Did EPA Analyze the Reliability Impacts of Its Proposed Carbon Rule?

The nation’s power sector is undergoing a challenging transition as the electricity grid’s resource mix is shifting towards more wind and solar power, and dispatchable generation, especially coal, is being retired.  So far, some 130 gigawatts (GW) of coal have retired since 2011.ⁱ In addition, utilities have announced plans to retire an additional almost 81 GW of coal by 2030.ⁱⁱ The ongoing retirement of dispatchable generation has caused North American Electric Reliability Corporation (NERC) officials and grid operators to warn about the possibility of electricity shortages, especially during extreme weather.ⁱⁱⁱ

Nonetheless, EPA is implementing or developing six rules that will cause even more coal retirements.^iv These rules include a proposal to reduce carbon emissions from existing coal-fired electric generating units (EGUs), new gas-fired EGUs, and certain existing gas-fired EGUs.^v  (The proposal is also referred to as the Clean Power Plan 2.0, or CPP 2.0.)  EPA used its Integrated Planning Model (IPM) to project the im- pacts of the carbon proposal on the coal fleet and electricity markets.^vi  These impacts are described in the Regulatory Impact Analysis (RIA) for the proposed rule and in accompanying Technical Support Documents. The EPA model projects a reference case which simulates the future without the proposed rule and a policy case with the proposed rule.^vii  The reference case includes the Inflation Reduction Act and a handful of other EPA rules, such as the proposed (not final) Good Neighbor Rule. The reference case does not include other rules such as the proposed Effluent Limitations Guidelines, the proposed Mercury and Air Toxic Standards, or the Regional Haze Rule, which EPA and states are implementing.  The difference between the reference and policy cases represents the incremental impact of the proposed Carbon Rule.

According to EPA, the future electricity supply projected in the reference case “is assumed [emphasis added] to be adequate and reliable,” even though this assumption is at odds with warnings from electricity officials about the increasing risks to resource adequacy and grid reliability.^viii

The coal fleet is projected to total approximately 188 GW this year according to EIA. EPA’s reference case projects the coal fleet will be reduced in size to 102 GW in 2028, 72 GW in 2030, and 51 GW in 2035.^ix  Because the future coal fleet is projected to be smaller in EPA’s reference case, there is a much smaller amount of coal-fired generation remaining to be impacted by the proposed rule.  Therefore, EPA projects the proposed Carbon Rule will cause the retirement of an additional 13 GW of coal in 2030 and 33 GW in 2035.^x

Grid impacts

According to the preamble to the proposed rule, “ EPA has carefully considered the importance of resource adequacy and grid reliability in developing these proposals and is confident that these proposed rules and emission guidelines … can be successfully implemented in a manner that preserves the ability of power companies and grid operators to maintain the reliability of the nation’s electric power system.”^xi

EPA used IPM to analyze resource adequacy (but not reliability) under the proposed rule. EPA defines resource adequacy as “the provision of adequate generating resources to meet projected load and generating reserve requirements in each power region.”  The agency says that reliability “includes the ability to deliver the re- sources to the loads, such that the overall power grid remains stable.” ^xii EPA’s defi- nition of reliability is critically important because the deliverability of electricity was not analyzed by the agency in its modeling. EPA goes on to say that “resource adequacy … is necessary (but not sufficient) for grid reliability.” ^xiii  We agree with EPA that resource adequacy and reliability are not the same thing.

According to EPA, IPM is “designed to ensure resource adequacy.” ^xiv The model pro- jects resource adequacy in the future “either by using existing resources or through the construction of new resources.”^xv In other words, the model adds enough new resources to ensure there is sufficient electric generating capacity in the future. According to the documentation for IPM, “the model determines the location and size of the potential units to build.”^xvi However, there is no assurance that future resources added by EPA’s model will actually be built. Given the notorious difficulty building new electric transmission lines, the same can be said of transmission added by the model.

EPA has not conducted any reliability analysis for the reference case or for the agency’s proposed Carbon Rule. The agency seeks to downplay concerns about potential reliability problems by, among other things, pointing to —

• “… significant design elements that are intended to allow the power sector continued resource and operational flexibility, and to facilitate long-term planning…”xvii
• Resource adequacy (but not reliability) analysis showing that the impacts of the proposed rule are “modest and manageable.”^xviii
• Consultation with DOE, FERC, and stakeholders.  This consultation includes a DOE-EPA “Joint Memorandum of Understanding on Interagency Communication and Consultation on Electric Reliability.”^xix

