3. 20 Public Utilities Fortnightly July 2015 www.fortnightly.com
sources – for renewable energy to represent 13 percent of total
output, and to retain nuclear generation at risk for retirement,
while building five planned nuclear units.
Block 4. Reduce energy consumption through state-driven
energy efficiency programs by 10.7 percent by 2029.
A state would not be required to meet the requirements of
each building block, but rather could use any combination of
the building blocks (or even another strategy) to achieve the state
emission’s target. EPA would also allow states to incorporate new
fossil fuel generators into the state’s plan for existing generators.10
By June 30, 2016, each state would either submit its imple-
mentation plan or, alternatively, indicate that it will participate
in a regional plan. But a little extra time to coordinate could be
obtained by providing plan information in phases: the final pieces
of the stand-alone plans would be sub-
mitted by June 30, 2017, with the more
complex regional plan information due
June 30, 2018. These state plans would
outline interim compliance by 2020,
full compliance by 2029 and be feder-
ally enforceable.11
The implementation
schedule is aggressive: the 2020 interim
target would occur just two years after
submission of the regional compliance
plan. Finally, a state’s failing to submit
a complying plan could result in severe
consequences: EPA could mandate a federal plan for that state
and impose sanctions (with the approval of the Secretary of
Transportation), including loss of highway funds and financial
support for public transportation.12
Reaction
EPA has received more than 4 million comments on the Clean
Power Plan.13
As a general matter, the criticism revolves around
two arguments – (1) EPA does not have legal authority to issue
and implement the rule and (2) implementation would adversely
impact reliability, especially if additional time is not provided for
compliance. On March 31, 2015, the White House submitted to
10. A state could also convert its emission rate target of CO2/MWh to a mass-
based target of total tons of CO2.
11. However, EPA also requested comment on a less stringent application of the
building blocks that would be implemented by 2025, instead of 2030: (1)
improving the heat rate of coal-fired generators by 4% instead of 6%; (2)
redispatching gas-fired, combined cycle generators at 65% capacity factor
instead of 70%; (3) use a value of 1% instead of 1.5% for annual incremental
electricity savings from demand–side energy programs. 79 Fed. Reg. at
34898. Given that several commenters have has for more time to implement
the Clean Power Plan, there may be little appetite for this option.
12. 42 U.S.C. § 7509.
13. Testimony of Janet McCabe, EPA Acting Assistant Administrator, at FERC
Technical Conference (March 31, 2015).
different fuel sources, such as a fossil fuels (coal, oil, and natural
gas), nuclear, and renewable sources (wind, solar, and hydro-
electric). Most electricity, however, is generated by burning coal
and natural gas. Indeed, in 2013, approximately 40 percent of
the power in the U.S. was generated by burning coal, while
gas combustion accounted for another 26 percent.5
These fossil
fuel-fired generators are the largest emitters of greenhouse gases
(GHG), primarily in the form of CO2, described by EPA as
the “primary GHG pollutant,” and which accounts for “nearly
three-quarters of global GHG emission and 82% of U.S. GHG
emissions,” according to the EPA.6
Clean Air Act Section 111 creates a two-step process for issu-
ing standards of performance (i.e., emissions standards): first,
establish standards under Section 111(b) for new and modified
generation sources and second, after completing the first step,
establish standards for existing sources under Section 111(d). In
particular, Section 111(d) requires EPA and the various states to
work together to achieve air quality standards, with each state
submitting a plan for establishing and implementing the “best
system of emission reduction” (BSER) for existing emission
sources,7
while EPA promulgates regulations establishing emission
guidelines and overseeing the state plan submission process.8
Working within this statutory framework and noting each
state’s generation mix in 2012, the Clean Power Plan proposes
state-specific goals reflecting EPA’s calculation of the emission
limitation that each state can achieve through the application
of the BSER to existing fossil fueled generation units.9
Thus,
the Clean Power Plan provides states with the “flexibility” to
utilize a portfolio of four “building blocks” to achieve CO2
emissions targets:
Block 1. Improve heat rates of coal-fired EGUs, by six per-
cent on average.
