A Primer on Pending Environmental Regulations and their Potential Impacts on Electric System Reliability

Posted by Content Coordinator on Tuesday, February 14th, 2012


Executive Summary

The purpose of this primer is to provide a basic background on recent and pending U.S. Environmental Protection Agency (USEPA) rules affecting the electric power generation sector (with coal power plants being a major focus). Several studies are briefly summarized that have assessed the environmental regulations’ possible collective impact on power plant retirements and electric system reliability.

Where available, USEPA analyses of the costs and benefits of proposed and final rules are presented. Also presented are planning options identified in several of the scenario studies that can help mitigate potential reliability issues. These environmental rules reflect long standing requirements contained within national environmental laws that Congress adopted and charged the USEPA with the responsibility for implementing. In a number of cases, the USEPA is now under court order to promulgate rules that have been deferred for years, or were deemed legally deficient in their original form. These rules will impose costs upon the electric generation sector, but they also have public health and environmental benefits that in some cases far exceed their projected costs.

Power plant owners will have to decide how to cost-effectively respond to these public health and environmental requirements. One outcome could be that a significant number of older un- or under-controlled coal-fired plants will be retired, rather than fit with new add-on technologies. Concerns have been raised that closing these plants for economic reasons could have a significant impact on the reliability of the electric grid due to lost generation capacity. Others contend that grid reliability concerns are overstated in light of the industry’s historical track record in retrofitting and replacing comparable amounts of generation under past rules, current reserve margins throughout the country, the under- utilized capacity of natural gas generators, growing energy efficiency efforts, demand- side management opportunities, rapidly expanding renewable supplies, and other planning options.

A number of studies have been performed that suggest a range of outcomes under different assumptions regarding environmental rule stringency. Taken together, the studies give a range of 25 – 76 GW in possible electric generation capacity retirements by 2020 as a result of pending environmental rules. Greater rule stringency regarding compliance time and degree of required technology coincides with higher amounts of projected capacity retirements. Cumulatively, the studies generally indicate a likelihood of locally confined reliability impacts, to the extent they may occur.

Historically, the electric power sector has been able to build new generation capacity over the span of a relatively few years well in excess of the upper end of projected generation capacity reductions. For example, between 2001 and 2003, over 160 GW of new generation capacity was built in the U.S. In addition, current peak electricity demand reserve margins in most areas of the U.S. are well above target reserve margins set by the North American Electric Reliability Corporation. This excess generation capacity can act as a further cushion in maintaining system reliability in many areas.

While the full scope and application of some of the USEPA’s forthcoming rules are not yet known, the agency has indicated its intent to provide compliance flexibility for power plants. When final rules are promulgated, a range of control technology options, where needed, should be available for compliance purposes. As the rules take effect, there are a number of options available to address supply and demand needs while shoring up system reliability, such as transmission upgrades, distributed generation sources, and energy efficiency programs. Where threats to electric system reliability legitimately arise, regulatory tools exist, and have previously been used, to mitigate potential problems on a location-specific basis.

Download Full Report (PDF): A Primer on Pending Environmental Regulations and their Potential Impacts on Electric System Reliability 



“NESCAUM is a 501(c)(3) nonprofit association of air quality agencies in the Northeast. Our Board of Directors consists of the air directors of the six New England states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont), New Jersey, and New York. Our purpose is to provide scientific, technical, analytical, and policy support to the air quality and climate programs of the eight Northeast states. A fundamental component of our efforts is to assist our member states in implementing national environmental programs required under the Clean Air Act and other federal legislation.”


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