By Amanda Durish Cook
CARMEL, Ind. — Mass-based compliance with the Clean Power Plan would cost less than one-third as much as a rate-based method by 2030, according to modeling by MISO.
MISO found that the price disparity between rate-based compliance, which limits emissions in tons per megawatt-hour, and mass-based compliance, which caps emissions in tons per year, increases over time due to the mass-based method’s increased flexibility under emissions trading.
By 2030, production-based compliance costs are expected to reach about $17 billion under a rate-based plan, while mass-based compliance is estimated at about $5 billion, according to the near-term analysis presented at Wednesday’s Planning Advisory Committee meeting. This includes the expense of generation, interchange and emissions, excluding additional transmission and pipeline infrastructure, and other capital costs.
MISO has said that individual states won’t shoulder the burden equally.
MISO Will be Compliant in First Years
Jordan Bakke, policy studies lead at MISO, said rate-based compliance is centered around adding zero-emission resources while mass-based compliance requires also removing emission-heavy generation. Early compliance targets are slated to be met through MISO states’ existing renewable portfolio standards and natural gas’s replacement of coal generation, but additional changes will be needed to continue compliance.
“The planning that has already occurred will only get us so far,” Bakke said. Compliance costs would rise significantly in the “mid- to late 2020s,” he said, after MISO’s existing generation mix fails to carry it through increasingly stringent emissions goals.
The threats to MISO’s coal fleet are less severe in a regional mass-based approach. The analysis forecasts six coal units to be idled by 2030 under mass-based plans, versus nine under rate-based compliance.
With either option, the grid operator said it would need new zero-emission resources to temper the price of CO2, which is expected to rise from about $20/short ton in 2022 to about $40/short ton by 2030 under mass-based compliance and almost $140/short ton under a rate-based regime.
“Coal unit capacity factors decrease greatly over time under the CPP, more dramatically with a rate-based implementation,” MISO wrote. On the other hand, MISO has suggested that mass-based compliance might require less capital investment because system dispatch won’t have to undergo as many changes. The RTO said the low capacity factors, even using a business-as-usual measurement, show coal units won’t be economically viable by 2022 or 2030.
66 Cases Modeled
Bakke said that the near-term modeling ran 66 cases with differing changes in capacity and either mass- or rate-based compliance: three business-as-usual scenarios in the years 2022, 2025 and 2030; 39 instances of business-as-usual resources but with CPP constraints applied; and 24 runs using alternative resource scenarios combined with CPP constraints. The three business-as-usual cases, which rely heavily on coal generation, would not meet emissions targets, while both categories that use CPP constraints would.
The study assumes a liquid carbon emissions market and that all states choose either mass- or rate-based plans. Bakke said further modeling will be needed if states decide to use a mix of rate-based and mass-based trading.
MISO said it assumed a $4.67/MMBtu natural gas price for 2015. In addition to modeling using its existing generation fleet, the RTO also is including units with signed generation interconnection agreements and projects approved under the 2015 Transmission Expansion Plan.
MISO Wants Reliability Provisions in State Plans
Meanwhile, Kari Bennett, MISO’s senior corporate counsel, said MISO’s comments to the EPA on the federal implementation plan (FIP) will focus on reliability.
In its comments, MISO said it would like EPA to authorize the use of a reliability safety valve in FIPs, similar to that in state implementation plans. MISO said EPA should allow a “meaningful, case-specific review of reliability that is comparable to the state plan requirement.” (See related story, FERC Outlines Principles for Clean Power Plan Analyses.)
Bennett said the comments do not get into the mechanics of how a safety valve would be developed or used.
“As we look at the situation, reliability is often case-specific and a sensitive issue,” she said. “We do think it is prudent for the EPA to include a reliability safety plan in the federal plan as well as state plans.”