Block 2. Dispatch newer natural gas combined-cycle (NGCC)
generators at up to a 70 percent capacity factor instead of older,
coal-fired generators.
Block 3. Increase generating capacity from low-emitting power
6. 79 Fed. Reg. at 34833.
7. See Clean Air Act § 111(d)(2) (EPA can issue Federal Implementation Plan if a
state plan is not satisfactory).
8. While there are no current greenhouse gas regulations for new generation
units, EPA has a issued a proposed rule. Standards of Performance for Green-
house Gas Emissions From New Stationary Sources: Electric Utility Generating
Units, 79 Fed. Reg. 1430 (Jan. 8, 2014). Specifically, the proposed rule would
apply to fossil-fired generating units (1) at least 25 MW in size, (2) for which
construction commenced after January 8, 2014, (3) that supply more than
one-third of potential output and 219,000 MWh/year (on a three-year rolling
average) to the electric grid. Id. at 1445-46. Given that the existing source per-
formance standards (ESPS) were proposed months before the new source per-
formance standards (NSPS) were finalized, producing for some a perplexing
procedural problem.
9. 79 Fed. Reg. at 34834.
EPA’s legal
authority
hinges on
deference –
its right to
construe an
ambiguous
provision.
4. July 2015 Public Utilities Fortnightly 21www.fortnightly.com
Some commentators, including constitutional law scholar
Laurence H. Tribe, contend that the Clean Power Plan violates
the United States Constitution because it seizes authority that
should be lodged in Congress and the States and runs afoul of
the Due Process and Takings Clause of the Fifth Amendment
by forcing power plants and the energy industry to shoulder the
burden of lessening global CO2 emissions.19
EPA’s final rule will
surely address these concerns. But this article instead focuses on
three issues involving EPA’s legal authority to issue the regulations
proposed by the Clean Power Plan.
First, does EPA have authority to regulate EGU emissions
under Section 111(d)?
Section 111 provides that EPA may prescribe regulations
under which each state submits a plan establishing “standards
of performance for any existing source
for any air pollutant (i) for which air
quality criteria have not been issued or
which is not . . . emitted from a source
category which is regulated under sec-
tion [112]… .” Because EPA regulates
EGUs under Section 112 (by virtue
of the Mercury Air Toxics Standards
[MATS] rule), a plain reading of the
statute would appear to prohibit the
Clean Power Plan. The Supreme Court
has said so too.20
Even EPA’s Legal
Memorandum admits that the Section 112 exclusion “appears
to preclude” authority to issue the Clean Power Plan.21
Maintaining that its legal authority to issue the rule requires a
more rigorous analysis than simply reading the Section 112 exclu-
sion published in the United States Code, EPA claims that there
is an ambiguity resulting from the enactment of the 1990 Clean
Air Act amendments. The House amendment (which contains
the Section 112 exclusion) and the Senate amendment (which
arguably permits dual regulation) were not reconciled during the
Conference Committee, with both amendments being published
in the Statutes at Large.22
From EPA’s perspective, the House and
Senate provisions conflict with each other, which in turn allows
EPA to construe Section 111(d) to permit regulation of pollution
sources under both Section 112 and Section 111(d), as long as
19. See Comments of Laurence H. Tribe and Peabody Energy Corporation,
Docket ID No. EPA-HQ-OAR-2013-0602 (Dec. 1, 2014); see also Testimony
of Laurence H. Tribe before the House Committee on Energy and Com-
merce, Subcommittee on Energy and Power (March 17, 2015).
20. American Electric Power Co. Inc. v. Connecticut, et al., 131 S.Ct. 2527, 2537 n.7
(2011); see also New Jersey v. EPA, 517 F.3d 574, 583 (D.C. Cir. 2008)
(“under EPA’s own interpretation of the section [111(d)], it cannot be used to
regulate sources listed under section 112.”).
