There’s a new report out today from the U.S. Government Accountability Office that provides some helpful breakdowns of information about power plant retirements, new EPA regulatory proposals, grid reliability and other matters. Here are a few of the highlights:
— It is uncertain how power companies may respond to four key Environmental Protection Agency (EPA) regulations, but available information suggests companies may retrofit most coal-fueled generating units with controls to reduce pollution, and that 2 to 12 percent of coal-fueled capacity may be retired. Some regions may see more significant levels of retirements. For example, one study examined 11 states in the Midwest and projected that 18 percent of coal-fueled capacity in that region could retire. EPA and some stakeholders GAO interviewed stated that some such retirements could occur as a result of other factors such as lower natural gas prices, regardless of the regulations. Power companies may also build new generating units, upgrade transmission systems to maintain reliability, and increasingly use natural gas to produce electricity as coal units retire and remaining coal units become somewhat more expensive to operate.
— Available information suggests these actions would likely increase electricity prices in some regions. Furthermore, while these actions may not cause widespread reliability concerns, they may contribute to reliability challenges in some regions. Regarding prices, the studies GAO reviewed estimated that increases could vary across the country, with one study projecting a range of increases from 0.1 percent in the Northwest to an increase of 13.5 percent in parts of the South more dependent on electricity generated from coal. According to EPA officials, the agency’s estimates of price increases would be within the historical range of price fluctuations, and projected future prices may be below historic prices.
— Regarding reliability, these actions are not expected to pose widespread concerns but may contribute to challenges in some regions. EPA and some stakeholders GAO interviewed indicated that these actions should not affect reliability given existing tools. Some other stakeholders GAO interviewed identified potential reliability challenges. Among other things, it may be difficult to schedule and complete all retrofits to install controls and to resolve all potential reliability concerns associated with retirements within compliance deadlines.
Not mentioned in that GAO summary was this from the full report:
Another factor that contributes to uncertainty is the increased focus on renewable energy production and other potential future regulations. In
recent years, there have been federal and state efforts to encourage the development of renewable energy sources—particularly wind and solar—
to produce electricity. For example, 30 states have laws or regulations requiring power companies to increasingly rely on renewable sources for
These and other policies may contribute to generation from renewable sources increasing from 10 percent in 2010 to 16 percent of
total electricity generation by 2035, potentially diminishing the demand for electricity from fossil fuels, including coal, in the future. Some
stakeholders we met with noted that there is uncertainty about future environmental requirements, in particular those aimed at reducing carbon
dioxide emissions to address climate change.
Such future requirements could affect the attractiveness of additional investments by power companies in existing coal-fueled generating units because coal-fueled units are more carbon intensive than other forms of generating electricity. As we have previously reported, on average, coal-fueled units produced twice as much carbon dioxide as natural gas units in 2010.
Interestingly, the GAO’s bottom-line conclusion, though, is that various government agencies don’t have a real handle on how all of this is going to work:
Existing tools could help mitigate many, though not all, of the potential adverse implications associated with the four EPA regulations, but the Federal Energy Regulatory Commission (FERC), Department of Energy (DOE), and EPA do not have a joint, formal process to monitor industry’s progress in responding to the regulations. Some tools, such as state regulatory reviews to evaluate the prudence of power company investments, may address some potential price increases. Furthermore, tools available to industry and regulators, as well as certain regulatory provisions, may address many potential reliability challenges. However, because of certain limitations, these tools may not fully address all challenges where generating units needed for reliability are not in compliance by the deadlines. FERC, DOE, and EPA have responsibilities concerning the electricity industry, and they have taken important first steps to understand these potential challenges by, for example, informally coordinating with power companies and others about industry’s actions to respond to the regulations. However, they have not established a formal, documented process for jointly and routinely monitoring industry’s progress and, absent such a process, the complexity and extent of potential reliability challenges may not be clear to these agencies. This may make it more difficult to assess whether existing tools are adequate or whether additional tools are needed.
You can read the full GAO report here.