NERC’s Report on Clean Power Plan Deeply Flawed, But the Lights Will Stay On

Moore Headshot 3Apr 21, 2015 by John Moore

An electric power industry organization has issued a new report on the Environmental Protection Agency’s proposal to cut harmful power plant emissions. It asserts that the Clean Power Plan requires too much, too soon, and urges EPA to delay compliance timelines. But this and other recommendations are built on a foundation of faulty assumptions and significant caveats. The North American Electric Reliability Corporation’s (NERC) mostly-closed process for developing the report also undercuts its credibility and usefulness. On the positive side, NERC did find that reliability can be maintained – in other words, no blackouts — even with its unrealistic, heavily-caveated assumptions.

Flawed and Unrealistic Assumptions

Reasonable assumptions are the heart of any grid reliability assessment. We’re not alone in our view: the issue that some of the report’s unrealistic assumptions and conclusions could give a false impression of the future was raised at the NERC board meeting last week.

Further weakening these assumptions, NERC adds several caveats that it concedes would affect the study: for example, it assumes no technological improvements nor any any meaningful deployment of energy efficiency and rooftop solar. That’s not credible for a 15 year study.

  • Credits only one-third or less of possible energy efficiency savings

NERC’s report gives nary a nod to the value of energy efficiency, mentioning it only in passing. We also understand that NERC’s embedded assumption for annual energy efficiency savings is only 0.5 percent a year, far less than the 1.5 percent and higher annual gains achievable in practice across the nation. While this difference may seem small, the higher savings from smarter energy use by residential and commercial consumers quickly add up, and significantly reduces power plant run times (and carbon pollution) at all hours of the day. The American Council for an Energy Efficient Economy recently found that utility energy efficiency programs alone – such as offering rebates for highly efficient appliances — could cut power sector carbon emissions 26 percent by 2030 relative to 2012 emissions, and cut power demand 25 percent from 2012 levels. That would eliminate the need for nearly 500 power plants by 2030.

  • Discounts the increasing momentum of wind and solar energy

Ignoring recent commercial growth trends for wind and solar power, NERC severely limits their deployment:

  • NERC assumes that only 12-20 gigawatts (GW) of new solar generation will be integrated into the grid by 2030. Recent industry analysis suggests that our nation will build 20 GW of solar in the next two years alone.
  • NERC assumes that less than 2 GW of new wind will be built each year through 2030. By comparison, recent reports suggest our nation will build 18 GW of wind in 2015-2016 alone.
  • NERC assumes that our nation will only build 11 to 12 GW of total new power plant capacity each year. Yet the grid has added roughly 30 GW of new generation each year since 2000.

The figure below, from page 31 of the NERC report, illustrates total new power plant additions through 2030. Yes, the little green dots are the few additional wind and solar plants scattered across the country — including virtually no new wind in the Midwest — a severe underestimation of the likely clean energy buildout.

NERC Capacity Additions.JPG

  • Preferences natural gas to the exclusion of renewables and efficiency

As a result of the overly burdensome constraints NERC imposed on new renewables and its conservative assumptions about energy efficiency, NERC’s analysis relies almost entirely on coal-to-natural gas shifts to comply with the Clean Power Plan. As NRDC and others have shown, energy efficiency and renewable energy are significant compliance solutions for the Clean Power Plan; NERC virtually ignores them here.

NERC’s overreliance on natural gas also leads it conclude, without any analytical support, that new gas pipelines will be needed to comply with the Clean Power Plan. In truth, adding more renewable energy and energy efficiency beyond the pittance in NERC’s report will reduce natural gas use and pipeline needs over time.

  • Flawed representation of carbon trading programs

NERC’s report attempts to measure the effects of regional carbon trading programs on Clean Power Plan compliance. However, as NERC admits, its model forces carbon trading to follow power flows, which artificially constricts the use of carbon trading for compliance. By requiring trades to follow power flows, NERC likely overestimates the amount of change needed in the nation’s power plant mix.

A closed, “black box” process

NERC’s process of review for the report departs from basic tenets of openness, with many stakeholders – both external and internal – barred from providing input that could have prevented the flaws discussed above. NERC’s closed process contrasts sharply with how most grid operators perform their reliability and other grid health assessments – involving stakeholders in public meetings, taking and responding to comments, and improving the final product.

Indicative of this problem, NERC has not yet released (as of April 21) the underlying assumptions and other data in its report, which impedes meaningful review. Once NERC releases the background data, I’ll update my conclusions if necessary.

Don’t bust the carbon cap

In addition to recommending that EPA extend compliance dates, NERC also recommends that the final Plan provide states the opportunity to change/extend their targets and modify their implementation plans in response to reliability concerns. But given the Clean Power Plan’s flexible design and the many tools available to grid operators to manage reliability issues, there is no good reason to allow states seek a compliance waiver or delay using a “reliability safety valve” or other reliability mechanism.

NERC’s recommendation also omitted the most basic requirement, which is that any reliability mechanism should include a requirement to offset any carbon emissions associated with implementation of the reliability mechanism. Requiring carbon offsets from within the electric system will preserve the integrity of the Clean Power Plan while maintaining reliability.

The lights will stay on

Rigorous and defensible grid modeling stresses the power system to find weak spots and identify solutions. But models need plausible assumptions to generate plausible outcomes. In this case, NERC unrealistically shortchanges renewable energy and energy efficiency and includes other erroneous assumptions. However, NERC did find that reliability can be maintained – in other words, no blackouts — even under its implausible, heavily caveated assumptions.

We also are confident that the final rule will not weaken reliability. And we are equally confident that the final Clean Power Plan will grant states and utilities sufficient time and the flexibility they need to design their own, individual plans to implement the standards, which will curb carbon pollution that drives climate change.

Written by John Moore