Grid Operators Say EPA Power Plant Proposal Could Affect Electricity Reliability

Published: August 24, 2023

By Concentric Staff Writer

Grid operators across the U.S. are expressing concern over new power plant regulations proposed by the U.S. Environmental Protection Agency (EPA), saying they could lead to reliability problems and that they rely on technologies that are not yet commercially viable.

EPA’s proposed rule (EPA-HQ-OAR-2023-0072-0001) issued in May would strengthen the current New Source Performance Standards for stationary power plants—mainly those powered with natural gas. It would also establish emissions standards for plants that would limit carbon dioxide emissions, including plants fueled by coal, oil, and natural gas, as well as establish emission guidelines for large, frequently used stationary combustion turbines, generally powered by natural gas.

EPA , when issuing the rule, said it could achieve up to 407 million metric tons of CO2 emission reductions. As it finalizes the rule it will adopt additional advanced modeling, aligning methodologies and “considering real-world scenarios within the power sector to best understand how components of the rule impact each other,” the agency said.

Nearly 1,200 comments were filed on the proposed rule, including a joint filing by four major independent system operators (ISO) and regional transmission organizations (RTO). The comments by Electric Reliability Council of Texas, the Midcontinent Independent System Operator, PJM Interconnection, and Southwest Power Pool expressed concern over the impact of the rule on reliability and its reliance that new carbon-capture and sequestration (CCS) and hydrogen technologies will be available in time, saying “hope is not an acceptable strategy.”

“The Joint ISOs/RTOs are concerned that the substance of the Proposed Rule as presently configured, as well as its timing, have the potential to materially and adversely impact electric reliability,” the filing says. “Moreover, the Proposed Rule, when combined with other EPA rules and other policy actions, could well exacerbate the disturbing trend and growing risk wherein the pace of retirements of generation with attributes needed to ensure grid reliability is rapidly exceeding the commercialization of new resources capable of providing those reliability attributes.”

The ISOs and RTOs said they have been at the forefront of issues created by renewables integration and increasing retirements of dispatchable generation units that will be exacerbated by the proposed rule. EPA is trying to design the rule to avoid a wave of generation retirements, but the agency assumes that new technologies will be available and able to substitute for current technologies, they said. The rule would also have short-term impacts by having a chilling effect on the investments needed to maintain system reliability as the new technologies are developed. Retirements of generators are already being seen because investors are reluctant to keep capital-intensive resources operational, the filing says.

The ISOs and RTOs urged EPA to address their reliability concerns, shortcomings in the agency’s analysis and assumptions, and that there is a need to incorporate timely reviews of technology advancement and unit retirements into the rule. They suggested building into the rule a process to monitor retirements and the development of CCS and hydrogen technologies. They also suggested EPA update the definition of “system emergency” to reduce uncertainty around when a unit might be called upon for reliability. EPA projects that the new technologies will prove to be economic as a result of subsidies built into the Inflation Reduction Act, but those technologies are not yet feasible on a large scale, and there are reasons to be skeptical they will be within the compliance period, the grid operators said.

The California Independent System Operator in a separate filing  told EPA that it supports the proposal, including provisions that would address situations where units are required to run for reliability purposes. These include EPA’s creation of sub-categories of resources for purposes of complying with the best system of emission reduction and establishment of lead-times for those resources to comply. EPA said it will also consult with the U.S. Department of Energy and Federal Energy Regulatory Commission during implementation and permit state implementation plans to include averaging and emission trading to meet compliance, provided that states ensure an overall level of emission performance by the affected electric generating units that is equivalent to each source individually achieving its own standard of performance.

EPA should also consider establishing additional pathways in any final rule to allow resources to operate on a temporary basis notwithstanding compliance schedules, if needed to support electric grid reliability, CAISO said. These include a process “to authorize specific resources to operate for a limited time based on a showing of reliability need or allowing states to demonstrate in their implementation plans that a temporary electric reliability need outweighs achieving emission reductions at specific facilities based on the best system of emission reduction when considering other steps and mitigation taken to reduce emissions within the state, air districts, and local communities.”

ISO New England in its comments said that based on its analysis, the rulemaking would have limited impact on oil and natural gas boilers, and they would mostly impact natural gas-fired units larger than 300 MW operating at greater than 50 percent of capacity factor. This might cause an operational shift from larger generators to smaller, less-efficient units, the ISO said, and the larger units also might have an incentive to avoid the energy market if compliance costs exceed potential profits. Generators operating far from the 50-percent capacity factor would have weaker incentives, which could cause market imbalances.

The ISO also said its analysis shows that with all the coal units scheduled to retire by 2032 and less generation from larger regulated gas units, the rule must be implemented carefully. The grid operator said it is concerned that it relies on coal, oil, and gas units at certain times when renewables are not available, and the rules could encourage retirement of those units.

“The ISO is aware that EPA plans to publish a separate rulemaking so as to cover all of the existing natural gas fleet. It is important to note that, until all parts of the rule are published, it is difficult for the ISO to gauge the overall impact of this current proposed rule and the results of this analysis may be underestimating the impact of the rule on future grid reliability,” the filing says. 

EPA’s proposed standards are based on a level of emission reductions that can be achieved through CCA as well as conversion of plants to burn hydrogen, but there are technical and economic hurdles to deploying these technologies under the proposed timelines. Those technologies might not be viable in New England, which does not have the capacity to store large amounts of CO2, it said.

“The lack of geological storage sites in New England also makes it infeasible to implement low-GHG hydrogen co-firing at large scale,” ISO-NE said. There are also gaps between ISO nameplate values and EPA-based historically derived values that create gaps in analysis that could greatly affect implementation of the rule, the grid operator said.

All views expressed by the author are solely the author’s current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, or related companies. The author’s views are based upon information the author considers reliable at the time of publication. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.














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