a lot of gas, and people are building there, and we’d like for capacity to come in this direction,” said Richard Doying, MISO’s executive vice president of operations and corporate services.

So far, PJM Interconnection has said it has sufficient gas-fired generation and demand response to make up for the closure of 20,000 megawatts of coal-fired generation. Transmission upgrades are also being completed on a tight schedule, he said.

PJM operates the grid in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

Andrew Ott, PJM Interconnection’s executive vice president of markets, said yesterday that those retirements stem from EPA’s mercury rules and competition from cheap gas, and have prompted carbon emissions to drop 15 percent since 2005.

But Ott said PJM could see an additional 11,000 megawatts of coal-fired generation retire.

“They’re already experiencing some competition for revenue,” he said. “Any additional nudge for them could cause a fair amount of retirement decisions. I think the key here is if you get a large volume of retirements at one time, then that would be a challenge.”