We’ve previously gone over here on Coal Tattoo the Congressional Research Service report that debunked the notion that EPA’s series of air pollution regulatory actions amount to some sort of “train wreck” for the nation’s energy system.
Now, there’s an interesting report out from PJM Interconnection — the folks who manage the regional power grid — that examines the potential impact of EPA’s proposals on their operations.
The bottom line:
Even with almost 7,000 MW less coal capacity clearing for the 2014/2015 Delivery Year, PJM estimates the RTO will carry a reserve margin of 19.6 percent for the Delivery Year, including the demand and capacity commitments of FRR entities. Even with the potential retirement of coal capacity already announced by FRR entities, there are also announced commitments to replace a portion of that capacity with new gas-fired capacity such that the RTO would still carry a reserve margin at or above of the target 15.3 percent installed reserve margin. Add into the mix the potential for new entry from Demand Resources, as has been the trend in recent years, and resource adequacy does not appear to be threatened.
Now, Bill and Keryn do some very interesting citizen journalism, though the tone they take sometimes isn’t exactly what I’m after here on Coal Tattoo. But heck, I’ve gotten a few good stories out of following their blogs, and they often are right on the money in saying much of West Virginia’s media establishment ignores the facts in covering energy issues.
In this instance, their particular interest in the PJM report was at least partly to use it to blast our good friend Michael Morris, CEO of Amercian Electric Power.
Bill for example initially wrote:
AEP CEO Mike Morris threw a fit a few months ago about long standing EPA rules that will cause coal-fired power plant closures more quickly than AEP had been planning. Morris threw around all kinds of doomsday forecasts. (I even think he used the words “brownouts and blackouts.”) Morris’s public “trainwreck” comments about the closings’ impact on grid reliability echo the hysterical “brownouts and blackouts” claims AEP spouted to support their PATH project.
Bill later edited out the part about “brownouts and blackouts,” after we had an email exchange about them.
On her blog, Keryn wrote:
Remember all the bleating about a “train wreck” AEP CEO Michael Morris was doing a couple of months ago about implementation of the EPA’s Clean Air rules? He told the press that the EPA rules would cause a disaster with mass unemployment, sky-high electric rates and huge blackouts. Guess what? He was full of hot air, again. I’m sure you’re not surprised about that, are you?
And on the great new Coalition for Reliable Power blog, Keryn wrote:
Morris’s scare tactics included mass unemployment, huge electric rate hikes and massive blackouts due to reliability issues. He reminds me of a manipulative 5-year old who threatens to hold his breath until he dies unless he gets his way.
I went back to see exactly what Mike Morris had said, looking for the specifics on this, and found a couple of things. Keryn was also kind enough to forward me some links she had saved.
Back when AEP initially announced that it would move up the dates for some for closing some ancient, inefficient and polluting coal-fired power plants in response to the EPA’s air toxics proposal, the company press release quoted Mike Morris:
Although discounted by some, the potential impacts on the reliability of the transmission system, particularly in the Midwest, are significant. The proposed timelines for compliance aren’t adequate for construction of significant retrofits or replacement generation, so many coal-fueled plants would be prematurely retired or idled in just a few years. AEP’s compliance plan alone would abruptly cut generation capacity in the Midwest by more than 5,400 MW. Depending on the year, another 1,500 MW to 5,200 MW of AEP generation would be idled or curtailed for extended periods as pollution control equipment is installed.
Morris went quite a bit farther in these statements in a story on the Power Engineering magazine website:
“It is clear, to me anyways,” said Morris, “that the activities that continue to go on at the Environmental Protection Agency are leading us into a very blind alley.”
“The United States economy will come to a screeching halt on the day that it no longer has base load generation to satisfy the market demands.”
And most interesting were comments Morris made to AEP stock analysts during a quarterly conference. First, he said of the EPA proposals:
Closing some of those facilities over time will, of course, have an effect on our ability to have gigawatt hours available for us in the off-system sales market. But throughout the footprints where we are very active with off-system sales, we expect other facilities will be shut as well. And that clearly will have not only a constructive impact on the capacity fees that we receive going forward, but it will also increase the amount of money recognized on gigawatt hours of energy put into the marketplace. And it doesn’t take much of an uptick in those 2 numbers to compensate for the megawatts that will be coming offline because, as you all can imagine, those were higher-price plants at the top of the stack, which didn’t dispatch as early as those on the lower cost portion.
So we feel as though there will be some impact, it surely won’t be a devastating impact.
