NERC Finds that Grid Reliability May Be Jeopardized by EPA Rules

North American Electric Reliability Corporation
November 2011

2011 Long-Term Reliability Assessment

The North American Electric Reliability Corporation, the entity responsible for the reliability of the nation’s electricity grid, recently issued its 2011 Long-Term Reliability Assessment. Among other findings in the report, NERC stated that “[e]xisting and proposed environmental regulations in the U.S. may significantly affect bulk power system reliability, depending on the scope and timing of the [EPA] rule implementation and the mechanisms in place to preserve reliability.” The report notes that while some environmental regulations have been finalized (i.e., the Cross-State Air Pollution Rule), others such as the Cooling Water Intake Structures (CWA § 316(b)) and the Air Toxics Standards for Utilities, have not yet been finalized. According to the report, environmental regulations “are shown to be the number one risk to reliability over the next 1 to 5 years.” Between 7,500 and 17,800 megawatts of electric generating capacity will have been retired by 2015 to comply with new pollution standards. When new rules for cooling water towers become effective in 2018, total retirements caused by environmental rules will rise to between 32,600 and 53,600 MW. Without new power generation or other steps, grid reserve margins would fall to as low as 10.4 percent in the region that covers Texas and 10.8 percent in New England by 2015, which are below NERC’s recommended margin of about 15 percent. The report concludes that other regions, including the West, would still have an ample electricity supplies.

According to E&E News, power companies have equipped about 72.5 percent of existing coal-fired capacity with pollution-controlling scrubbers or announced plans to add scrubbers, leaving about 89 gigawatts of capacity that will need to be retired or fitted with controls. Retirement plans have already been announced for plants generating 29 GW, and decisions need to be made with respect to the remaining 60 GW.

The NERC report also noted the significant growth in wind and solar generation, as well as significant increases in demand-side management that continue to offset future resource needs. With respect to transmission investments, the report observed that transmission growth is generally responding to increased plans for integration and delivering new resources, primarily renewable resources. The NERC report also cited the increased reliance on natural gas as the primary fuel source for on-peak capacity, and noted that the role of unconventional gas production (i.e., shale gas development) in bolstering North American supply “is an obvious driver for the increased capacity projections.” The report cited the need for operational measures to be put in place that would minimize the risks associated with the interdependencies of the electric and gas industries.