Grid Operators: Reliability in Jeopardy from New Rule

For the past few months, PACE has reported on the growing list of concerns about the potential impacts of EPA’s proposed carbon rule for power plants. Many of those concerns have focused on cost, with a variety of voices arguing that the new rule will saddle consumers with higher power bills. Those voices have included members of the U.S. Senate, several state governors, state attorneys general, a former federal energy official, CEOs of rural electric cooperatives, and utility commissioners from across the nation. Their warnings carry a great deal of weight and should raise red flags with federal policy makers.

Now, grid operators are adding their voices to the debate. Their message is simple: EPA’s new carbon rule will have serious impacts on power reliability.

Recently, two regional transmission organizations outlined the difficulties they will face as a result from the rule. Last week, the Midcontinent Independent System Operator, better known as MISO, presented its findings at the September open meeting of the Federal Energy Regulatory Commission. MISO officials stressed that the collective impact of EPA rules likely will result in parts of the MISO region lacking the necessary energy generation necessary to meet consumer demand.

MISO’s CEO, Clair Moeller, noted that there has already been a retirement of nearly 18 percent of the region’s coal fleet. Moeller said that projections show that the region will fall short of reaching the energy reserve requirement for 2016. In other words, some customers across the upper midwest might not have access to electricity when they need it.

Also last week, the Southwest Power Pool (SPP) submitted a response to the Missouri Public Service Commission regarding the EPA rule. SPP had concerns similar to MISO, noting that they anticipate significant reliability impacts directly resulting from compliance with the rule. In order to mitigate these impacts, SPP believes that electric transmission upgrades will be required. The costs and length of time necessary for these updates could be staggering.

“It is important to recognize that if electric transmission upgrades are required as part of the solutions to comply with the EPA’s proposed rule, the planning and construction of transmission upgrades can take up to eight and a half years and cost up to approximately $2.3 million per mile for new 345 kV transmission lines, excluding substation costs,” SPP said. Therefore, “a transmission-related solution would not likely be feasible for a 2020 deadline.”

Opposition from utility officials and politicians casts serious doubt on the EPA rule, but it is easy for the media to dismiss those concerns as politically-motivated. It is not so easy to turn a blind eye to reliability concerns being voiced by the people responsible for making sure the power grid works when we need it to. Those operators are telling us that EPA’s rule is downright dangerous. Reliable electricity isn’t just a convenience. It’s serious business that can have life and death implications. Surely the president and the EPA will take note of that.


Utility Commissioners Speak Out on EPA Carbon Rule

Former and current public utility commissioners nationwide are concerned about the potential negative consequences of EPA’s new carbon rule. In a letter sent last week to energy regulators and EPA, seventeen current and former public utility commissioners from eleven states expressed serious concerns over the agency’s proposed carbon dioxide rule. The commissioners believe the new regulation poses a threat to the diversity and stability of the nation’s power.

Read the Letter Here

“Our concern with the EPA’s proposed carbon rules is that they fail to adequately forecast the serious economic and reliability impacts of dramatically reduced or even elimination of coal-fired generation,” the letter states. “Coal’s primary benefits are that it provides reliable and affordable electricity. And, unfortunately, the EPA has underestimated how much its proposed rules will increase the cost of electricity to consumers.”

The commissioners argue that not only will EPA’s carbon rule drive up power prices, but coal plant retirements spurred on by already-implemented regulations mean that “the grid will be unlikely to have the spare capacity needed to meet surging winter demand, an unacceptable situation that will only be exacerbated by these carbon regulations.”

