A Free-Market Energy Blog

Electric Grid Reliability: Texas vs. EPA

By Ed Ireland -- October 10, 2023

“Just the possibility that EPA will enact such sweeping regulations will slow investment in new power generation that all U.S. power grids need. Recent grid warnings about possible outages this summer will likely continue into the winter while potential new-generation projects proceed cautiously.”

The U.S. Environmental Protection Agency (EPA) recently proposed new greenhouse gas standards for fossil-fuel-fired power plants. These draconian regulations, part of the Biden Administration’s “all of government” climate policy—which is at odds with affordable, reliable energy—threaten the stability of the U.S. power grid.

The EPA plan is the “nuclear option” of regulations because the agency is not just proposing new regulations designed to meet more stringent clean air standards with fines if the criteria are not met. Instead, EPA seeks to impose unachievable CO2 emissions targets that will shut down existing coal and natural gas power plants and threaten the viability of the nation’s power grids. At stake is 60 percent of U.S. generation: natural gas (39%) and coal (20%).

The rules and regulations are phased in starting in 2024, meaning that the effect is that baseload generation sources, such as natural gas and coal, may not be built because these regulations shorten the economic life of such projects. This threatens the viability of the grids within a few years, not sometime in the distant future.

Clean-up Coal: Modern Technology at Work

The war on coal, in particular, ignores the technological progress of power plants. “Coal-fired electricity generation is cleaner than ever,” stated the U.S. Department of Energy. “NETL’s research shows that a new coal plant with pollution controls reduces nitrogen oxides by 83 percent, sulfur dioxide by 98 percent, and particulate matter by 99.8 percent compared to plants without controls.”

Progress with coal plant emissions is reflected in the decline in aggregate emissions. As EPA reports:

From 1995-2022, annual emissions of SO2 from power plants fell by 93 percent and annual emissions of NOX from power plants fell by 87 percent. In 2022, sources in both the CSAPR SO2 annual program and the ARP together emitted 0.85 million tons, a reduction of 11 million tons from 1995 levels. In 2022, sources in both the Cross-State Air Pollution Rule (CSAPR) NOX annual program and the ARP together emitted 0.75 million tons, a reduction of 5.1 million tons from 1995 levels.

The CO2 Obsession

Why is EPA threatening the viability of the US power grids and, therefore, the U.S. economy? EPA is clear that its goal is to limit climate change (page 33243):

These proposals focus on reducing the emissions of GHGs from the power sector. The increasing concentrations of GHGs in the atmosphere are, and have been, warming the planet, resulting in serious and life-threatening environmental and human health impacts. The increased concentrations of GHGs in the atmosphere and the resulting warming have led to more frequent and more intense heat waves and extreme weather events, rising sea levels, and retreating snow and ice, all of which are occurring at a pace and scale that threatens human welfare.

The power sector in the United States is both a key contributor to the cause of climate change and a key component of the solution to the climate challenge. In 2020, the power sector was the largest stationary source of GHGs, emitting 25 percent of the overall domestic emissions. These emissions are almost entirely the result of the combustion of fossil fuels in the EGUs that are the subjects of these proposals.

Forget that the U.S. accounts for around 15 percent of global manmade greenhouse gas emissions (U.S./world) today, and China and other developing countries cancel out U.S. emission reductions with new coal capacity by the week. Forget that climate policy today cannot change climate for decades given physics. Consumers are refuting climate policy by the day, with increasing GHG concentrations reducing the warming effect of future emissions per metric ton.

Wishful Thinking

As one might expect, EPA does not entertain the idea that their proposed regulations could devastate US power grids. The reason is that the EPA models assume that replacement generation will always be built to replace shuttered coal and natural gas power generation. This was pointed out during the EPA public hearings by Michelle Bloodworth, the President and CEO of America’s Power:

EPA’s modeling concluded that it would not cause any resource inadequacy. However, EPA’s model is designed to never project resource inadequacy because the model simply adds replacement capacity to offset retiring capacity regardless of whether this new replacement capacity would actually be built in the real world and provide the same accredited capacity value and reliability attributes as the coal fleet, such as fuel security.

If EPA’s assumptions about replacement power generation are incorrect, what is the fallback plan? Well, there isn’t one. As the coal-fired and natural-gas-fired generation is shuttered because it doesn’t meet the new standards, there is no guarantee that sufficient replacement generation will be built. EPA penalties will make the new generation uneconomic. The US could face inadequate and unreliable power generation sooner rather than later.

EPA model’s built-in assumption that sufficient new natural gas generation will always be built is due to their additional assumption that carbon capture and storage and hydrogen co-firing will be used to offset the carbon emissions. In the EPA’s May 11, 2023, announcement about their proposed new standards for coal and natural gas-fired power plants, EPA Administrator Michael Regan said:

By proposing new standards for fossil fuel-fired power plants, EPA is delivering on its mission to reduce harmful pollution that threatens people’s health and wellbeing.

EPA’s proposal relies on proven, readily available technologies to limit carbon pollution and seizes the momentum already underway in the power sector to move toward a cleaner future. Alongside historic investment taking place across America in clean energy manufacturing and deployment, these proposals will help deliver tremendous benefits to the American people—cutting climate pollution and other harmful pollutants, protecting people’s health, and driving American innovation.