21. Legal Memorandum at 21.
22. 79 Fed. Reg. at 34853.
the United Nations Framework Convention on Climate Change
a pledge that the U.S. will reduce greenhouse gas emissions by
26 percent to 28 percent of 2005 levels over the next 10 years.14
As a result, the issue is not whether EPA will issue a final rule,
but rather how will it address the major issues and reinforce its
positions in advance of the anticipated legal challenges.
In response to requests from stakeholders, FERC convened a
series of four technical conferences across the country to discuss
the implications of various compliance approaches to the Clean
Power Plan, focusing, in particular, on the issues subject to its
jurisdiction – reliability, wholesale energy markets, and energy
infrastructure. One message was consistently relayed by panelists
in all four technical conferences – FERC should publicly state
that EPA’s interim targets for 2020 are unworkable. 15
That
feeling was well expressed by Gerry Anderson, Chairman and
CEO of DTE Energy:
“Because of the way the interim targets are designed,
80 percent of states must achieve more than half of their 2030
emission rate goals by 2020 and 11 states must achieve 75 percent
or more of their 2030 goals by 2020.”16
FERC Chairman LaFleur stated that “people both for and
against the Clean Power Plan are looking to us to publicly
validate their views. I‘ve taken a pretty firm line that I don‘t
think that‘s FERC’s role.”17
It will be interesting to see whether
FERC’s “role” changes, now that Commissioner Norman Bay
has become Chairman.
Legal Authority
Section 111(d) of the Clean Air Act is relatively short, has seldom
been used by EPA to promulgate regulations, and has never been
tested by any judicial review. It is, to say the least, an unlikely
statute on which to base legal authority for the broad GHG
emissions reductions sought by the Clean Power Plan. Indeed,
recognizing that its legal authority will be challenged, EPA, in
addition to the legal analysis in the proposed rule, also issued a
companion legal memorandum, more than 100 pages in length,18
to defend its reliance on Section 111(d) for authority to issue
the proposed rule.
14. https://www.whitehouse.gov/the-press-office/2015/03/31/
fact-sheet-us-reports-its-2025-emissions-target-unfccc.
15. See, e.g., “Central region stakeholders urge FERC to back flexibility on interim
CPP goal,” Inside FERC (April 6, 2015) at 1.
16. Gerry Anderson, Chairman and CEO of DTE Energy, EPA’s Clean Power
Plan: Achievable Goals and Deadlines are Critical for Reliable, Affordable
Electricity, The Hill (Feb. 19, 2015) (Op-Ed). Anderson represented DTE
and the Edison Electric Institute (the electric utility trade association) at the
February 19, 2015 FERC technical conference.
17. Transcript of Chairman Cheryl LeFleur’s National Press Club Speech (Jan.
27, 2015) at 3.
18. Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for
Existing Electric Utility Generating Units (June 2, 2014).
EPA could be
encroaching
on FERC’s
exclusive
authority
over regional
energy
markets.
5. 22 Public Utilities Fortnightly July 2015 www.fortnightly.com
natural gas combined-cycle generators up to 70 percent. EPA
“assumed that each state would implement it on a state-by-state
basis, without relying on a multi-state regional grid.”26
Yet EPA
recognized that “because all of the lower-48 states, with the
exception of Texas, are part of a multi-state regional grid each
state’s implement ion of building block 2 would, as a practical
matter necessarily occur on an interstate, and not intrastate
basis.”27
EPA could be encroaching upon the FERC’s exclusive
jurisdiction over regional energy markets and wholesale sales
of electric energy.28
Further, the organized electric markets
administered by the RTOs (“Regional Transmission Organiza-
tions”) typically use models grounded on economics (least-cost)
and security constraints (physical limitations on the grid) to
dispatch electricity from generating plants and other resources.
