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NERC: EPA’s Clean Power Rule Could Transform Coal Power Use

Implementation of the Environmental Protection Agency’s (EPA’s) proposed Clean Power Plan (CPP) could change the use of the U.S. coal-fired generating fleet from baseload to seasonal peaking—and pose grave implications for plant economics and operating feasibility, the North American Electric Reliability Corp. (NERC) suggests in new special assessment. 

The new report is the second in a series of special reliability assessments to examine the potential risks to reliability that may arise from implementation of the CPP rule as required by NERC’s Board of Trustees in August 2014. In its November 2014–released Initial Reliability Review, NERC conducted a preliminary evaluation of the CPP’s building blocks and concluded that the implementation of the rule could impact reliability of the bulk power system.

The April 17–released Potential Reliability Impacts of EPA’s Proposed Clean Power Plan—Phase I notes that there is “significant uncertainty” about what the final CPP rule—due out this summer—will mandate in terms of compliance timeline flexibility, and carbon dioxide targets and target calculation modifications.

As proposed, however, the rule will accelerate a “transformative shift” in resource use toward greater use of gas and renewables, it says.

And it will spur a mass retirement of baseload capacity. Per NERC’s reference case from the 2014 Long-Term Reliability Assessment, more than 33.5 GW of coal, oil, natural gas, and nuclear generation capacity is expected to retire between 2015 and 2020, while an additional 7 GW will retire between 2021 and 2025. NERC’s separate modeling of CPP state and regional cases suggest that between 41 GW and 43 GW could be shuttered from 2016 to 2020. An additional 42 GW to 44 GW could be closed between 2020 and 2030.

Regional cases generally yield more retirements. The greatest amount of resource retirements are expected in ERCOT, SPP, NPCC, and MISO.

While the power mix transformation is expected to introduce “changes to operations and expected behaviors of the system,” it will also present reliability challenges as “new resources have different [essential reliability service (ERS)] characteristics than the current generation fleet,” says the report.

One significant finding points to the shift of existing coal-fired generation from baseload to seasonal peaking operations. NERC suggests that between 14 GW and 22 GW of coal capacity will remain online until 2030, but they will be operated infrequently.

“Under these conditions, the eroding plant economics of such generation resources renders their continued operation at risk and subject to potential retirement. In a wholesale electricity market structure, generators may need additional incentives (e.g., capacity payments) to keep low capacity factor fossil generation economic and in service,” the report notes.

The transformation will also spur power flow changes, requiring new transmission and gas infrastructure to integrate changes. The report finds that about 60 GW of additional gas-fired capacity is estimated to be in service by 2020, and 80 GW by 2030. That will mean U.S. gas demand could soar from 39 Bcf/d to 50 Bcf/d—an increase of about 30%.

The report’s findings also echo many industry comments submitted to the EPA that call for more time to develop coordinated plans to address shifts in generation, and to set up corresponding transmission reinforcements.

“Because the industry will be implementing plans simultaneously, it is uncertain whether adequate equipment (e.g., generators, solar panels, wind facilities, transformers, and conductors) and resources (e.g., engineering, procurement, and construction) will be available to support those plans,” it says.

source: http://www.powermag.com