Apparently we have struck a nerve at EPA. On Tuesday we released our new report, Assessing Emerging Policy Threats to the U.S. Power Grid. The message of the report is simple—the reliability of the grid is in danger because of policy, such as EPA’s regulation. In fact, a whopping 103 GW of reliable coal-fired electricity—enough to power the homes of 80 million Americans—is set to go offline because of EPA. On Wednesday, EPA responded with a blog post arguing that despite all of their actions, they actually care about grid reliability.
EPA’s argument does not stand up to scrutiny. The three reports they cite do not show that EPA regulations will safeguard reliability. On the contrary, they call into question EPA’s commitment to reliability. Worse, EPA is either dangerously ignorant of the true costs of maintaining a reliable power grid or they are blatantly dishonest. It’s tough to say which is worse.
Let’s review EPA’s argument. First EPA quotes Acting Assistant Administrator Janet McCabe who argues that EPA has a 40 year track record with the Clean Air Act, but omits that carbon dioxide regulation is completely different than previous regulations. McCabe said:
Over EPA’s long history of developing Clean Air Act pollution standards for the electric power sector, including the proposed Clean Power Plan, the agency has consistently treated electric system reliability as absolutely critical. Because of this attention, at no time in the more than 40 years that EPA has been implementing the Clean Air Act has compliance with air pollution standards resulted in reliability problems.
For sake of argument, let’s assume this is all true. But this argument does not help EPA. That’s because, for the first time in more than 40 years, EPA is regulating carbon dioxide emissions. The goal of EPA’s pollution regulations for the last 40 years was to eliminate all emissions from power plants that weren’t water vapor or carbon dioxide. That’s because water vapor and carbon dioxide are the unavoidable byproducts of combustion, which is the process that provides over two-thirds of our electricity in the U.S. That’s why EPA’s regulations for existing power plants creates four buildings blocks—three of which EPA does not even have the authority to enforce on the states because the regulation of carbon dioxide is so different from what EPA has ever done.
EPA Cites Three Studies—None of Which Argue that EPA’s Regulation Will Safeguard Reliability
Department of Energy
EPA argues, “a new Department of Energy report predicts the power sector would maintain reliability under the Clean Power Plan with only modest changes to natural gas pipeline infrastructure.” This is incorrect for a number of reasons. First, according to the DOE report, it is “not based on any real or proposed policy.” See page v and page 1. The DOE report specifically denies EPA’s claim that they would maintain reliability under the regulation of carbon dioxide from existing power plants.
Second, DOE’s report includes three cases—a reference case, an intermediate natural gas demand case, and a high natural gas demand case. The high natural gas demand case assumes the closure of 129 GW of coal-fired power. This is not a high natural gas demand case, but is what is actually going to happen under the combined pressures of EPA’s existing source rule and other anti-coal policies such as the Mercury and Air Toxics Standards. As we explain in a new report, at least 103 GW of reliable coal generation is set to go offline, on top of the more than 8 GW of reliable nuclear power that will also shutter as a result of federal policies. Coal and nuclear plant closures put increasing stress on the natural gas delivery system, which itself fell 19 GW short during last year’s polar vortex. All told, falling more than 130 GW short is a mainstream estimate.
Third, the DOE report assumes that new pipeline infrastructure will be built. This is a bit rich for EPA and DOE to argue that it is not a problem to build pipelines in the United States the same week that President Obama vetoed a bill to finally permit the Keystone XL pipeline. The President argued that six and a half years is not enough time to properly study the pipeline. The same activists who oppose the Keystone XL pipeline already oppose other pipelines and the administration is only emboldening their efforts.
Fourth, the DOE report assumes the natural gas production will continue to increase. This is not a terrible assumption, but the Obama administration is working to reduce natural gas production—not increase it. Natural gas production on federal lands has already fallen under the Obama administration. Plus, EPA is planning new regulations on methane emissions, specifically from new oil and gas drilling, the federal Bureau of Land Management is planning a new regulation on hydraulic fracturing, and there is nothing stopping EPA from making the carbon dioxide regulations on new power plants so strict that it is impossible to build new natural gas power plants.
EPA has already proposed a regulation on new power plants that will prevent new coal-fired power plants from being built. There is no reason to believe EPA will not do the same to new natural gas power plants. After all, natural gas power plants emit carbon dioxide, and the goal of EPA’s regulations is not to have an actual impact on climate change, but to reduce carbon dioxide. Therefore, their logic dictates that EPA will implement much tighter carbon dioxide controls on new natural gas power plants.
DOE’s report does not help EPA make the case that they care about reliability.
The Brattle Group
EPA also cites a recent study from the Brattle Group for a group called Advanced Energy Economy. According to their website, “Advanced Energy Economy is a national association of business leaders who are making the global energy system more secure, clean, and affordable.” Their members are groups like the Solar Energy Industry Association, First Solar, RES Americas, and Fahr LLC, among others. Fahr LLC, according to their press release is, “an umbrella entity for prominent investor and philanthropist Tom [Fahr] Steyer’s extensive business, policy, political, and philanthropic efforts.”
Instead of a definitive critique of the Brattle Group’s report, I’ll let Jurgen Weiss, senior researcher at the Brattle Group, explain:
[P]eople recognize that NERC put out some concerns. Those concerns were not really based on a very in-depth and final, if you want, quantitative analysis of how this will play out, because you can’t. And I think our report is in the same vein. We also have not based it on some kind of exhaustive quantitative modeling of the future since we don’t know it, but we propose alternatives, and so people are appreciative of having alternatives out there that NERC can and perhaps should consider as it moves forward in its own analysis.
