Study: Impact of EPA regulation on the electric industry

The North American Electric Reliability Corporation’s 2010 Special Reliability Scenario Assessment: Resource Adequacy Impacts of Potential U.S. Environmental Regulations
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Executive Summary

In the United States, several regulations are in the process of being proposed by the U.S. Environmental Protection Agency (EPA) that directly affect the electric industry. Depending on the outcome of any or all of these potential regulations, the results could accelerate the retirement of a significant number of fossil fuel-fired power plants. EPA is currently developing rules that would mandate existing power suppliers to either invest in retrofitted environmental controls at existing generating plants or retire them. The most significant proposed EPA rules have been in development for over ten years and are currently undergoing court-ordered revisions that must be implemented within mandatory timeframes.

The results of this assessment show a significant potential impact to reliability should the four EPA rules be implemented as proposed. The reliability impact will be dependent on whether sufficient replacement capacity can be added in a timely manner to replace the generation capacity that is retired or lost because of the implementation of these rules. Implementation of the rules must allow sufficient time to construct new capacity or retrofit existing capacity. Planning Reserve Margins appear to be significantly impacted, deteriorating resource adequacy in a majority of the NERC Regions/subregions. In this scenario, reduced Planning Reserve Margins are a result of a loss of up to 19 percent of fossil fuel-fired steam capacity in the United States by 2018.2 Additionally, considerable operational challenges will exist in managing, coordinating, and scheduling an industry-wide environmental control retrofit effort.

This assessment examines four potential EPA rulemaking proceedings that could result in unit retirements or forced retrofits between 2013 and 2018. Specifically, the rules under development include:

1. Clean Water Act – Section 316(b), Cooling Water Intake Structures

2. Title I of the Clean Air Act – National Emission Standards for Hazardous Air Pollutants (NESHAP) for the electric power industry (referred to herein as Maximum Achievable

Control Technology (MACT) Standard)

3. Clean Air Transport Rule (CATR)

4. Coal Combustion Residuals (CCR) Disposal Regulations

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The North American Electric Reliability Corporation (NERC) is an international regulatory authority established to evaluate reliability of the bulk power system in North America. NERC develops and enforces Reliability Standards; assesses adequacy annually via a 10‐year forecast and winter and summer forecasts; monitors the bulk power system; and educates, trains, and certifies industry personnel. NERC is the electric reliability organization for North America, subject to oversight by the U.S. Federal Energy Regulatory Commission (FERC) and governmental authorities in Canada.1

NERC assesses and reports on the reliability and adequacy of the North American bulk power system, which is divided into eight Regional areas, as shown on the map below and listed in Table A. The users, owners, and operators of the bulk power system within these areas account for virtually all the electricity supplied in the U.S., Canada, and a portion of Baja California Norte, México.