NERC defines reliability as consisting of (1) adequacy and (2) operating reliability. NERC explains operating reliability as “The ability of the Bulk Power System to withstand sudden disturbances, such as electric short circuits or the unanticipated loss of system elements from credible contingencies, while avoiding uncontrolled cascading blackouts or damage to equipment.” ^xx  NERC’s definition of reliability is roughly consistent with EPA’s definition.  However, IPM is not capable of determining whether the grid is reliable in either the reference case or with the proposed Carbon Rule because reliability analysis would involve projecting the availability of essential reliability services and possibly other attributes (below).  According to NERC, “Generating resources need to be able to provide voltage control, frequency support, and ramping capability as Essential Reliability Services to balance and maintain the electric grid. Without these minimal characteristics, the grid could not be operated reliably [emphasis added].”^xxi

In addition to these essential reliability services, other attributes are necessary for grid reliability. The following is a sample of reliability attributes that are being evaluated by MISO and PJM.^xxii

The coal fleet provides a number of these and other reliability attributes, but EPA has not analyzed the loss of these attributes.

Recently, Senator John Barasso, Ranking Member of the Senate Energy Committee, and Senator Shelley Moore Capito, Ranking Member of the Senate Environment Committee, co-signed a letter to the chairman and other members of FERC urging the Commission to hold a series of technical conferences to analyze the impact of the proposed Carbon Rule on grid reliability.^xxiii This is a much-needed step to help ensure the Carbon Rule does not undermine grid reliability.

i According to EIA, the coal fleet totaled 317.6 GW in 2011 and is projected to total 188 GW in 2023.

ii America’s Power uses a data base that tracks announced coal retirements. As of May, utilities had announced plans to retire 185 coal units (80.6 GW) during 2023 -2030.

iii See, for example, NERC’s press announcement on May 17, 2023: “Two-thirds of North America Faces Reliability Challenges in the Event of Widespread Heatwaves … NERC’s 2023 Summer Reliability Assess- ment warns that two-thirds of North America is at risk of energy shortfalls this summer during per i- ods  of  extreme  demand.”  https://www.nerc.com/news/Pages/Two-thirds-of-North-America-Faces-

Reliability-Challenges-in-the-Event-of-Widespread-Heatwaves.aspx

iv These regulations are the Coal Combustion Residuals Rule, Good Neighbor Rule, Effluent Limita- tions Guidelines (proposed), Mercury and Air Toxics Standards (proposed), a Carbon Rule (pro- posed), and the Regional Haze Rule. For example, EPA projects the Good Neighbor Rule will cause the retirement of 13 GW of coal by 2030. Nonetheless, EPA determined that the GNR “is not a ‘sign if- icant energy action’ [under Executive Order 13211] because it is not likely to have a significant ad- verse effect on the supply, distribution, or use of energy.” EO 13211 applies to “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.”

v The proposal covers existing gas-fired combustion turbines that are larger than 300 MW and oper- ate at a capacity factor greater than 50%.  EPA indicated that it would undertake a separate rulemak- ing for the remainder of the existing gas fleet.

vi See https://www.epa.gov/airmarkets/power-sector-modeling.

vii The term reference case is synonymous with base case, baseline, and business as usual.

viii “Resource Adequacy Analysis Technical Support Document,” EPA Office of Air and Radiation, April 2023. (“Resource Adequacy Analysis TSD”)

ix Of the 72 GW of coal projected for 2030, 9 GW would have CCS and 63 GW would not.  In 2035, 12 GW would have CCS and 39 GW would not. “Integrated Proposal Modeling and Updated Baseline Analysis – Memo to the Docket,” EPA, July 7, 2023.

x Ibid.

xi “New Source Performance Standards for Greenhouse Gas Emissions From New, Modified, and Re- constructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions From Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule,” 88 Fed. Reg. 33246, May 23, 2023.

xii Resource Adequacy Analysis TSD.

xiii Ibid.

xiv Ibid.

xvxv Ibid.

xvi https://www.epa.gov/power-sector-modeling/documentation-post-ira-2022-reference-case

xvii According to EPA, these include subcategorization, adequate time to plan, enforcement discre- tion, and administrative compliance orders.  88 Federal Register 33415, May 23, 2023.

xviii “New Source Performance Standards for Greenhouse Gas Emissions From New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions From Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule,” 88 Federal Register 33246, May 23, 2023.

xix https://www.epa.gov/power-sector/electric-reliability-mou

xx “Reliability Terminology,” NERC, August 2013.

xxi “Essential Reliability Services – Transformation of the Electric Power System,” NERC, December

2015.

https://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERS%20Abstract%20Report%20Final.pdf  xxii See, for example, “PJM’s Evolving Resource Mix and System Reliability,” 2017, and “Identification of Sufficient System Reliability Attributes,” MISO Resource Adequacy Subcommittee, May 24, 2023. xxiii June 30, 2023, letter from Senators Barrasso and Capito to FERC Chairman Phillips and Commis- sioners Danly, Clements, and Christie.