Houston — The final Clean Power Plan may have a lighter impact on Texas than the initial rule, but it could still impair reliability and hike retail prices over the next few years, according to an Electric Reliability Council of Texas report.
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On Friday, ERCOT released its analysis of the impact of the final CPP, which shows that in one set of scenarios, an additional 4,000 MW to 4,700 MW of coal-fired generation would retire by 2030 because of the new rules, and energy costs for consumers may increase by as much as 16% by 2030 due to the CPP on its own.
In contrast, a November 17, 2014, ERCOT report about the impact of the preliminary rule indicated the proposed carbon-dioxide limits would result in the retirement of an additional 3,300 MW to 5,700 MW of coal-fired generation more than would otherwise have retired. Also, the 2014 analysis indicated that the preliminary CPP would result in "increased energy costs for consumers in the ERCOT region by up to 20% in 2020."
"We continue to have concerns about the potential impacts on planning and operation of the ERCOT power grid," said ERCOT CEO Trip Doggett. "Based on our analysis, we are especially concerned about reliability risks associated with multiple unit retirements within a short time frame."
ERCOT is designed to "encourage new, more efficient technologies, but that change needs to occur at a pace that supports continued reliability," Doggett said in a prepared statement.
But John Hall, state director for Environmental Defense Fund's clean energy program, said reliability should not be a concern because the final CPP included a "safety valve" to allow plants that are needed for reliability to operate in conflict with a state's carbon reduction plan for a limited period.
And T.J. Ermoian, president of Texas Energy Aggregation, said: "I believe that the rapid advances in solar and energy storage, their speed in getting permitted, and accelerated development brought on by expiration of the alternative energy investment tax credit will fill most any void created by the inevitable retirement of coal plants."
Under the business-as-usual scenario, absent the CPP, 1,100 MW of natural gas-fired generation would be added by 2030, but with the CPP, an additional 300 MW to 1,800 MW of gas-fired generation would likely be added by 2030, the latest report shows.
Without the CPP, ERCOT expects 1,000 MW of wind capacity to be added by 2030, but with the CPP, an additional 3,600 MW to 8,400 MW would be developed.
The biggest addition by 2030 would be solar power, with or without the CPP, the latest report shows. In the business-as-usual scenario, 13,000 MW of solar capacity would be added, but an additional 400 MW to 1,100 MW of capacity would be added under the CPP scenarios.
Asked about the latest report's projections for price increases, Mark Burlingame, managing director of Dallas-based Energy Guidance Group, said the ERCOT forecast is "somewhat conservative."
"As an example of additional costs, ERCOT analysis indicates it is possible that 329 miles of new transmission lines will need to be constructed to support these new resources," Burlingame said. "In addition, 11 transformers will be needed. Excluding the transformers, total costs for these system upgrades could cost an additional $615 million."
The latest report, in some respects, correlates with a study issued Tuesday by the Environmental Defense Fund, which indicated that Texas is "88% of the way toward compliance" with the CPP.
Dana Lazarus, an ERCOT planning analyst who helped put together ERCOT's latest study, said: "We did see many consistencies with the EDF study."
The final CPP set a target of cutting emissions from the existing generation fleet to 32% below 2005 levels by 2030, whereas the preliminary rule set the target cut at 30% by 2030. The final rule also said interim CO2 reductions should be accomplished by 2022, whereas the preliminary rule said the interim reductions must be done by 2020.
The latest study covers three scenarios in addition to the business-as-usual case.
All of the models assume gas prices would rise from an average between $3.50/MMBtu and $4/MMBtu in 2016 to more than $6/MMBtu by 2030, but Warren Lasher, ERCOT director of system planning, said gas prices may rise more quickly as the US generation fleet switches to gas by 2030.
Texas Energy Aggregators' Ermoian said: "If Texas builds enough new LNG plants to shift gas toward being affected by global trends rather than primarily just domestic factors, we could see more volatility return to our market."
One CPP scenario assumes that the CO2 limit allows the ERCOT system to determine the least-cost way to comply, and does not place a price on CO2.
A different scenario applies a CO2 emissions price to cause ERCOT to achieve compliance with the limits.
The last scenario combines the CO2 emissions prices scenario with the impact of compliance with the regional haze rule.
"In the CO2 Price & Regional Haze scenario, unit retirements driven by the Regional Haze requirements put ERCOT-wide emissions below the emissions limit for the first interim performance period, resulting in a $0.00/ton CO2 price for the first three years of compliance," the study states. "These prices then increase in the subsequent performance periods as the CO2 emissions limits become more stringent. To meet the final emissions limit in 2030, a price of $22.50/st CO2 is required, or $21.00/st CO2 in the scenario that also includes Regional Haze."
The US Environmental Protection Agency's regional haze rule requires facilities that produce emissions that impair visibility to use best available retrofit technology to reduce those emissions, which include fine particulate and compounds that contribute to the particulates' formation, such as nitrogen oxides, sulfur dioxides and certain volatile organic compounds.
Texas is disputing the EPA's attempt to impose its regional haze federal implementation plan, rather than Texas' own state implementation plan.