What We Learn From A New Clean Power Plan Grid Report

July 24, 2015 | 2:32 pm
Mike Jacobs
Senior Energy Analyst

Much heat and smoke has been produced over the EPA Clean Power Plan rule. PJM, the grid operator serving the region from Chicago, through the Ohio Valley to Washington D.C. and Norfolk finds no need for alarm. This is one independent authority that has provided more clarity on grid reliability impacts from the CPP than others with a preview of its next report. extra-extra-god-news-istock

The key findings of this report:

  1. Power plant retirements will occur over time, and new plants will replace them.
  2. Transmission needs in this region are modest and manageable.
  3. Cutting carbon emissions is easier through regional cooperation.

What’s the basis for this news?

The starting point for this effort was to recognize the EPA rules on carbon do not require a plant to close. Instead of drawing up a thin analysis that takes the worst possible interpretations, PJM (which serves 61 million people, and makes a profit by attracting other utilities to use its platform for electricity market transactions) developed a range of likely scenarios to better understand what might happen. Now it has released a look at the transmission needed, which largely answers all the biggest questions.

What is still left to do?

PJM created scenarios in collaboration with state regulators from the states it serves, and these show the significant advantage of a regional compliance approach to reducing CO2 emissions. PJM certainly can’t instruct the states to take the lower-cost approach, but it could make a big bright flashing sign that says the states that do not coordinate their compliance will see higher costs, more power plants under pressure to retire, and more new transmission required.

PJM operates a set of sophisticated markets, and describes the potential plant closings that may result from the reduced use of coal as the 111(d) rule is applied. What PJM has omitted from the presentations of these results is the number of coal plants that will be under pressure to close by the same economic measures, ABSENT the adoption of a CO2 regulation. Low natural gas prices, even cheaper energy efficiency, and great renewable energy resources are all competing with the older coal plants. PJM and others should illustrate what portion of the coming changes are likely to occur anyway by making a distinction between the various 111(d) scenarios, and the future with no CO2 rule will.

The new PJM report released today brings forward the engineering by illustrating what transmission needs are likely for the various scenarios of Clean Power Plan implementation. Transmission, like any path to the market, determines how well the supply can meet demand.

A useful dialogue about the energy supply requires a mix of engineering, economics, and policy. The regional transmission organizations like PJM are supervised by the Federal Energy Regulatory Commission (except in Texas) and are engaged with an official body of state representatives. With these regional state bodies (the Organization of MISO States, the Organization of PJM States etc.), and with individual states communicating with the grid operators, there is a means for bringing the engineering reality of power supply issues to light. Order 1000 from FERC established requirements to ensure transmission plans include input from states, and recognize public policy.

Advantages of regional grids

Grid operations, reliability, and integration of renewable energy improve with large regional grids. The development of market-based grid operations on a larger scale has fostered innovation and flexibility to respond to changes in the nation’s needs and renewable energy plant capabilities. Regional grids provide price information and optimization of resources that increase reliability and save on fuel costs.

As renewable energy has grown the expertise of regional grids to integrate wind and solar has grown. These many studies and reports show the engineering community has adopted  wind and solar on to the grid  without great integration expense or controversy. Going forward, the regional grid operators have the tools and skills to meet the carbon-reduction challenge.

Next comes the states’ turn

Individual states also have direct influence over the economics of energy supply decisions. A variety of strategies provide 31 states the means to get more than halfway toward meeting the EPA’s 2020 emissions benchmarks. In addition, states that regulate utility-owned power plants with cost-recovery in consumer rates have an economic opportunity to keep plants open. Currently 29 states and the District of Columbia have renewable energy standards (RES) that make very significant strides to CO2 reduction. PJM has previously provided state-by-state analyses of the EPA Clean Power Plan and illustrated the role of RES, and of scenarios going forward, including the greater cost for states that do not cooperate with a regional compliance approach.

Electricity in all states other than Texas, Hawaii, and Alaska, flows on a regional grid. Making use of that grid, and pooling energy resources to find the lowest cost means to supply demand, is how we do this. Honest assessments of the transmission system and the growth of new power supplies, as well as alternatives for power plant retirement due to the EPA’s proposed Clean Power Plan, will inform state decisions. Today we have a great model of these assessments.