THE EPA CLEAN POWER PLAN

What Effects Will This Have On Your Bottom Line?

On June 2, 2014, The Environmental Protection Agency (EPA), issued its proposed Clean Power Plan. This introduces CO2 emission limits for existing electric generation facilities.

Most people agree that the plan will be good for the environment, and will reduce our countries dependence on fossil fuel. How this plan will impact our current electricity infrastructure, and ultimately you the end user is a little more complicated.

What Does the Plan Mean?

Implementation of the “Clean Power Plan” reduces fossil-fired generation. This is aimed at reducing CO2 emissions from existing power plants to 30 percent below 2005 levels by 2030. Under the EPA proposal, substantial CO2 reductions are required as early as 2020.

According to the EPA’s Regulatory Impact Assessment, generation capacity would be reduced by between 108 and 134 GW by 2020.

The proposed plan only applies to existing fossil-fueled generators. This plan sets emissions rate targets for each state. Power produced by renewable energy resources and verifiable energy savings from energy efficiency would count toward a reduction in a state’s emission rate.

How Will This Impact Our Current Electricity Grid?

Simply put, the “Grid” is complex system of wires and poles that connect Generators to Utilities to Consumers. Many experts claim the new rule poses a real threat to electric reliability. The EPA estimates that 12,400 megawatts of fossil fuel electricity generating capacity would be retired in Texas alone due to the new rule. It is not certain if Texas, and other neighboring States similarly affected, can afford to lose this much generation capacity. In a recent reliability analysis, ERCOT (Energy Reliability Council of Texas) warned the rule “could result in transmission reliability issues due to the loss of generation resources in and around major urban centers.”

Developing suitable replacement generation resources to maintain adequate reserve margin levels may represent a significant reliability challenge, given the constrained time period for implementation.

What Is Being Done to Ensure Reliability?

The North American Electric Reliability Corp. (NERC) plans to offer details on how to design a mechanism to prevent electricity generating capacity from being jeopardized when states move to comply with the regulations.

On August 14, 2014, the NERC Board of Trustees directed NERC to develop a series of special reliability assessments to examine the proposed plan. This report is NERC’s initial reliability review of the potential risks to reliability, based on the assumptions contained in the proposed clean power plan.

Janet McCabe, the acting assistant administrator for air and radiation, told the Federal Energy Regulatory Commission on March 31 that “it should go without saying that we are looking very hard at all of this information and thinking hard about how to take account of the suggestions in the final rule. You can expect EPA will address many of these ideas in the final power plan issued this summer.”

McCabe’s comments are raising expectations that EPA’s final version of its rule will incorporate some significant changes regard to timing.

How Will This Affect Your Business?

Opponents allege that energy prices will soar, depending on factors such as region, and generation resources. They claim that power companies forced to make expensive upgrades will impact customers for years to come. Proponents claim that despite higher prices in the short term, there will be long term benefits such as lower electricity bills, and a positive economic impact on the state and regional level.

Although the direct impact to end users will not be completely understood for quite some time, affects will differ based on many contributing factors. But what can you do to protect your business?

For more information on the EPA regulations, as well as other factors that directly affect your organization’s energy spend, contact one of our senior energy advisors today at 1.800.920.4631.

Matt Helland
Sr. VP of Client Relations

Sources:

nerc.com
eenews.net
bipartisanpolicy.org
pjm.com
usnews.com