One can only puzzle how Mr. Regan and the EPA can assert that carbon capture and storage and hydrogen co-firing are “proven, readily available technologies.” These technologies have been hyped as “the next big thing” for some years, but they have not yet been proven technologically capable or economically feasible at an industrial level.

It is also important to note that literally every person that provided testimony in support of EPA’s proposed rules and regulations at the recent hearings was adamantly against carbon capture and storage and hydrogen co-firing. The same people that want to shut down all fossil fuel power generation do not support CCS or hydrogen co-firing. Since EPA listens to and responds to these people and the anti-fossil fuel NGOs, it is unlikely that EPA’s support for these technologies will continue.

Senator Chuck Grassley expressed this sentiment in a letter he wrote EPA administrator Michael Regan on June 27, 2023, pointing out the dangerous implications of EPA’s proposed Power Plant Rule:

The proposed Power Plant Rule seeks to regulate gas emissions from fossil fuel-fired electric generating units under the authority of the Clean Air Act. This rule would set new caps on emissions for power plant operators making it more expensive to produce electricity.

The rule would require most gas and coal-fired power plants in operation to cut their carbon-dioxide emission by 90 percent by 2040 or shut down. Most of our 3,400 natural gas and coal plants would be affected by this rule, which is roughly 25 percent of the country’s greenhouse gas emissions. The rule also discourages the construction of new, gas-fired plants by imposing expensive, new standards.

Our current dependency on these fossil fuel plants is substantial. As recent as 2022, U.S. Energy Information Administration figures show fossil fuels accounted for more than 60% of our electricity generation, with 60% of that amount coming from gas and 40% from coal.

Renewables, on the other hand, accounted for only 21.5%, with nuclear energy making up the rest. The U.S. relies heavily on power plants to fuel Americans’ homes, businesses, and even their cars. If the proposed rule targeting power plants is finalized the price of electricity will increase due to the burden it would place on the energy providers.

Senator Grassley also focused on the EPA’s incorrect and dangerous assumptions about carbon capture (emphasis added):

The proposed rule may not be workable due to a lack of available technology. The rule implies the wide use of new, carbon capture technology as a method to reduce emissions being released into the atmosphere. Despite the EPA’s analysis, there’s concern that the carbon capture technology is not yet technically, and fully, economically demonstrated for large scale use. Because of that, the regulations could force coal and gas-fired power plants to shut down and leave the grid vulnerable to blackouts, more expensive to operate, and subject to long-term consequences.

Put simply, the Power Plant Rule, proposed by the EPA, will decrease our ability to rely on our power grid because of challenges to cost and output. The power plants that cannot reduce their emissions enough to meet the standards will close, taking power offline and reducing the reliability of our grid.

Senator Grassley criticizes EPA for simultaneously promoting another set of regulations he calls “The Electric Vehicle Rule,” which would increase dependency on the power grid. At the same time, “The Power Plant Rule” would limit the ability of the power grid to generate sufficient electricity. The entire letter is worth reading and hopefully signals that the legislative branch observes what EPA proposes. We will look forward to reading EPA’s response.

What’s Next?

It is reassuring to see that Senator Grassley notified the EPA that he and other members of Congress are watching the EPA’s activities and can expect to be subjected to questions and even hearings. Unfortunately, none of that will likely stop the EPA from doing what it said. If EPA does issue final rules, lawsuits will be filed immediately, with some or one of those lawsuits ending up at the Supreme Court.

Fortunately, there is a precedent Supreme ruling that should apply. The court case, West Virginia vs. EPA led to the Supreme Court decision centered on the Clean Power Plan (CCP) proposed by the EPA by the Obama administration. On June 30, 2022, the Supreme Court ruled that regulating existing power plants fell under the major questions doctrine. Within that, Congress did not grant the EPA authority to regulate emissions from existing plants. The Heritage Foundation provided this summary of the Supreme Court ruling:

  1. The Supreme Court shut down the ability of the EPA to completely reengineer Americans’ sources of electricity around a radical climate agenda.
  2. The EPA put itself squarely in a position to set energy and economic policy under the guise of environmental policy while enjoying nearly unfettered power to do so.
  3. The court rightly determined that the EPA far exceeded its role by creating an authority for itself out of thin air to regulate the electricity sector.

In short, the Supreme Court shut down the ability of the Environmental Protection Agency to completely reengineer Americans’ sources of electricity around a radical climate agenda based on the agency’s expansive interpretation of a narrow provision in the Clean Air Act.

In doing so, the Supreme Court has made it harder for other regulatory agencies to get away with similar power grabs.

It is hard to imagine that the Supreme Court will rule differently than it did with the Clean Power Plan of 2015, but lawsuits must work their way through the courts. Hopefully, the Court will be able to rule soon after the EPA finalizes its second attempt to exceed its authority and spare the U.S. from the potentially severe impacts of the EPA’s flawed proposed rules and regulations.

In the meantime, just the possibility that EPA will enact such sweeping regulations will slow investment in new power generation that all U.S. power grids need. Recent grid warnings about possible outages this summer will likely continue into the winter while potential new-generation projects proceed cautiously.

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