Meeting the EPA’s emissions targets will require the RTOs, which
are public utilities, to transmog-
rify the models into what has
been labeled as “environmental
dispatch,”29
with the likely result
reducing dispatch of the most
economic generation resources
and causing higher market clear-
ing prices to ratepayers.30
Even EPA recognizes that the
redispatch of NGCCs at a 70-percent utilization factor would
result in an average cost of $30/metric ton to reduce CO2 emis-
sions and this was a “reasonable” cost to impose on electric
ratepayers, because it would not cause “significant economic
impacts.”31
But that Federal Power Act requires FERC to deter-
mine the “just and reasonable” rates for wholesale power: “Even
if the effect of . . . would make a small dent in the consumer’s
pocket, … the Act makes unlawful all rates which are not just and
reasonable, and does not say a little unlawfulness is permitted.”32
Traditionally, FERC’s policy is to not favor one type electric
generation fuel over another: that is, to avoid preferring wind
26. Legal Memorandum at 90.
27. Legal Memorandum at 91.
28. See 16 U.S.C. § 824(b)(1).
29. FERC Commissioner Moeller describes compliance with the Clean Power
Plan as requiring a change from “economic dispatch” to “environmental dis-
patch.” Testimony of Commission Philip Moeller, House Energy Com-
merce Subcommittee on Energy Power (July 29, 2014).
30. Southwest Power Pool letter to EPA Administrator McCarthy (Oct. 9, 2014)
(SPP Letter) at 9 (compliance with the CPP will have “material adverse eco-
nomic impacts on the SPP customers”); PJM Interconnection Economic
Analysis of the EPA Clean Power Plan Proposal (March 2, 2015) at 6-7
(“Electricity production costs are likely to increase with compliance because
larger amounts of higher-cost, cleaner generation will be used to meet emis-
sions targets.”).
31. 79 Fed. Reg. at 34865.
32. Federal Power Comm’n v. Texaco, Inc., 417 U.S. 380, 399 (1974) (con-
struing the NGA).
EPA is not regulating the same pollutant under both sections.
Under the Supreme Court’s two-step analysis as first
announced in 1984 in the case of Chevron, USA Inc. v. NRDC, a
court will first give effect to the unambiguous intent of Congress,
but upon finding an ambiguity will defer to EPA’s interpretation
of the statute it administers.23
With the legal authority for the
Clean Power Plan hinging upon the deference afforded EPA
in construing an “ambiguous” provision, look to see whether
EPA will attempt to further buttress its “ambiguity” argument
in the final rule. Ultimately, the courts will determine whether
EPA’s “interpretation” is entitled to deference or, alternatively, is
merely rationale for not complying with the Section 112 exclusion
published in the United States Code.
Second, the Clean Power Plan would authorize state plans
that achieve emissions reductions using a portfolio approach
(e.g., increased use of natural gas renewable energy resources,
as well as demand-side efficiencies), as opposed to relying solely
on the EGUs. Section 111(d)(1) requires each state to submit
a plan that “(a) establishes standards of performance for any
existing source [for certain air pollutants] … and (b) provides
for the implementation and enforcement of such standards of
performance [emphasis added].” EPA claims that it does not need
additional Congressional to require a portfolio approach, because
of its interpretation of Section 111(d)’s requirement that states
set performance standards “ for” affected resources:
Although “for” could be read as meaning that the standards
must apply to affected sources, ”for” is also reasonably interpreted
to have a more capacious meaning: “Standards (such as EE and
RE standards) are reasonably considered to be “for” affected
sources if they would have an effect on affected sources … .24
Consequently, the legal authority for the Clean Power Plan
could come down to the definition of “for.” Since the list of
actions that could affect emissions sources is limited only by
one’s creative imagination, for this “capacious” argument to be
successful on appeal, EPA may desire to identify some meaningful
limitations on its jurisdictional reach under Section 111(d). It
will be interesting to see if and where EPA draws the line on the
limits of its jurisdiction.
