WASHINGTON — PJM and other grid operators will face unprecedented reliability challenges in the next several years as federal environmental regulations and low energy and capacity prices threaten to sideline baseload coal and nuclear capacity, federal and PJM officials told state regulators.
“The next two, three years, I just hope energy is not on the front page every single day,” Federal Energy Regulatory Commissioner Philip Moeller told the National Association of Regulatory Utility Commissioners winter meeting, shaking his head. “If you’re up for excitement, the next two, three years will be very exciting.”
MATS, Coal Ash, GHG, Cooling Water Rules
Moeller cited the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) and pending EPA rules on coal ash and greenhouse gas emissions. More than 30 GW of coal-fired capacity retirements have been announced nationwide, with about three-quarters expected by 2015, when MATS takes full effect. (See sidebar: State Regulators Await GHG Rules.)
PJM CEO Terry Boston and others also cited EPA’s pending regulations on cooling water intakes, which will affect nuclear and fossil steam generating units representing more than 80% of U.S. generation, according to the North American Electric Reliability Corp. The greatest impact will be on more than 1,200 generators with once‐through cooling water systems, NERC said.
Boston said he was most concerned about the impact of the rules on the nuclear fleet, citing an estimated cost of $400 million to $500 million per plant to install closed-cycle cooling systems.
David Owens, executive vice president of the Edison Electric Institute, said it could cost the industry as much as $100 billion to comply with the regulations.
“I hope that the [EPA] air division is talking to the water division,” Moeller said. “There are so many [regulations] coming. I’m fuel neutral … but we can’t be reliability neutral.”
John Shelk, CEO of the Electric Power Supply Association, echoed Moeller’s concerns, saying, “I worry a lot about the next five to 10 years.”
Markets’ Impact on Reliability
Several speakers also voiced concerns that energy and capacity markets in PJM and other RTOs aren’t providing enough revenue to sustain nuclear generation, which is unaffected by most of the new EPA regulations.
“Right now competitive markets are not working and that’s why we’re losing nuclear plants,” said Marvin Feitel, president and CEO of the Nuclear Energy Institute.
EEI’s Owens agreed. “I think it would be a travesty if we lost a large number of nuclear plants because we don’t have sustainable price signals,” he said.
Owens said the markets’ treatment of demand response was partly at fault. “I think [DR] gets paid too high a price because I don’t think it’s the same as steel in the ground,” he said. “Right now we’re shutting down plants that [should remain operating] because of market distortions.”
FirstEnergy CEO Tony Alexander said competitive markets are flawed because they encourage excess capacity.
“Those of you in regulated states would never put your states at risk the way we are in PJM and other competitive markets,” he said.
PJM’s Boston defended the RTO’s market rules but conceded that the current low prices are “not sustainable.”
“The markets aren’t broken, but furiously competitive,” he said.
Gas-Electric Dependencies
FirstEnergy’s Alexander also called for changes in the relationship between the electric grid and natural gas pipeline system.
“You can’t have the electric system at the tail being wagged by the pipeline system. That’s what we’re building today,” he said.
Commissioner Moeller said two consecutive warm winters “masked our vulnerability” to gas supply shortages, vulnerabilities that were exposed during last month’s arctic cold. FERC will hold a technical conference April 1 to discuss operational and market issues raised by the grid’s response to this winter’s cold. (See related story: Technical Conference Set on Winter Reliability.)
