A wave of coal plant closures in the Midwest tied to new U.S. EPA clean air rules is squeezing critical reserve margins — the excess power that’s provided a buffer against reliability problems — in Michigan, Kentucky, Iowa and Indiana, a top grid expert warned yesterday.

Clair Moeller, who supervises transmission and technology for the Midcontinent Independent System Operator, told federal regulators in Washington, D.C., that the Midwest is not on pace to achieve a goal of 14.5 percent reserve margins in 2016.

Moeller said capacity will be tight in MISO, which oversees the grid in 15 states from the Gulf Coast to Manitoba, in 2016 and beyond. The region is slated to retire 12,600 megawatts by the end of 2016 to comply with EPA’s Mercury and Air Toxics Standards (MATS).

“My job is to be the canary in the coal mine,” Moeller said during an interview at the Federal Energy Regulatory Commission. “It’s the coal plant closures and the time required to replace them.”

Moeller, referencing a survey released this summer, told FERC members yesterday that MISO will see a 2.3-gigawatt margin shortfall in its north and central regions. A lack of adequate transmission will prevent those areas from tapping into a capacity surplus in MISO’s southern footprint, he added, meaning the region will likely rely more heavily on “emergency procedures,” including demand response, backup diesel generators and various contracting methods.

The tight reserve margins mean balancing demand and supply will become more critical, he said.

“During the past decade, we haven’t had to care very much because we had such a surplus of capacity that loss of load risk was trivial. Thirty percent reserve margin meant you could mail it in, frankly,” Moeller said. “It’s time to sharpen the pencil and make sure we’re not making assumptions within our math that are too risky. These are forecast and statistical kinds of numbers, so we’re not going to be right.”

Moeller said it’s unclear whether operators in MISO will need more time to comply with MATS.

FERC Chairwoman Cheryl LaFleur said the agency has heard a number of requests are “in the pipeline” from companies seeking a fifth year to comply with MATS, but none in MISO.

“We are aware of a couple of projects that are … retiring a coal facility and replacing it with a gas facility. They’re still talking about their construction schedule,” Moeller said. “If the construction schedule looks like we’ve got a gap there, we’ve told those two projects we would support their request.”

Separately, MISO released a report this week that showed EPA’s carbon proposal could put an additional 14,000 MW of coal capacity at risk of retirement (EnergyWire, Sept. 18).

“We are concerned as we move through the next tranche of environmental regulations, we expect this tight capacity situation to persist for a long time,” Moeller said. “That is causing us to relook at some of our rules.”

Going forward, MISO will examine tightening its definitions about what constitutes emergency resources and availability. MISO is also looking at adjusting market rules — or possibly changing business practices — to ensure entities that come to the market short are taken offline first, he said.

Other panelists were more optimistic but acknowledged 2016, the compliance year for MATS, will be tricky.

Eric Callisto, a member of the Public Service Commission of Wisconsin, reminded FERC that reserve margins will be low but sufficient in 2016, and states have been working with MISO for months to address the problem, including constructing new projects and upgrading facilities. Callisto also noted the concern is concentrated in pockets throughout the Midwest.

“This is not a footprintwide problem,” he said.

John Quackenbush, a member of the Michigan Public Service Commission, said most of that state’s concern is focused on the Upper Peninsula, where the only baseload plant is slated for retirement. “We also have contentious relationships between parties up there,” Quackenbush said.

Callisto and Quackenbush said they’re relatively comfortable with MISO’s model for ensuring the region has enough power, a point Moeller said boosted his outlook.

“There’s no doubt that we’ve gotten to a spot that is tight, that’s absolutely tight, you can’t contest that,” Callisto said, but he added that the region has been resourceful at ensuring reliability with tight margins.

“My confidence springs from the answers of these two gentlemen,” Moeller said.

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