Third, assuming that EPA has authority to engage in the
portfolio approach to reduce CO2 emission, the issue is whether
building block 2 regulates matters within the jurisdiction of the
Federal Energy Regulatory Commission (FERC).25
Building
block 2 requires each state to reduce emissions by increasing
23. Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 842-43 (1984).
24. 79 Fed. Reg. 34930
25. Similarly, 21 states currently have no renewable portfolio standard (RPS)
or renewable energy (RE) program. Yet, by administrative fiat building
block 3 would effectively require an RPS or RE program in those 23 states.
See 79 Fed. Reg. at 34868 (Table 6 – State RE Generation Levels for State
Goal Development)
Fuel diversity is
a good thing.
Changing the
mix to cut CO2
could undo that.
6. July 2015 Public Utilities Fortnightly 23www.fortnightly.com
As noted above, EPA determined each state’s emissions rate target
based on the 2012 generation fuel mixes. Figures 1 and 2 set
forth the fuel mix percentages for the country’s seven organized
markets and the average for the United States.35
The charts illustrate several key points. First, note that the
organized markets have a diverse
fuel mix, but that there are signifi-
cant regional differences. California
and New England rely very little
on coal-fired generation. Not so in
MISO, PJM, and SPP, where coal is
definitely the baseload fuel. Indeed,
notice that the generating output of
coal-fired generation units is even
greater than the respective generation capacity. Further, nuclear
generation represents approximately a third of generation output
in PJM, New York, and New England: retaining that carbon-
free generation will be vital to the success of the Clean Power
Plan. Finally, in most organized markets output from renewable
generation resources falls well under 11 percent. Viewed against
this fuel mix backdrop, EPA’s twin goals – of reducing coal-fired
generation output and increasing the use of natural and renewable
35. See Susan Tierney, Paul Hibbard, and Craig Aubuchon, Electric System Reli-
ability and EPA’s Clean Power Plan: The Case of PJM, Analysis Group (March
16, 2015) at 8 (SNL Financial).
over coal, or natural gas over nuclear. It will be interesting to see
whether Clean Power Plan results in a change of FERC policy.
However, even without a change in policy, a former FERC
General Counsel believes that FERC could still facilitate CO2
regulation in wholesale market design:
For example, when California created a cap-and-trade program
for greenhouse gas emissions, the FERC approved changes in
wholesale market design which accommodated it. But that is very
different from the FERC creating greenhouse gas policy by impos-
ing its own price on carbon emissions by wholesale sellers. Such
an action would constitute a jurisdictional bridge too far … .33
Accordingly, “the ISO/RTO Council has already begun
working on regional measurement and compliance options that
could be incorporated into wholesale market design.”34
It remains
to be seen whether an RTO (or its transmission owners) will seek
to modify the RTO’s market design, much less whether FERC
will approve the changes.
Reliability Concerns
33. John S. Moot, Subsidies, Climate Change, Electric Markets, and the FERC, 35
Energy LJ 345, 348 (2014).
34. John S. Moot, Subsidies, Climate Change, the FERC, 35 Energy LJ at 359,
citing ISO/RTO Council, EP CO2 Rule—ISO/RTO Council Reliability
Safety Valve and Regional Compliance Measurement Proposals (2014) avail-
able at http://www.isorto.org/Documents/Report/20140128_IRCProposal-
ReliabilitySafetyValve-RegionalComplianceMeasurement_EP-CO2Rule.pdf.
At bottom, gas
infrastructure
issues can and
will impact
compliance.
