Texas’ main power grid operator, in its second report in a month on U.S. EPA plans, said yesterday that potential or recently finalized federal environmental rules could affect reliability and costs as substantial coal-fueled generation may retire.

The Electric Reliability Council of Texas, or ERCOT, estimated that as much as 8,700 megawatts of coal-fired capacity could be phased out in future years in light of several possible EPA regulations.

The study incorporated and echoed some of the findings from a report last month on the potential effects of EPA’s proposed Clean Power Plan, which aims to reduce carbon dioxide emissions at existing power plants (EnergyWire, Nov. 18). Some environmental groups said the new report didn’t provide a complete picture.

ERCOT’s latest study again included an examination of the Clean Power Plan. The operator also looked at potential effects of Mercury and Air Toxics Standards (MATS); the Cross-State Air Pollution Rule; a regional haze program that seeks to improve visibility in national parks; a cooling water intake plan; effluent guidelines for steam electric power; and a coal combustion residuals plan.

“The results of this study indicate that the Regional Haze requirements and the Clean Power Plan will have significant impacts on the planning and operation of the ERCOT grid,” the operator said in its report. “Both are likely to result in the retirement of coal-fired capacity in the ERCOT region.”

ERCOT said unit retirements might lead to local transmission reliability issues, with a strain possible on the ability to integrate renewable resources.

The operator added that if the anticipated retirement of coal resources happened in a short amount of time “reserve margins in the ERCOT region could reduce considerably, leading to increased risk of rotating outages as a last resort to maintain operating balance between customer demand and available generation.”

ERCOT said the need for reliability might lead to curtailing some renewable resources and possibly to a lack of compliance with deadlines tied to the Clean Power Plan.

A ‘moderate to high risk of retirement’

The report listed potential compliance costs for certain generation. For the cross-state rule, the cost for coal compliance might be a range of 75 cents to $7.25 per MWh, while for gas units it could be 10 cents to $2.75 a MWh. The regional haze cost for coal was shown as possibly $450 to $573 per kilowatt.

ERCOT estimated that 3,000 MW to 8,500 MW of coal-fired capacity in its region would have “moderate to high risk of retirement,” primarily because of costs related to the proposed regional haze program. One MW can serve about 200 to 500 homes, depending on conditions, according to the council.

The study showed possible effects in the short term from the cross-state pollution rule. ERCOT said some regulations might not have big effects across the system, although they might affect the economics of some units.

The Clean Power Plan, ERCOT said, could result in a retirement of as much as 8,700 MW of coal-fueled capacity when considered with other requirements.

EPA’s proposed Clean Power Plan seeks a 30 percent reduction in carbon dioxide emissions from U.S. power plants by 2030 compared with 2005 levels. Targets vary by state, and the goal for Texas is about a 39 percent decline compared with 2012 in pounds per megawatt-hour.

ERCOT noted that resource owners must tell it no less than 90 days before a certain date that a unit would be mothballed or retired.

“Given the competitiveness of the ERCOT market and the current uncertainty surrounding environmental regulations, it is unlikely that generators would notify ERCOT of potential retirements or units suspensions before the minimum notification deadline,” ERCOT said in the report, noting issues could arise without early notification.

ERCOT suggested the Clean Power Plan would lead to higher energy costs at the wholesale and consumer levels in its region. Costs for consumers might rise as much as 20 percent in 2020, ERCOT said, not including costs related to transmission upgrades, higher natural gas prices, added ancillary services, energy efficiency investments, costs of new capacity, and costs related to retiring or reduced operation of coal-fired capacity.

Report questioned

ERCOT said its study included a survey of generators that use fossil fuels, and it also had modeling on potential effects of some proposals.

Environmental advocates were quick to raise questions yesterday about the latest report, while also pointing out data points they said could help Texas find a path to cleaner energy.

The Sierra Club, in an emailed release, called the study useful but “flawed and incomplete.” It said ERCOT used higher energy costs that weren’t in proportion with what’s expected, adding that it assumed a “worst-case scenario” for the Clean Power Plan.

“It omits data and information critical to making informed decisions about Texas’ energy market,” the Sierra Club said in the release. “It is also pessimistic about the ability of the Texas market to adjust to change, and market participants to develop new solar and wind resources, use natural gas more efficiently, take full advantage of the cost savings from improved energy efficiency, and demand response, and energy storage technology to make the system work.”

Jim Marston of the Environmental Defense Fund said in an emailed statement that ERCOT’s study showed Texas “can go a long way toward complying with the proposed Clean Power Plan by meeting other clean air safeguards” for which companies have had years to prepare.

Another group, the Advanced Energy Management Alliance, said via email that demand response should be an area of focus for ERCOT. The alliance said it would advocate in the coming months for Texas legislation to allow wide use of demand response without constraints on its growth.

Robbie Searcy, a spokeswoman for ERCOT, said the operator’s role “is to evaluate potential reliability impacts, and that’s what this study does by looking at potential impacts to resource adequacy as well as our ability to operate the transmission grid in a manner that is reliable.”

ERCOT’s report shows there’s work to do and decisions to be made as rules are prepared, said John Fainter, president of the Association of Electric Companies of Texas. He said shareholders and reliability will need to be protected.

“It takes time,” Fainter said of figuring out a plan, adding that “EPA doesn’t send us a magic wand that you can just wave over it.”

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