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Samir Succar’s Blog

3 Reasons Why We Don't Have to Choose Between our Health and a Reliable Power Grid: Facilitating a Transition Away From Dirty Coal

Samir Succar

Posted August 19, 2010

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The promise of new clean air rules from EPA will go a long way toward eliminating emissions from the oldest, dirtiest power plants that pollute our air and threaten our health. Despite some spurious claims from industry groups, it’s abundantly clear that we can clean up our power plants and still keep the lights on by making better use of existing resources, adding flexibility to our electricity consumption and increasing the efficiency of our homes and businesses.

In July 2010, the EPA proposed the Clean Air Transport Rule (Transport Rule), a Clean Air Act rulemaking to reduce sulfur dioxide (SO2) and nitrogen oxide (NOx) from power plants.  The proposal targets smog and soot pollution from the fossil energy utility fleet in 31 upwind states and the District of Columbia in order to protect air quality and public health in downwind states. EPA’s analysis shows that the Transport Rule would generate more than $120 billion in annual health benefits (for details, see my colleague John Walke’s detailed post on the proposed transport rule). Next year EPA will propose and finalize critically important Clean Air Act standards to reduce coal- and oil-fired power plant emissions of mercury, arsenic, lead, acid gases and over six dozen other hazardous air pollutants.

The question is, if new clean air regulations lead operators to retire coal-burning power plants rather than comply with the regulations, can we make sure that the lights stay on? The answer is a resounding yes and there are three ways to ensure that’s the case:


1) Using our existing resources.  It turns out that the US has a substantial “cushion” of power plants that are underutilized. A recent report from MJ Bradley & Associates and Sue Tierney shows that there are several thousand megawatts of generating capacity beyond what we need to maintain reliability in every part of the country. Also, according to a recent NERC report, even if economic growth picks up quickly, we will still be ahead of their reliability criteria for some time. MIT’s Future of Natural Gas report shows that significant fractions of the natural gas fleet are running at low utilization rates (i.e., operating only 38% of the time on average). Our own preliminary analysis shows even if one were to assume coal retirement rates on the order of 10% of the fleet [1], modest increases in existing natural gas plant utilization could compensate for, and even exceed, lost generation from retiring coal capacity in nearly every region (to decode the region names, click here):


Figure 1.  Coal Plant Retirements and Increased Natural Gas Utilization Rates by NERC Region [1]


2) Demand response is a low cost source of flexibility for the grid.  A second resource that can help firm up our grid is demand response (DR): allowing factories and businesses to respond to market signals by adjusting their consumption of electricity. This can free up other resources during times of peak demand and contribute to system reliability by adding a source of flexibility to the power mix. FERC’s National Assessment of Demand Response Potential shows that demand response can reduce peak electricity demand by up to 20% ­ compared to only about 5% of total reserves lost through coal plant retirements in even the most dire utility industry predictions. Even in FERC’s moderate DR deployment scenario (their so-called “Enhanced Business as Usual” case), demand response potential exceeds expected retirements in every region save one (with even the difference in that region a mere 2%). And it bears emphasis that we have multiple reliability solutions to draw upon.


Figure 2  Coal Retirements and Demand Response by Census Region [1]


3) Boosting efficiency decreases electricity demand.  Energy efficiency can further reduce pollution, ease our dependence on fossil fuels and enable us to power our economy in a smart, clean and reliable way. NRDC’s own preliminary assessment based on data from energy efficiency potential studies from ACEEE and EPRI show that increasing energy efficiency could likely compensate for much or all generation lost through these projected coal retirements.


Figure 3.  Coal Retirements and Energy Efficiency by Census Region [1]


So, can we afford to carry out EPA’s upcoming smog, soot and air toxic regulations for power plants? The short answer: We can’t afford not to.

Not only will these rules deliver huge health benefits, but their impact on grid reliability will be minimal. We have three huge resources to address any impacts of coal plant retirements on system reliability and each one is big enough to roughly address this issue on its own: we can better utilize our existing power plants, build more flexibility into our power consumption and run our economy more efficiently. Implementing these solutions together will deliver important benefits on their own (affordable energy, GHG emissions mitigation, renewables integration cost reduction), but as a bonus they help maintain grid reliability and facilitate a much-needed transition away from yesterday’s dirty, polluting energy sources and toward a cleaner energy future.

Many thanks to Starla Yeh and Ted Hesser for their help on the analysis presented here.

[1] Cumulative coal retirement figures (32 GW, nameplate capacity) based on average retirements forecast by Goldman Sachs, Citibank, EEI and Alliance Bernstein with geographic distribution of unit retirements independently derived on the basis of vintage, back end control configuration and capacity factor.

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John WalkeAug 19 2010 12:55 PM

It's also worth noting that even an estimated 32GW of retired nameplate capacity for coal plants represents approximately 3% of total installed capacity, taking into account all fuel sources.

Thomas LongAug 19 2010 04:14 PM

It's also worth noting that switching from cheap baseload coal plants to gas peaker plants will result in significant cost increases across the board, especially in coal-reliant states in the Midwest and South. Can you say region tax?

If you have have fuel switching to compensate for the 32GW of retired coal capacity (I'm using your numbers, I've heard as high as 100GW), do you honestly believe that natural gas prices will stay as depressed as they currently are? It is only cheap now because storage is high and industrial demand has plummeted due to the recession.

Not to mention, the quoted study by MJ Bradley & Associates is a farce that was heavily influenced by the gas industry, which coincidentally wants us to believe that our nation's shale gas reserves are abundant, easy to produce and cheap.

Bernstein recently reported that Barnett Shale producers are running more frack stages and producing lower initial production volumes than what was occurring several years ago. Those 'prolific' shale plays are increasingly expensive to drill in and are producing lower volumes of gas than expected. Shale gas isn't the panacea many are making it out to be. This is why companies like Chesapeake are switching gears to liquids exposure over gas.

The recent push for gas generation fueled by abundant shale gas is also somewhat ironic, considering many of the proponents are lobbying their legislators to reign in the fracking practices of the natural gas industry due to water quality concerns.

So after we shutter 32GW of coal capacity and prevent domestic natural gas producers from drilling with the most advanced methods available, what do you propose we do to keep the lights on?

Samir SuccarAug 19 2010 07:46 PM

Thomas - you make some good points above regarding the impact that a big shift to natural gas fired generation would have on commodity prices, but that's exactly why we need to leverage demand response and energy efficiency to the greatest extent possible. All of the potential studies show that demand side management is an enormous, low cost resource and the sources I used above (especially the EPRI efficiency report) are on the conservative side. There's a *lot* of potential embedded in EE and DR and they are chronically undervalued in traditional utility planning. Not only will these resources help stem the cost impacts to the region, but they will also reduce any upward pressure on natural gas price.

I have also seen some of the higher retirement projections you mentioned, but I believe those are for a range of regulations outside the scope of what I discussed here. I know the ICF/EEI figures are much higher when they include carbon prices consistent with ACES, but that is not part of this analysis. Our retirement numbers were based on figures from Goldam Sachs, Allied Bernstein, Citibank and EEI and we found they all fell in the same 25-40 GW range for the choice of inputs we considered here.

You also make some good points regarding the often understated challenges associated with shale extraction and the potential risk to water supplies, and I do think a rush to expand natural gas installed capacity would be ill-advised. But I think making better use of our existing generating facilities and infrastructure is an important component of the solution, even if its not the whole solution.

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