Fig. 1
Fig. 2
Capacity by Region
Energy Output by Region
Percent of Generating Capacity (MW) by Fuel (2012)
Percent of Generation Output (MWh) by Fuel (2012)
Generation Fuel CAISO ERCOT ISO-NE MISO NYISO PJM SPP USA
Coal 3% 20% 7% 39% 6% 40% 36% 29%
Nuclear 12% 5% 13% 7% 12% 16% 4% 9%
Natural Gas 54% 62% 45% 39% 52% 30% 43% 41%
Renewable 30% 12% 13% 12% 17% 7% 15% 16%
Other 1% 0% 22% 3% 12% 6% 3% 5%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Generation Fuel CAISO ERCOT ISO-NE MISO NYISO PJM SPP USA
Coal 5% 31% 4% 56% 3% 44% 60% 38%
Nuclear 23% 11% 32% 14% 29% 33% 6% 19%
Natural Gas 48% 50% 55% 23% 45% 18% 25% 30%
Renewable 23% 8% 9% 6% 21% 3% 9% 11%
Other 0% 0% 1% 1% 2% 1% 0% 1%
Total 100% 100% 100% 100% 100% 100% 100% 100%
7. 24 Public Utilities Fortnightly July 2015 www.fortnightly.com
to incorporate into the final rule the following four modifications
that would mitigate potential negative impacts to the electric grid’s
reliability, while also minimizing complexity and administrative
burden. As written:
(1) [R]equire State Plans to include a component that describes
the evaluation of impacts to state, multi-state, and/or regional
grid reliability from the implementation of the proposed State
Plan. In organized market regions, ISO/RTOs would perform the
evaluation. In vertically integrated regions, the registered entities
responsible for reliability in the state and/or region . . . would
perform the evaluation. This component would also describe
the assessment results and how the State Plan considered and/
or addressed any identified impacts to grid reliability during the
development of the State Plans;
(2) [E]stablish criteria for EPA to use in reviewing the State
Plan component that describes the evaluation and consideration
of impacts to state, multi-state,
and/or regional grid reliability
from the implementation of the
proposed State Plan;
(3) Apply … “glide path” flex-
ibility . . . to address gas pipeline
and transmission infrastructure
(“gas infrastructure”) needs to
also address electric system infra-
structure (“electric infrastruc-
ture”) development where: (1)
the 2030 compliance deadline
is achievable and (2) flexibility
is needed due to the timing of
necessary electric infrastructure development; and
(4) [A]dopt a “Reliability Safety Valve” (“RSV”) process
applicable during State Plan implementation to address unantici-
pated grid reliability impacts resulting from the administration
of the State Plan.41
Similarly, given the rapidly approaching 2020-29 interim emis-
sions performance period, some RTOs are concerned that there
will be insufficient time for reliable and efficient implementation.
Thus, Southwest Power Pool suggests that EPA extend by at least
five years “the proposed schedule for compliance in order for
the necessary electric transmission, electric generation, and gas
pipeline infrastructure to be identified and constructed within and
across the appropriate planning areas.”42
MISO, however, urges
EPA to remove the 2020-2029 interim emission performance
period altogether, noting that its Multi-Value Project portfolio
of electric transmission projects (which support both economic
41. Comments of the ISO/RTO Council, EPA-HQ-OAR-2013-0602
(Dec. 1, 2014) at 2.
42. SPP Letter at 9-10.
fuels – will pose some challenges.
Fuel diversity can be a good thing, protecting both electric
companies and their customers from consequences resulting
from fuel unavailability, fluctuations in fuel prices, and changes
in regulatory practices. Changing the fuel supply mix to reduce
CO2 emissions could have unintended adverse consequences.
