New EPA rules will erode power grid reliability, report finds

Four federal environmental regulations to improve water and air quality could by 2018 chop by nearly half the amount of projected reserve energy available to the US power grid, says a new report.

Nationwide, hundreds of coal-, oil-, and gas-fired power plants, with a collective capacity of about 76,000 megawatts (one megawatt provides enough power for about 750 homes), could be retired if the forthcoming rules are implemented under the fastest proposed timeline, says the report by the North American Electric Reliability Corp. (NERC), an industry group charged with ensuring grid reliability. A "moderate" pace of implementation would lead to a 46,000-megawatt cut in reserve generating capacity, it says.

NERC determines the amount of generating capacity that needs to be on standby to meet peak electricity load in the summer months and to cover for any unexpected generating outages. That "planning reserve margin" would drop by almost half if the environmental rules are implemented under the fastest possible scenario. Under a "moderate" timetable for implementation, the reduction in reserve capacity would be less.

“The results of this assessment show a significant potential impact to reliability should the four EPA rules be implemented as proposed,” said Gerry Cauley, NERC president and CEO, in a statement.

Mr. Cauley did not argue that the environmental rules are impossible to accommodate, but he did say a longer implementation time will probably be needed.

“To ensure bulk power system reliability, the proposed rules should provide sufficient time to acquire replacement resources, offsetting the reductions in capacity from unit retirements and deratings from environmental control retrofits,” he said.

Utility companies have long argued that tougher environmental regulations would reduce grid reliability. Environmental groups and some green energy groups hailed the report, saying that its close examination proves that three of the four rules would have little or no impact on grid reliability.

"The NERC assessment affirms that the electric power industry can maintain electric system reliability while improving our air quality and protecting public health," said Michael Bradley, executive director of the Clean Energy Group, a coalition of electricity generating and electricity distribution companies committed to environmental stewardship, in a statement. "The clear message from the report is that EPA's proposed air rules aimed at curbing hazardous air emissions from power plants will have negligible impact."

He noted that NERC's projected number of plant retirements as a result of new air regulations is "significantly lower than others have projected."

The NERC study comes on the heels of a recent Wall Street analysis that forecast a similar impact on America's coal-fired power plants. Tougher federal air pollution rules coming next year could result in electricity companies shuttering nearly one-fifth of America's coal-burning power plants, mostly facilities more than 40 years old that lack any emissions controls, that study by Credit Suisse found.

The four regulations, enforced by the Environmental Protection Agency, mark a ratcheting-up of Clear Water Act and Clean Air Act rules.

One new requirement increases the amount of cooling water from power plants that is recycled rather than discharged, a move intended to limit heat damage to lakes and rivers. Of the four rules, it would have the biggest effect on the power grid, causing plant retirements or derating of up to 37,000 megawatts of capacity.

By comparison, a tough new standard for mercury emissions would lead to loss of 5,000 megawatts, in a worst-case scenario, the NERC report said. New limits on sulfur and nitrogen emissions could eliminate another 7,000 megawatts. Finally, new coal-ash impoundment requirements could see 2,000 megawatts retired under the fastest implementation schedule.

This was all good news to Conrad Schneider, advocacy director of Clean Air Task Force, a Boston environmental group. The NERC report, he says, should sweep away arguments that clean-air requirements might weaken the grid.

"This study removes any contention that the Clean Air Act rules would drive significant reliability concerns," he says. "The only potential problem NERC found that might drive reliability concerns was the clean water intake rule. But it was also the one for which the EPA has the widest discretion about timing and implementation."