EPA claims that the “Authors [of the Brattle Report] concluded that the plan’s critics haven’t fully addressed the options that utilities and grid operators have to achieve EPA’s carbon emissions reduction goals without causing blackouts.” But EPA omitted the fact that the Brattle Group itself hasn’t fully addressed these same options.
Furthermore, Weiss admits that EPA’s existing source rule could impact grid reliability depending on the actions taken by the states. As Weiss explains:
What [NERC] seem[s] to be a little more worried about is what states will ultimately do in their state implementation plans and whether they will make full use of those tools, whether they’re, you know, operational tools or technology tools or the flexibility tools we talked about, like regional cooperation, or whether we’ll pick a solution or strategy to comply that actually narrows their choices in ways that, then, could impact reliability.
One serious issue with regional cooperation is anything that would be binding between states would require an interstate compact and the Constitution requires interstate compacts to be approved by Congress. It is unlikely states will have the time to hammer out interstate compacts or for Congress to approve them. Therefore, regional cooperation would have to be voluntary and nonbinding.
The Brattle Report does not provide much support for EPA’s argument that reliability will not be threatened by EPA’s proposed regulation. In fact, Weiss raises the issue that states need to do a lot in order to avoid grid reliability problems, and this is a tall order for the states to accomplish with limited time—especially because the changes will drive up electricity rates.
Lastly, EPA claims that a report from the Analysis Group provides evidence that reliability is not an issue. EPA quotes from the report, arguing “As proposed by EPA, the Clean Power Plan provides states and power plant owners a wide range of compliance options and operational discretion [. . .] that can prevent reliability issues while also reducing carbon pollution and cost.”
EPA failed to read the next paragraph which contains a very important caveat—the needed flexibility isn’t necessarily in EPA’s proposed regulation. The Analysis Group explains:
Clean Power Plan is fundamentally different from the Mercury and Air Toxics Standard (MATS) and is well-suited to utilize such flexible and market-based approaches. Experience has shown that such approaches allow for seamless, reliable implementation of emissions-reduction targets. In its final rule, EPA should clarify acceptable or standard market-based mechanisms that could be used to accomplish both cost and reliability goals.
Moreover, EPA has stated repeatedly that it will write a final rule that reflects the importance of a reliable grid and provides the appropriate flexibility. We support such adjustments in EPA’s final rule as needed to ensure both emissions reductions and electricity reliability. [emphasis added]
In other words, the Analysis Group has concerns that EPA’s proposed rule isn’t sufficiently clear to allow enough flexibility to actually protect grid reliability. Otherwise, “such adjustment in EPA’s rule” would not be necessary.
Is EPA dangerously ignorant of the electric grid (or just good at committing logical fallacies)?
After citing three studies that don’t support its position, EPA goes into ad hominem attack mode, shooting the messenger so it doesn’t have to deal with the message. EPA opines:
As with anything EPA does, a handful of special-interest critics are automatically opposed. They claim the Clean Power Plan will threaten reliability because they benefit from maintaining the status quo. In fact, failing to take steps to modernize our electric grid is the costliest thing we could do.
EPA provides no evidence that its critics aren’t concerned about safeguarding grid reliability. But beside the ad hominem, EPA says that “failing to take steps to modernize our electric grid is the costliest thing we could do.” This is a not only a naked assertion devoid of any support, but it is also not clear what EPA means by “modernizing our electric grid.” If EPA means that increasing the use of renewables (to comply with their carbon dioxide regulations) is “modernizing the grid” then they are dangerously ignorant of the way the power grid works and the true costs of different generation technologies.
The low-cost sources of electricity generation are, existing hydro, nuclear, coal, and combined cycle natural gas plants (in that order). These sources are cheaper than any new sources of generation—cheaper than new combined cycle natural gas, new wind, new solar, new anything. It isn’t 100 percent clear what EPA means by modernizing the grid, but if they mean closing existing power plants, it will increase the cost of electricity. That would seem to be “the costliest thing we could do.”
EPA’s blog post should make people more concerned about grid reliability. EPA took the time to try to argue that they are working to safeguard the reliability of the electric grid and failed. They cite three studies, but in each case the studies do not support EPA’s position. In the words of the DOE, their study is “not based on any real or proposed policy.” So it’s hard to claim, as EPA did that the study “predicts the power sector would maintain reliability under the Clean Power Plan” because it didn’t study that plan. The Brattle Group’s study admits that the EPA rule could impact grid reliability depending on the actions taken by the states, and the Analysis Group study explains that, at the very least, EPA’s regulation is not explicitly flexible enough to “ensure both emissions reductions and electricity reliability.”
EPA should withdraw the rule in the name of electricity reliability. If EPA cannot identify studies which explicitly show the rule will safeguard the reliability of the electric grid, then Americans are wise to be concerned.
 Another reliability-threatening rule from EPA, the Mercury and Air Toxics Standard (MATS), is responsible for shuttering the bulk of the 54 GW of coal-fired generation that will come offline before the Existing Source Rule takes effect. The trouble with claiming success on MATS is that the deadline is in April—EPA is celebrating a milestone it has yet to reach.
 DOE explains on page v, “The purpose of this study is to understand the potential infrastructure needs of the U.S. interstate natural gas pipeline transmission system under several future natural gas demand scenarios. Specifically, three scenarios were developed: a reference scenario and two scenarios with increased electric sector natural gas demand. Both increased demand scenarios—an Intermediate Demand Case and a High Demand Case—are based on a simple, illustrative national carbon policy applied to the electric power sector (not based on any real or proposed policy) that drives increased electric sector natural gas use. The Intermediate and High Demand Cases differ only in their underlying assumptions about coal-fired power plant retirements. In particular, the High Demand Case, which assumes greater coal-fired power plant retirements, is intended to be an upper-bound test case on natural gas consumption in the electric power sector.”