‘Hope’ isn’t a strategy: Biden EPA grilled by America’s largest electric grid operators

The Biden administration’s new Environmental Protection Agency (EPA) rule regulating carbon dioxide emissions from power plants has come under criticism from the largest regional power grid operators in the country.

The proposed rule — known as Rule 111 — would dramatically transform the makeup of the electricity grid. Most of the country’s coal plants would be forced to retire, and a slew of wind, solar, battery storage, and backup natural gas plants would be built in their place.

Representatives from Electric Grid Council of Texas (ERCOT), Midcontinent Independent System Operator (MISO), PJM Interconnection (PJM), and Southwest Power Pool (SPP) — identified as the “Joint ISOs/RTOs” and collectively serving over 150 million customers — submitted joint comments slamming the new rule as a threat to grid reliability.

A threat to grid reliability

According to the Joint ISOs/RTOs, the proposed rule by the Biden EPA would “greatly exacerbate an ongoing loss of critical, dispatchable generating capacity that is needed to ensure reliability.” Dispatchable generating capacity is any resource that can increase or decrease electricity production on demand, such as coal, natural gas, nuclear, and oil power plants.

The Joint ISOs/RTOs are concerned because, historically, renewable and energy storage additions haven’t been sufficient to replace the retiring capacity of coal and natural gas plants to maintain reliability.

For example, since 2000, the U.S. has retired over 100 gigawatts (GW) of coal capacity while at the same time adding nearly 200 GW of renewables — a nearly 2:1 replacement.

However, the coal capacity provided nearly 100 GW of reliable capacity, whereas the renewables only provide about 40 GW. See the graph below.

Data provided by EIA-860 historical data.

As the ISOs/RTOs explain in their filing, wind and solar do not provide the same reliability to the grid and thermal generators:

Although each of the Joint ISOs/RTOs is seeing a rapid growth in renewable and energy storage systems interconnecting to the grid, given the intermittent and energy-limited nature of those resources, their capacity (or accredited) value is substantially discounted from the capacity (or accredited) value of thermal generation today… Although providing valuable carbon-free electricity, the new resources do not, at present, provide the same levels of essential reliability services – or attributes – as their thermal counterparts.

Emphasis added.

In other words, despite the extraordinary buildout of wind and solar in recent years, renewable resources are failing to provide the same level of reliability as coal and gas because they are weather-dependent and may be producing no electricity at all.

EPAs new Proposed Rule would contribute to this issue and threaten the reliability of the electric grid.

Reliability impact before implementation

The Joint ISOs/RTOs warned several times that this rule may impact grid reliability even before its implementation because investors would be incentivized not to invest in reliable existing power plants.

Here it is straight from the filing:

The ISOs/RTOs are already seeing retirement of generators that are concerning as they appear to be driven by a reluctance of investors to make the commitments needed to keep these capital-intensive resources operating… With continued and potentially accelerated retirements of dispatchable generation, supply of these reliability attributes will dwindle to concerning levels… As a result, the Proposed Rule can have negative impacts on electric grid reliability even before the effective date of this rule.

And again:

[T]he Joint ISOs/RTOs are also concerned about the chilling impact of the Proposed Rule on investment required to retain and maintain existing units that are needed to provide key attributes and grid services before the compliance date required by the rule. Investments are based, in part, on the expected revenues associated with continuing operation of the unit. Unit owners may decide to retire units early than incur additional expense and risk.

Viability of proposal in question

The Joint ISOs/RTOs criticized several other assumptions made by the EPA, including overstating the “commercial viability of CCS [carbon capture sequestration] and hydrogen co-firing” and ignoring “the cost and practicalities of developing new supporting infrastructure within the time frames projected.”

Without firm proof of the commercial and operational viability of these technologies, proceeding with these requirements could place the reliability of the electric grid in jeopardy. In short, hope is not an acceptable strategy.

Emphasis Added.

No reliability analysis conducted

Another key area of contention from the ISOs/RTOs, which the Center of the American Experiment also highlighted in our comments, was that the Biden EPA failed to even conduct a reliability analysis of the changes of the Proposed Rule.

Our comments sought to provide this missing reliability analysis to see if EPAs modeled grid could actually keep the lights on 24/7, 365 days of the year.

We found that in no year EPA modeled (2028, 2030, 2035,2040, 2045, 2050, and 2055) did the EPA ensure enough reliable capacity for MISOs grid to maintain reliability.

In our analysis, we used historical data from 2019 through 2022 and increased demand and wind and solar capacity factors to match EPA projections for each of the modeled years.

In fact, EPAs model year 2040 resulted in several 15-hour blackouts peaking at over 26,000 MW – the size of Minnesota and Wisconsin combined – as the graph below shows.

Joint ISOs/RTOs recommendations on Rule 111:

The Joint ISOs/RTOs finished by recommending the EPA not to adopt the Proposed Rule, noting the short comment period offered by the EPA “and the lack of dialogue on these specific issues leading up to the Proposed Rule have made it difficult for the Joint ISOs/RTOs to undertake the full analysis of reliability impacts that a Rule of this magnitude should include.”

They also recommended several changes they would make to the rule, including:

  1. The creation of a sub-category for existing facilities that are necessary for reliability and can be exempt from compliance.
  2. A process to monitor and adjust the Rule’s compliance based on the progress of the infrastructure needed to accommodate EPAs proposed changes to the grid.
  3. Allow allowance trading nationally or regionally.
  4. Update the definition of “System Emergency” for more clarification on when a unit can run due to reliability reasons.

These are beneficial changes to the Biden EPAs Proposed Rule 111, but likely wouldn’t be enough to address all the concerns raised by the Joint ISOs/RTOs, Center of the American Experiment, and other stakeholders around the country.

Hopefully, EPA takes the concerns of the largest grid operators in the country seriously, all of whom are sounding the alarm on the massive reliability issues already plaguing the country that would be exacerbated if this rule is adopted.