Moreover, it may be extremely difficult to produce and transport
sufficient supplies of natural gas to meet the EPA’s targets. And,
the electric transmission system may need to be reconfigured to
account for new utilizations of existing generation resources and
to transmit increased amounts of renewable energy from remote
locations to load centers. These infrastructure changes will take
time, a concern echoed by the North American Electric Reli-
ability Corporation (NERC), which is tasked with maintaining
the reliability of the bulk power system in North America.36
NERC notes that that implementing the Clean Power Plan
will create significant infrastructure challenges. To begin,
a large amount of coal-fired generation capacity – about
103 GW by 2020 – will need to be replaced, largely by gas-fired
generation.37
But additional natural gas pipeline capacity will
be required in certain parts of the country to satisfy increased
gas-fired generation capacity. “As an example, current and planned
pipeline infrastructures in Arizona and Nevada are inadequate for
handling increased natural gas demand due to the Clean Power
Plan. Pipeline capacity in New England is currently constrained
. . . “38
And NERC notes that “it takes three to five years to plan,
permit, sign contract capacity, finance, and build additional
pipeline capacity … .”39
Moreover, the relationship between gas-
fired generation and gas availability was severely stretched during
the 2014 “Polar Vortex,” where extended, region-wide periods of
cold had an impact on natural gas availability.40
Increased reliance
on natural gas as a generation fuel could exacerbate the problems
experienced in 2014. At bottom, gas infrastructure issues can and
will impact compliance with the Clean Power Plan.
Against this backdrop, the ISO/RTO Council has urged EPA
36. Potential Reliability Impacts of EPA’s Proposed Clean Power Plan, NERC
(Nov. 2014) at 2 (NERC’s Initial Review); but see Jurgen Weiss, et al., EPA’s
Clean Power Plan and Reliability: Assessing NERC’s Initial Reliability Review
(Feb. 2015) (a Brattle Group assessment commissioned by the Advanced
Energy Economy Institute).
37. NERC’s Initial Review at 9. NERC explains:
The EPA estimates that an additional 49 GW of nameplate coal capacity will
retire by 2020 due to the impacts of the proposed CPP. When including the
54 GW of nameplate coal capacity already announced to retire by 2020
(mostly due to MATS [Mercury and Air Toxic Standards]), the power indus-
try will need to replace a total of 103 GW of retired coal
resources by 2020 … . .”
Id.
38. NERC’s Initial Review at 10.
39. NERC’s Initial Review at 10.
40. NERC’s Initial Review at 9.
Natural gas in a
pipeline moves
at less than 25
miles per hour.
These laws of
nature cannot
be changed by
environmental
regulations.
8. July 2015 Public Utilities Fortnightly 25www.fortnightly.com
reliability of the pipeline system, which in turn would result in
the pipeline’s imposing significant penalties (for short notice
deviations from scheduled or contract quantities and related
imbalances). Should an RTO compensate a generator for these
penalties and other short term operating costs? If not, will there
be sufficient investment in natural gas-fired peaking facilities to
support significantly increased amounts of renewable generation?
At bottom, electricity moves at the “blink of an eye,” while
natural gas in a pipeline moves at less than 25 miles per hour.
These laws of nature cannot be changed by environmental regula-
tions, but instead must be addressed if the electric industry is to
rely more heavily on natural gas-fired generation. This will take
time. Failure to address it could result in increased costs, adverse
reliability impacts, and non-compliance with the Clean Power
Plan will act as a catalyst for the on-going attempts to better
harmonize the electric and natural gas industries. F
and reliability benefits) is not anticipated to be completed until
2019 – 13 years after work first began.43
Indeed there will be a legion of issues for the electric and
natural gas industries to address. For example, increased reliance
on renewable resources, such as wind and solar, also requires
increased reliance on quick-start natural gas generation facilities.
These generation units must necessarily ramp up and down
on short notice (as wind velocities or solar intensities change),
often during peak periods, which impacts both natural gas and
electric markets. Thus, when a generator, in order to maintain
electric reliability, unexpectedly “pulls” gas off a pipeline without
a corresponding injection (possibly due to lack of gas supplies),
there can be a direct impact on the deliverability, pressure, and
43. Midcontinent Independent System Operator, Inc. (MISO) Letter EPA
Administrator McCarthy (November 25, 2014) at 5.
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