Dire predictions: ERCOT says CPP poses real threats

October 21, 2015 | By Barbara Vergetis Lundin

The U.S. Environmental Protection Agency's (EPA) Clean Power Plan (CPP) could result in the retirement of at least 4,000 MW of coal-fired generation capacity in the ERCOT region, as early as 2022, according to an updated analysis of the impacts of the CPP by the Electric Reliability Council of Texas (ERCOT).

Dallas skyline. Credit: Ultima_Gaina

In August 2015, the EPA released the CPP final rule, which sets limits on carbon dioxide (CO2) emissions from existing fossil fuel-fired power plants. The original rule was proposed in June 2014, but the final rule made saw adjustments to emissions limits and deadlines for compliance.

The amount of unit retirements could pose challenges to grid reliability, which ERCOT expects to intensify and occur earlier when the effects of the CPP are combined with other environmental regulations, such as EPA's proposed Regional Haze Federal Implementation Plan (FIP). If ERCOT does not receive adequate notification of these retirements, and if multiple units retire within a short timeframe, there could be periods of reduced system-wide resource adequacy and localized transmission reliability issues.

"We continue to have concerns about the potential impacts on planning and operation of the ERCOT power grid," said ERCOT CEO Trip Doggett. "Based on our analysis, we are especially concerned about reliability risks associated with multiple unit retirements within a short timeframe. As new technologies emerge and market conditions change, the grid is changing," Doggett said. "Our market is designed to encourage new, more efficient technologies, but that change needs to occur at a pace that supports continued reliability."

ERCOT anticipates the impacts of these changes could also increase retail power prices by up to 16 percent by 2030. This does not take into account the impacts of new transmission projects or other investments that could be needed to support compliance. In the ERCOT Region, it takes at least five years for a new major transmission project to be planned, routed, approved, and constructed.

The ERCOT analysis considered the impacts of the plan in terms of mass-based approaches (measuring tons of emissions) to achieve emissions targets for the ERCOT region, modeling four scenarios: Baseline, CO2 Limit, CO2 Price, and CO2 Price and Regional Haze.

The Baseline scenario is based on current trends in the ERCOT region and market and considers announced retirements and current regulatory requirements. The CO2 Limit scenario considers a system limit on emissions, allowing the model to select the lowest-cost resource option without regard to market design or other considerations associated with implementation. CO2 Price includes an estimated price for CO2 emissions that would cause the ERCOT region to achieve the compliance targets. CO2 Price and Regional Haze also includes a CO2 price and models the combined impacts of the CPP and the proposed Regional Haze Federal Implementation Plan within the ERCOT region.

ERCOT anticipates about 4,000 MW of generation capacity would retire to achieve CPP compliance by 2030 -- increasing to about 4,700 MW when Regional Haze requirements are taken into consideration. In scenarios that include a price for carbon emissions, study results indicate more than 14,000 MW of utility-scale solar, 9,000 MW of wind capacity and nearly 3,000 MW of new gas-fired combustion turbines would be added to achieve compliance within the ERCOT market.

The model, which is consistent with ERCOT long-range planning studies, assumes a gradual increase in natural gas prices over time, to a little more than $6 per MMBtu by 2030, and a continued decrease in capital costs associated with wind and solar development.

ERCOT also has concerns with the future renewable generation mix. The study predicts a sizeable amount of renewable capacity additions, due to improving economics and the impacts of regulating CO2 emissions. If there is not sufficient ramping capability and operational reserves during periods of high renewables penetration, the need to maintain operational reliability could require the curtailment of renewable generation resources. The ability to curtail intermittent generation resources in real-time operations is a key backstop for maintaining the reliability of the system. Curtailment would reduce production from renewable resources, and could delay achievement of compliance with the CPP limits, according to the report.

For more:
- see the report

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