And Morris also said:
Notwithstanding that, we feel pretty comfortable at American Electric Power with our overall view of what we think the EPA’s rulings, not only that which are issued, but those which will be issued, will have on our overall system.
Still, despite those things, Morris went on to say:
Nonetheless, we will continue to do what we can politically, as well as in the general dialogue with the EPA to try to put greater rationality in what it is that they’re trying to accomplish. I know that some of the more principled NGOs are concerned about the approaches that we have taken to this, particularly in the legislative arena.
But our position, we think, is reasonable. It gets us to the same environmental footprint by 2020 instead of 2016 or 2017, and it’s not in a much more financially and electrically rational and beneficial way. So we will continue to put as much pressure on the EPA as we can. I’m happy to see that today, they decided to put another cap on oil and gas drilling. That will bring some additional folks in the fray of trying to discuss about the incredible aggressiveness that the EPA is taking, all in keeping with what they think is their challenge, but nonetheless, in our view, unnecessarily over-the-top and a bit aggressive. I don’t think there’s a corporation in America that doesn’t want to get to the right place, it’s just a matter of trying to get there in a cost-effective and energy-effective way.
OK … So, I don’t see where Mike Morris actually used the words “blackout” and “brownout.” But it’s hard to not walk away feeling like that’s what he’s trying to suggest. At the same time, I also walk away not sure which Mike Morris we’re dealing with here — I mean, is this a guy who believes climate change is real and that Congress should do something about it, or is this a typical energy company CEO who just wants to fight regulation because that’s what energy companies are supposed to do? It’s like he’s got two little Mike Morris cartoon characters sitting on his shoulders, and he’s not sure which to follow. Look at what he says in that conference call about AEP’s decision to drop its carbon capture project at the Mountaineer Plant:
… Going forward, without a carbon legislation or without an appropriate approach to carbon and its impact, it was simply not able for us to go forward and continue that project. It has been completed or will be completed through the base in engineering drawings and activities and laid up for another day.
That was an opportunity for Morris to repeat his support for climate legislation or some other “appropriate approach” to reducing greenhouse gas emissions … He kind of punted on it.
And if activist bloggers are writing scathing stuff about Morris trying to scare us about widespread blackouts, his own rhetoric might need to be toned down to match what he is really trying to say.
From my reading of it, PJM certainly doesn’t think the impacts are anywhere near what Mike Morris suggested … though they do offer this caution:
Although no system-wide capacity problem is apparent in PJM from the announced retirements, this does not mean that localized reliability concerns may not arise given the location of particular units and the unique locational services they provide such as congestion management of particular transmission facilities, voltage support for the transmission system, or black start services. It is for this reason that PJM proposed, in its comments to the EPA in the NESHAP rulemaking, a “reliability safety valve” to be included in the final EPA NESHAP rule to address these particular circumstances. The key is whether replacement resources or transmission reinforcements can be timely added given the breadth of the potential retirements and the pressure on outside vendors to supply new turbines and related resources.
One of the problems, of course, is the way the mainstream media is covering these issues.
For example, Matthew Wald at The New York Times made much of any potential impacts on the grid, and insisted the PJM was among those greatly concerned about the issue. He wrote that:
PJM Interconnection, the regional unit that set the demand record on July 21, has suggested that the E.P.A. rules would put the grid’s reliability at risk.
But the direct quote from PJM is not nearly so broad:
“E.P.A.’s analysis of the impact of the proposed rule may understate the level of expected generation of plant retirements and does not provide sufficient flexibility or time to address potential localized reliability concerns,” it wrote in a statement filed with the agency.
And then there was Ezra Klein at The Washington Post, who wrote:
Industry groups such the Edison Electric Institute, which represents investor-owned utilities, and the American Legislative Exchange Council have dubbed the coming rules “EPA’s Regulatory Train Wreck.” The regulations, they say, will cost utilities up to $129 billion and force them to retire one-fifth of coal capacity. Given that coal provides 45 percent of the country’s power, that means higher electric bills, more blackouts and fewer jobs. The doomsday scenario has alarmed Republicans in the House, who have been scrambling to block the measures. Environmental groups retort that the rules will bring sizeable public health benefits, and that industry groups have been exaggerating the costs of environmental regulations since they were first created.
I have to wonder, though, if Klein bothered to read the Edison Electric Institute report, which says specifically:
Areas not analyzed in this report include: potential impacts to retail or wholesale electricity prices; potential impacts to local economies or potential job losses associated with plant closures; and potential local or regional impacts to grid reliability from unit retrofits and retirements.