February 12, 2015

Compliance with EPA’s Clean Power Plan Unlikely to Materially Affect Electric Grid Reliability, According to Report by Brattle Economists

Consultants at The Brattle Group released a report analyzing concerns raised by the North American Electric Reliability Corporation (NERC) in its Initial Reliability Review (IRR) about the impact of the Environmental Protection Agency’s (EPA) proposed Clean Power Plan (CPP) for reducing carbon emissions. The Brattle report, prepared for the Advanced Energy Economy Institute, reviews and analyzes the reliability concerns raised in NERC’s IRR and the options for mitigating them. Brattle concludes that taking advantage of the full set of operational, market, and technological options should allow compliance with the CPP without materially affecting grid reliability.

In its assessment of NERC’s IRR, the Brattle report finds that the combination of the ongoing transformation of the power sector, the steps already taken by system operators, the large and expanding set of technological and operational tools available, and the flexibility provided to states under the CPP would enable planners to meet the challenge of achieving emission reductions without sacrificing reliability. The authors identify several key points not sufficiently recognized in NERC’s report:

  • Individual states and groups of states have the flexibility under the CPP to develop plans that reflect their particular circumstances and reliability issues, rather than having to implement each of the “building blocks” the way EPA used them to set the states’ compliance targets.
  • Retirement of the least efficient plants, mainly occurring regardless of the CPP due to existing air quality regulations and wholesale power price trends, will by itself improve the emissions profile of the remaining coal fleet.
  • Potential natural gas shortages due to pipeline constraints are generally short-term and seasonal; can likely be mitigated by a mix of back-up fuels, natural gas demand response, gas storage, LNG, and other measures in the short run; and can be solved permanently by pipeline expansion if necessary, with many projects already proposed or underway.
  • System operators already have many operational tools and market mechanisms available to maintain reliability and to manage a complex and changing power grid in the presence of significant amount of intermittent renewable generation that are higher than the amount CPP would likely require in most regions.

The Brattle report does not address the overall costs of complying with the CPP at the national, regional, or state level, including any potential costs associated with managing reliability, nor does it address the potential constraints that some states may face in pursuing cost-effective CPP compliance strategies during the 2020 to 2029 interim target period. The report discusses but has not attempted to comprehensively present changes to the existing market design, operational/planning practices that could significantly reduce total compliance costs. Such changes could include regional and inter-regional cooperation to address the potential infrastructure investments needed to support the ongoing shift towards more gas-fired and renewable energy supply and the increasing impact of distribution-level activities on electricity markets and utility planning.

The report concludes that—given the wide range of options in principle available to states for compliance and addressing reliability needs—state, regional and federal actions can be expected to maintain reliability while complying with the CPP. However, since unexpected reliability concerns could arise, the authors also suggest that the CPP could benefit from the EPA further clarifying how it plans to enforce the CPP in cases where addressing such unexpected reliability needs may warrant some deviation from approved state implementation plans.

The Brattle report, “EPA’s Clean Power Plan and Reliability: Assessing NERC’s Initial Reliability Review,” is authored by Brattle principals Jürgen Weiss and Bruce Tsuchida, associate Michael Hagerty, and research analyst Will Gorman. The report and executive summary are available for download below.

Associated Experts
Tsuchida 084
Principal
+1.617.864.7900
Mr. Tsuchida specializes in the analysis of wholesale electric markets and modeling. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Jurgen weiss0492
Principal
+1.617.864.7900
Dr. Weiss specializes in issues broadly motivated by climate change concerns, such as renewable energy, energy efficiency, energy storage, the interaction between electricity, gas and transportation, and carbon pricing. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Hagerty 043
Associate
+1.202.955.5050