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Thursday, June 07, 2012
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Grid Reliability and Mercury and Air Toxics Standards

By Guest Author, Corinne Bell, Pace University School of Law ‘13

Corinne Bell is a joint-degree student concentrating in energy systems and policy at the Yale School of Forestry & Environmental Studies and concentrating in environmental law at Pace Law School.

The Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS), announced December 21, 2011, regulate power plant emissions in accordance with the 1990 Clean Air Act Amendments. These standards, which take effect April 2013, will prove to be a substantial planning challenge to grid planning and reliability.

Plants affected by MATS have two options: retrofit to meet the new standards within three years, or retire. More than half of the nation’s coal plants are over forty years old, and for a good portion of them, retrofitting will not be cost effective. The EPA estimates that the new rules will result in the retirement of 4.7 GW of coal-fired plants, while Brattle Group estimates the number to be around 50-65 GWs, or 15 percent to 20 percent of our current fleet. Independent System Operators (ISOs) and Regional Transmission Operators (RTOs) have serious concerns about how this will affect the reliability of the nation’s power grid.

ISOs are particularly concerned about the localized effects of decommissioned plants in transmission-constrained areas, including reduced service to certain load pockets. The Midwest ISO (MISO), covering all or part of eleven states in the Midwest, is one ISO that will be greatly affected by the new standards. MISO expects to retire 12.6 GW out of its current resources, totaling 114.5 GW. MATS will also increase pressure on marginal units,[1] and regions are coordinating with neighboring generators and system operators to manage for outages and ensure resource adequacy. Other options being explored to lessen the blow include demand response and behind-the-meter generation. Demand response allows utility customers to adjust their consumption based on price signals and behind-the-meter generation is defined as generation that delivers energy to load without use of the transmission system (for example, solar panels on a residential roof).

In the instance that retrofitting an affected plant is viewed as a sound investment, managers have two big issues to overcome: supply chain and retrofitting timeline restraints and plant outage scheduling.

Two of the available retrofit options, flue gas desulfurization and fabric filters, require a timeline longer than the three years allowed under MATS. The timing issue is further complicated by the relatively small supply of these technologies; it is not possible for suppliers to meet in a timely manner the surge in demand created by MATS.[2] MISO, for example, is looking very closely at these supply chain issues.[3]

Given the large number of plants affected, retrofitting must be carefully scheduled to ensure that enough capacity remains online to meet demand. These retrofit outages will be much longer than standard maintenance outages, which ISOs and utilities have more experience scheduling.

And then there is the issue of who foots the bill. Someone has to pay for the retrofits; does the plant absorb these costs, or can they be passed on to the ratepayer?

While some have called MATS an “attack on coal,” it is only one of the many gathering challenges to coal. (1) The economics of coal power are faltering:[4] coal prices have been on the rise while natural gas prices have fallen drastically. (2) Coal plants are much less efficient than combined-cycle technologies.[5] (3) Proposed Cooling Water Quality rules would also greatly affect coal-fired power plants and, (4) if new plants are evaluated under New Source Review Standards, they could not be built without carbon capture and sequestration (effectively meaning that no new coal can be built). To point to MATS as a coal killer is an overly simplistic view; it should instead be seen as finally internalizing some of the negative externalities for which these plants have not been held accountable in the past.

Energy Bar Association, Sixty-Sixth Annual Meeting, (April 26, 2012) Panel on EPA Regulation of Generator Emissions.

[2] MISO, EPA Regulations: Balancing Reliability, Affordability and Environmental Protection presentation to Energy Bar Association, Sixty-Sixth Annual Meeting.

[3] A MISO report on supply chain issues was expected in late April.

[4] Continental Economics, EPA Regulation of Generator Emissions—Key Market Issues, Energy Bar Association, Sixty-Sixth Annual Meeting.

[5] Id.

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