Signing the letter were Sandra Hochstetter Byrd, Arkansas (2000-2007); Jeff Davis, Missouri (2004-2012); Chuck Eaton, Georgia (2006-present); Tim Echols, Georgia (2010-present); H. Doug Everett, Georgia (2002-present); Paul Foran, Illinois (1985-1993); Raymond Gifford, Colorado (1999-2003); Jeffrey Golc, Indiana (2007-2010); Mark David Goss, Kentucky (2004-2008); David Hadley, Indiana (2000-2006); Kenneth Hill, Tennessee (2009-present); Terry Jarrett, Missouri (2007-2013); Larry Landis, Indiana (2002-2014); Kenneth McClure, Missouri (1990-1997); Todd Snitchler, Ohio (2011-2014); Bob Stump, Arizona (2008-present); and Stan Wise, Georgia (1995-present)

“The EPA and the administration are out of step with mainstream Democrats and Republicans and the general public who support a rational, sensible approach, one which is sensitive to the needs both of the environment and of the middle class and the working poor, which will be crushed by the EPA rules,” the letter explains. “We simply can’t afford the EPA in its current trajectory.”


Japanese Nuclear in Focus

In March of 2011, Japan experienced the worst nuclear incident in modern history when an earthquake led to the meltdown of three of the six reactors at the Fukushima Nuclear Plant. The incident led to serious questions about the future of nuclear power in Japan, with former Prime Minister Naoto Kan even announcing his commitment to end nuclear power in Japan altogether by 2040. While the Japanese voting public remains highly skeptical about the use of nuclear power, realities on the ground could be leading to a resurgence of nuclear power for the nation.


Prior to the Fukushima incident, Japan’s forty-eight nuclear reactors produced 29% of the nation’s electricity, with liquified natural gas (LNG) also contributing 29% and coal-fired generating adding another 25%. According to data from the National Bureau of Asian Research, however, the use of nuclear power plummeted post-Fukushima, contributing just 11% of Japan’s power in 2011 and just 2% in 2012. Today, not one of Japan’s forty-eight nuclear reactors is generating electrons.

Depleting the world’s 3rd largest economy of nuclear power turned out to be a painful choice on a number of levels. According to a report from the Daily Mail, extra energy imports have led to a Japanese trade deficit of nearly $200 million. Electricity bills are up 50%. Carbon emissions from the nation’s electric power industry have doubled. Consumers, manufacturers, and power producers alike have felt the pinch of removing one of the nation’s staple baseload power resources.

Why such drastic results though? Part of the reason is that Japan replaced its nuclear capacity by using vastly more LNG; in fact, the use of LNG for power in Japan skyrocketed from 29% in 2010 to 48% in 2012. And so did the price. Japanese LNG costs nearly doubled after Fukushima. The price per million BTU of natural gas in Japan today is nearly five times the standard price in the U.S. Japan’s heavy use of LNG to replace nuclear power drove up demand, in turn driving up the price of a limited resource.

In addition to LNG, Japan is also leaning heavily on coal. A recent PBS special report details that Japan is running its fossil fuel fleet at full-tilt, importing $266 billion worth of oil, gas and coal in 2013. In fact, a report by Bloomberg shows that Japan’s ten power companies consumed 5.66 million metric tons of coal in January, a record for the month and 12 percent more than just a year ago. The nation is investing long-term in IGCC technology to make its coal-fired plants even more efficient.

In light of continued trade deficits and high power prices, Japanese leaders have reconsidered the wisdom of the nation’s total nuclear shutdown. Recently, Prime Minister Shinzo Abe revealed a new Basic Energy Plan that could bring the country’s 48 reactors back online after a series of rigorous safety tests. Japan is even considering adding new nuclear capacity. Perhaps in time, the nation might revert to a more balanced mix of fossil fuels, nuclear power, and renewables.

There is much to be learned from Japan’s experience in the three years since Fukushima. Faced with an urgent need to meet consumer demand for power, Japan resorted to the quick solution of natural gas. The results were predictable: rising natural gas prices and higher power bills. U.S. power suppliers, forced to replace significant coal-fired capacity due to new federal regulations, are already rushing to fill the void with natural gas. The domestic supply of natural gas in the U.S., of course, will make this bargain less costly, and perhaps smoother, than the Japanese experience, but no one knows the long-term effect of upsetting the balance of fuel sources (nuclear, coal, natural gas) that has served our nation’s consumers well for decades. Japan has witnessed the harmful effects of this imbalance up close, and is wisely reversing course toward a more sustainable future.