Reliability Must Run Agreements

Coal-fired and other thermal power plants provide important reliability attributes.  However, half the existing coal fleet (more than 93,000 MW) has announced plans to retire by the end of 2030, with the likelihood of more retirements due to EPA regulations.  The retirement of massive amounts of coal-fired generating capacity within a short time span, combined with the increasing penetration of renewable power sources, has prompted warnings about shortages of electric generating capacity and other potential reliability problems.

Reliability Must Run (RMR) Agreements have been used to keep certain power plants operating past their planned retirement dates in order to prevent reliability problems.  As explained in our new paper, RMR Agreements are contracts between a regional transmission organization (RTO) and a power plant owner to keep the plant operating beyond its intended retirement date.  As an incentive to continue operation, RMR Agreements provide payments for the power plant to recover its costs and earn a return.  Agreements typically are no longer than one year.

Although RMR Agreements have been used in the past to avoid reliability problems, they have certain drawbacks.  For example, RMR Agreements are not meant to address resource adequacy problems and declining reserve margins caused by thermal retirements, and RMR Agreements do not supersede environmental regulations which could force retirements.  

More than half the coal fleet  is located in four regions of the country: PJM, MISO, SPP and ERCOT.  The process for negotiating RMR Agreements varies considerably across these regions.

Although more than 93,000 MW of coal-fired generating capacity have announced plans to retire by the end of 2030, this total does not include additional retirements that are likely to result from future EPA regulations.  For example, EPA estimates that its proposed Ozone Transport Rule will cause 23,000 MW of coal to retire by 2025.  Given the massive number of expected coal retirements, the potential for reliability problems, and the drawbacks with RMR Agreements, there are several important questions that need to be resolved by grid operators, generators, utility commissioners and policymakers.  These questions include:

Are RMR Agreements an effective way to prevent a large number of coal retirements from causing both resource adequacy and reliability problems, or are there more effective ways?

Would grid operators need to change their RMR procedures in order to evaluate the resource adequacy and reliability impacts of a large number of coal retirements? How long would it take to make these changes?

 Would a large number of RMR Agreements be harmful to electricity markets? Are there other unfavorable consequences of a significant number of RMR Agreements? 

Will EPA design its regulations to mitigate coal retirements and avoid increasing risks to reliability?