NERC report confirms EPA's air regulations on power plant emissions won't jeopardize electric grid reliability; proposed cooling water intake structure rule will have greatest impact on plant retirements

WASHINGTON , November 28, 2011 (press release) – Report Says EPA’s Proposed Cooling Water Intake Structure Rule Will Have Greatest Impact on Power Plant Retirements

The Clean Energy Group’s Clean Air Policy Initiative, a coalition of electric power companies, released the following statement today regarding the North American Electric Reliability Corporation’s (NERC’s) report on the reliability impacts of complying with U.S. Environmental Protection Agency (EPA) rules:

Today, NERC released its “2011 Long-Term Reliability Assessment,” which includes an update of its 2010 review of the potential impact of upcoming environmental regulations. The NERC report makes clear that EPA’s proposed regulation of mercury and other toxic air emissions from power plants will have manageable impacts on the nation’s electric grid and will not jeopardize reliability. By comparison, the report concludes that EPA’s proposed regulation for cooling water intake structures has the potential to have the greatest impact on power plant retirements.

These findings reaffirm the conclusions of a recent report released by MJB&A and the Analysis Group regarding impacts from EPA’s air regulations on grid operations and electric reliability. “It is helpful that NERC reaffirms what many in the utility industry have been saying for months – the tools exist to manage the implementation of the air rules without impacting reliability, and NERC expects that industry and regulators will use these tools,” said Michael J. Bradley, Executive Director of the Clean Energy Group’s Clean Air Policy Initiative. “This should put to rest the concern that the air rules will force the closure of a significant number of older plants. Instead, what the NERC report highlights is the need to focus attention on the satisfactory resolution of the proposed regulation of cooling water intake structures. Based on recent correspondence with Congress, we believe that EPA recognizes the importance of providing flexibility for plants, just as they have done in the proposed air rules, and we are encouraged by recent statements.”

NERC’s assessment finds that EPA’s proposed regulation of cooling water intake structures under section 316(b) of the Clean Water Act triggers about 70 percent of the estimated plant retirements and derates, notably in 2018. This impact may decrease, however, given a recent letter that EPA Assistant Administrator Nancy Stoner sent to Congressman Rob Andrews (D-NJ) indicating that the Agency is considering a technology alternative for the impingement requirements in lieu of the cumbersome numeric impingement limits included in the proposed 316(b) rule, which would provide plants with more certain and cost-effective options to comply and continue to operate.

According to NERC’s analysis, the Cross-State Air Pollution Rule (CSAPR) and Utility Air Toxics Rule may potentially cause between 8.6 and 16 GW of coal-fired plants to retire or derate by 2018. These estimates represent less than 5 percent of the nation’s coal-fired power plants and are far lower than the high estimates from others. Additionally, the report makes conservative assumptions in terms of compliance by requiring a baghouse for all coal-fired power plants. In reality, electrostatic precipitator (ESP) upgrades and other compliance strategies, such as facility averaging, are likely to reduce the costs of compliance.

The NERC assessment also points out that since its last report, many older coal plants have announced plans to retire for reasons other than the EPA rules. Rather, the low price of natural gas, reductions in demand, and the inefficiency of these older plants make many uneconomic to operate today.

Bradley concluded, “The NERC report findings, along with the well-documented range of options available to the industry and regulators to manage electric system reliability, prove that with proper planning and coordination, the electric industry can comply with EPA’s proposed air regulations consistent with the Clean Air Act. There is no reason to delay the implementation of the clean air rules.”

About the Clean Energy Group’s Clean Air Policy Initiative

The Clean Energy Group’s Clean Air Policy Initiative is a coalition of electric power companies dedicated to responsible energy and environmental stewardship. The members serve electricity to more than 52 million people, have nearly 150,000 megawatts of generating capacity throughout the U.S., and deliver natural gas to more than 10 million customers.

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