Reliability of the U.S. Electric System and Environmental Regulation A P R I L 2 6, 2 0 1 2 Christopher Van Atten Senior Vice President vanatten@mjbradley.com ICAC Annual Meeting Hilton Head, South Carolina
EPA Regulatory Roadmap for the Electric Sector 2010 2011 2012 2013 2014 2015 2016 2017 2018 MATS Develop MATS Compliance with MATS (new sources) Compliance with MATS (existing sources) Potential 4 th year* Potential 5 th year** Criteria Air Pollutants Develop CSAPR CSAPR stayed Potential compliance with CSAPR depending on outcome of litigation Interim CAIR Develop Supplementary CSAPR (TR2) Estimated Compliance Develop Criteria NSPS Revisions Develop Revised NAAQS Compliance with Revised Criteria NSPS for new and modified sources ( new dates from March 2011 proposal) SIP provisions developed in response to revised NAAQS (e.g., Ozone, PM 2.5, SO 2, NO 2, NO x /SO x, CO) GHG Compliance with Federal GHG Reporting Rule PSD/BACT and Title V Apply to GHG Emissions (PSD applies only for new and modified sources above tailored thresholds) Develop GHG NSPS for new sources Develop GHG NSPS for modified and existing sources Compliance for new sources (effective for new sources upon publication of proposal in Federal Register) Estimated Compliance (existing and modified sources) CCB Develop Coal Combustion By-Products Rule Pre-compliance Period Estimated Compliance 316(b) Develop 316(b) Regulations Pre-compliance Period Phase-In of Compliance (up to 8 years) Effluents Develop Effluent Regulations Phase-In of Compliance (5-year NPDES cycle) * Sec. 112(i)(3)(B) authorizes EPA/states to provide up to one additional year to comply with standards if necessary for the installation of controls. ** Enforcement discretion per EPA s December 2011 memorandum. Final Rule (publication date or court deadline) Final Rule (estimate; no deadline) 2
Coal Plant Retirements Announced Since 2010 MW 40,000 35,000 30,000 Cumulative Retirements Announced (MW) Plant Characteristics Avg. unit age: 53 years Avg. unit size: 153 MW 25,000 20,000 15,000 10,000 5,000 0 2010 2011 2012 Sources: MJB&A 3
Location of Announced Retirements Coal Plant Retirement Announcements Since 2010 500 to 1,405 MW 300 to 500 MW 150 to 300 MW 25 to 150 MW Source: MJB&A Analysis based on MJB&A tracking, EPA NEEDs 4.10, Ventyx Velocity 4
Reliability is Tied to Many Issues Generation Capacity Planning Procedures Transmission Capacity Market Conditions Aging generation fleet and distribution system Weak demand growth Shifting fuel prices Negative investment outlook Regulatory Choices Electric Reliability Load Management Electricity Demand 5
Key Concepts 1. Resource Adequacy: sufficient resources, in the form of available generation and demand response capacity, to meet peak demand in a given region 2. Grid Reliability: transmission adequacy, voltage support, and system stability 6
Reserve Margins and Targets in 2015 DOE analysis projects that target reserve margins can be met in all regions under stringent assumptions Source: U.S. DOE. Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations. December 2011. 7
PJM Interconnection PJM Progress in Evaluating Deactivation Requests 17 GW Source: MJB&A based on PJM Transmission Expansion Advisory Committee April 12, 2012 update, earlier PJM Generator Deactivation lists, and various press reports used to confirm plans. 8
Southwest Power Pool Staff delivered a report to the Strategic Planning Committee on the effects of MATS and CSAPR Rules in 2013 and 2015 (April 9, 2012). SPP Region Results based on survey of companies in the region. The lowest generation capacity margin over the three years would be about 22% in the summer of 2015, compared with SPP s targeted capacity margin of about 12%. Still evaluating impacts on SPP transmission plan. 9
ERCOT ERCOT s projected reserve margin is only slightly above target levels ERCOT Region The reserve margin for this summer was increased from 12.11% to 13.86% when Luminant announced plans to keep the Monticello coal plant (1,130 MW) on-line. Texas experienced the hottest summer on record in 2011 emergency procedures were initiated on seven days due to low operating reserves (no rotating outages). Source: ERCOT ERCOT is an energy only market no capacity market. ERCOT is evaluating whether energy only approach is sufficient to ensure resource adequacy. 10
ISO New England On April 2-3, 2012, ISO New England completed its sixth forward capacity market auction to procure resources for 2015-2016. Preliminary results indicate that the region was able to procure sufficient resources to meet its reliability needs: 30,757 MW of generating resources 3,628 MW of demand resources 1,924 MW of imports 2,853 MW of excess supply Existing power plants and demand resources may submit delist bids to withdraw from the capacity market. Those bids are evaluated to determine whether the resource is needed to ensure reliability on the power system. Final auction results and any resources retained for reliability will be filed with FERC by the end of the month. 11
MATS Compliance/retirement extensions to address reliability Reduced stringency of PM standard Limited use provision for oil-fired units 12
Compliance Timing Options for MATS 2012 2013 2014 2015 2016 2017 CAA s Three Year Compliance Track ~March 2015: MATS Compliance Deadline (unless extended) Fourth Year Extension Track under Section 112 One year extension requests filed with states States grant 4 th year extensions (by ~March 2015) ~March 2016: MATS 2016 Compliance Deadline (unless Administrative Order (AO) obtained for reliability critical units) Fifth Year Extension Track under CAA Section 113 ~March 2013: Companies anticipating an AO must submit compliance plans for owned/operated EGUs Upon learning of installation delay: submit notice of length of delay and request AO for reliability critical units ~ September 2015: request AO for retiring but reliability critical units ~by March 2016: EPA issues AOs for reliability critical units PJM, MISO and SPP have already started requesting information about compliance plans to coordinate outages, understand retirements, and assess any reliability concerns. ~ March 2017: MATS 2017 Deadline (unless caseby-case extension)
Issues to Watch On-going PJM reliability assessment and May capacity auction Report on resource adequacy in ERCOT due June 1 FERC-NARUC Reliability Forum next meeting scheduled for July 2012 FERC Whitepaper on MATS Extensions next steps unclear NERC Long-Term Reliability Assessment will be published in October timeframe 14
Appendix 15
NERC Regions 16