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ERCOT Analysis of the Impacts of the Clean Power Plan  

Author:  | Economics, Grid, Texas

The Electric Reliability Council of Texas (ERCOT) is the independent system operator (ISO) for the Texas Interconnection, encompassing approximately 90% of electric load in Texas. ERCOT is the independent organization established by the Texas Legislature to be responsible for the reliable planning and operation of the electric grid for the ERCOT interconnection. Under the North American Electric Reliability Corporation (NERC) reliability construct, ERCOT is designated as the Reliability Coordinator, the Balancing Authority, and as a Transmission Operator for the ERCOT region. ERCOT is also registered for several other functions, including the Planning Authority function.

In June 2014, the U.S. Environmental Protection Agency (EPA) proposed the Clean Power Plan, which calls for reductions in the carbon intensity of the electric sector. The Clean Power Plan would set limits on the carbon dioxide (CO₂) emissions from existing fossil fuel-fired power plants, calculated as state emissions rate goals. For Texas, EPA has proposed an interim goal of 853 lb CO₂/MWh to be met on average during 2020-2029, and a final goal of 791 lb CO₂/MWh to be met from 2030 onward. EPA calculated the state-specific goals using a set of assumptions about coal plant efficiency improvements, increased production from natural gas combined cycle units, growth in renewables generation, preservation of existing nuclear generation, and growth in energy efficiency.

ERCOT has evaluated the potential implications of the proposed Clean Power Plan for grid reliability and conducted a modeling analysis of the impacts to generation resources and electricity costs in the ERCOT region. Based on this analysis, ERCOT anticipates that implementation of the proposed Clean Power Plan will have a significant impact on the planning and operation of the ERCOT grid. ERCOT estimates that the proposed CO₂ emissions limitations will result in the retirement of between 3,300 MW and 8,700 MW of coal generation capacity, could result in transmission reliability issues due to the loss of generation resources in and around major urban centers, and will strain ERCOT’s ability to integrate new intermittent renewable generation resources. The Clean Power Plan will also result in increased energy costs for consumers in the ERCOT region by up to 20% in 2020, without accounting for the costs of transmission upgrades, procurement of additional ancillary services, energy efficiency investments, capital costs of new capacity, and other costs associated with the retirement or decreased operation of coal-fired capacity in ERCOT. This summary report describes the results of ERCOT’s analyses.

Summary of ERCOT Concerns with the Clean Power Plan

ERCOT approaches this analysis from the perspective of an independent grid operator in a competitive market which has achieved significant success in using competition to drive efficient outcomes. Existing market policies and investments in transmission in ERCOT have incentivized market participants to maximize the efficiency of the generating fleet and develop new technologies including renewable generation. With recent investments in transmission, more than 11 GW of wind capacity have been successfully integrated into the ERCOT grid. The ERCOT region maintains a forward-looking open market and provides affordable and reliable electricity to consumers in Texas.

ERCOT’s primary concern with the Clean Power Plan is that, given the ERCOT region’s market design and existing transmission infrastructure, the timing and scale of the expected changes needed to reach the CO₂ emission goals could have a harmful impact on reliability. Specifically, implementation of the Clean Power Plan in the ERCOT region, particularly to meet the Plan’s interim goal, is likely to lead to reduced grid reliability for certain periods and an increase in localized grid challenges. There is a natural pace of change in grid resources due to advancing cost effective technologies and changing market conditions.

This pace can be accelerated, but there is a limit to how fast this change can occur within acceptable reliability constraints. It is unknown based on the information currently available whether compliance with the proposed rule can be achieved within applicable reliability criteria and with the current market design. Nevertheless, there are certain grid reliability and management challenges that ERCOT will face as a result of the resource mix changes that the proposed rule will induce:

  • The anticipated retirement of up to half of the existing coal capacity in the ERCOT region will pose challenges to reliable operation of the grid in replacing the dispatchable generation capacity and reliability services provided by these resources.
  • Integrating new wind and solar resources will increase the challenges of reliably operating all resources, and pose costs to procure additional regulating services, improve forecast accuracy, and address system inertia issues.
  • Accelerated resource mix changes will require major improvements to ERCOT’s transmission system, posing significant costs not considered in EPA’s Regulatory Impact Analysis.

Download original document: “ERCOT Analysis of the Impacts of the Clean Power Plan

This article is the work of the author(s) indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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