The EPA’s Clean Power Plan under Section 111(d) of the Clean Air Act proposes a reduction in the carbon intensity of America’s power sector. Fortunately, modern technologies available today make it such that environmental objectives no longer work against reliability and affordability. The Clean Power Plan therefore presents an opportunity to make needed improvements and investments in grid optimization that pay off for customers. States can use America’s Power Plan as a resource to find cost savings that coincide with low-carbon energy infrastructure and reliability.
Under the proposed Clean Power Plan, states will be allowed to submit regional plans under which multiple states can achieve joint compliance with Section 111(d). Regional efforts to comply with the carbon intensity rules of 111(d) can uncover increased reliability and lower costs:
- Linking or widening balancing areas reduces the costs of decarbonization by reducing system-wide variability, which, in turn, reduces the amount of reserve capacity needed on the system. Recent studies for the Western Grid and CAISO-Pacificorp have quantified these benefits.
- Adding transmission capacity reduces system costs. Planning for and Investing in Wires describes how needed investments in transmission can frequently be more than paid for by the cost savings the new capacity makes possible. Recent transmission expansion plans from Midwest Independent System Operator and Southwest Power Pool confirm the economic benefits of transmission expansion.
One option that states have to meet the requirements of the Clean Power Plan is to retire carbon-intensive generators in favor of lower-carbon capacity. Integration of distributed energy resources (DERs) and changes in the utility business model will reduce the cost of this transition:
- Energy, capacity, and grid services need not come in the form of new generation; each can be supplied by distributed resources such as energy efficiency, demand response, storage, and distributed generation, often at a fraction of the cost. In Distributed Energy Resources: Policy Implications of Decentralization, the experts of America’s Power Plan highlight many of the measures states can take to take advantage of low-cost demand-side resources and distributed generation.
- Because distributed resources erode electricity sales, utilities have no incentive to take advantage of them under traditional rate of return regulation. In New Utility Business Models: Utility and Regulatory Models for the Modern Era, our experts explore innovative regulatory models that base compensation on utility performance, rather than cost of service. By aligning utility incentives with the goals of the Clean Power Plan, utilities can become engines for compliance without worrying about their financial viability.
Good Resources on the Clean Power Plan
Well-established power groups are drawing different conclusions regarding the feasibility of maintaining grid reliability as states act in order to abide by the EPA’s Clean Power Plan. What’s causing these reliability authorities to reach such different conclusions, and is more analysis needed? The experts of America’s Power Plan highlight pathways to decarbonize the electricity sector while enhancing reliability and minimizing cost, while pointing out that states are already ahead of pace to meet the renewable energy goals of the Plan.
EPA’s Clean Power Plan & Reliability: Assessing NERC’s Initial Reliability Review, by J. Weiss, et al. – Brattle Group (Feb. 2015)
Commissioned by Advanced Energy Economy, this report found that compliance with the CPP is unlikely to materially affect reliability. It highlights the combination of the ongoing transformation of the power sector, the steps already taken by system operators, the large and expanding set of technological and operational tools available and the flexibility under the CPP are likely sufficient to ensure that compliance will not come at the cost of reliability.” The report has a useful table responding point by point to concerns raised in a NERC report that predicts reliability problems under the proposed CPP.
Preparing for 111(d): 10 Steps Regulators Can Take Now, by Kenneth Colburn and Christopher James (July 2014)
This excellent policy brief identifies ten concrete actions that states can take over the next year to help lay the groundwork for an effective, approvable implementation plan. Among many other important steps states can take, the authors recommend engaging with other decision makers—fellow regulators, other offices within the state, and other states.
EPA Clean Power Plan: Phase I – Preliminary Technical Report, by Western Electricity Coordinating Council (WECC) Staff (Sept. 2014)
In order to ascertain the effects of the Clean Power Plan proposed rule on reliability in the Western Grid, WECC investigated the reliability impacts of removing approximately 7 GW of coal generation, a likely economic reality for states under the Plan. Results of the study showed that reliability was not significantly compromised under this scenario. The study also explores the obligations for each state under the proposed rule, and compares the effects of the rule on each state with the low-carbon policies already in place.
Teaching the ‘Duck’ to Fly, by Jim Lazar – Regulatory Assistance Project (Jan. 2014)
In Teaching the Duck to Fly, Jim Lazar describes readily available options utilities can use to adapt to high penetrations of variable renewables. This paper takes aim at the iconic California “duck curve,” so named because of the shape of the state’s projected net load curve for a typical spring day in 2020—essentially showing a major down-ramp in net demand when the sun rises and a major up-ramp when it sets. Metaphorically, Mr. Lazar “teaches the duck to fly” by applying existing opportunities in energy storage, energy pricing, demand response, and renewable energy technologies to flatten load shapes to minimize ramping requirements. Mr. Lazar suggests ten low-carbon strategies that utilities can mix and match to create a load shape that can be met with existing resources.
Examination of Potential Benefits of an Energy Imbalance Market in the Western Interconnection, by M. Milligan et al. – NREL (March 2013)
An EIM takes advantage of the reduction in wind and solar generation variability that is achieved via the geographic diversity inherent across a wide area. This study examined the benefits of creating an Energy Imbalance Market for the Western Interconnection. In the study, NREL quantifies the benefits that the EIM could provide under several scenarios: shortening balancing intervals from one-hour intervals ($1.3 billion), partial geographic participation in the EIM ($95-275 million), full geographic participation in the EIM ($146-294 million), and full geographic participation in the EIM at lower gas prices ($281 million). The study provides a solid modeling framework for assessing the benefits of an EIM across vast geographical regions.
Advanced Energy Technologies for Greenhouse Gas Reduction, by Advanced Energy Economy (May 2014)
This report details 40 different advanced energy technologies and services that states can consider as they develop compliance plans to reduce emissions under EPA’s Section 111(d) carbon standard. These solutions do not constitute a comprehensive list, but rather demonstrate the breadth of options that states have at their disposal today.