EPA’s Clean Power Plan: Achievable goals and deadlines are critical for reliable, affordable electricity

After the Environmental Protection Agency (EPA) issued its proposed guidelines last June to reduce carbon emissions from existing power plants, the agency was flooded with millions of comments from a broad range of interested parties. Among those submitting comments were the nation’s electric utilities, which are uniquely tasked with implementing EPA’s guidelines, known as the Clean Power Plan, while also providing reliable and affordable electricity, around the clock, for more than 300 million Americans.

As the generators of electricity and operators of the nation’s expansive and interconnected electric grid, electric utilities are pleased that the Federal Energy Regulatory Commission (FERC) is hosting a technical conference this week in Washington to discuss how the Clean Power Plan will impact the reliability of the nation’s electric grid. EPA’s understanding of the electric system could be enhanced by working more closely with FERC, which is responsible for system reliability issues.

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It is worth underscoring that our industry has a strong track record when it comes to reducing emissions associated with electric generation. And we are committed to finding a workable path to achieving the Clean Power Plan’s proposed reductions, while also ensuring the continued reliable and affordable delivery of electricity.

That said, there is a feature of the Clean Power Plan that is unworkable and unnecessarily risky.At first glance, it may appear that EPA’s proposed guidelines give states until 2030 to achieve compliance. In large measure, this is not the case. That’s because EPA has proposed stringent interim targets that start in 2020. Because of the way the interim targets are designed, 80 percent of states must achieve more than half of their 2030 emission rate goals by 2020 and 11 states must achieve 75 percent or more of their 2030 goals by 2020.

The speed and scope of the changes that the 2020 compliance targets would require are unprecedented and, thus, threaten the reliability of the system. After state plans are finalized and approved by EPA in the 2017 to 2018 time frame, most utilities and states effectively will have less than three years to complete a host of major compliance initiatives.

Three years is simply not enough time to make the substantial changes in the generation resource mix, energy infrastructure, and market mechanisms required to make the proposed 2020reductions. Even with enhanced efficiency and reductions in demand growth, the bulk of the emission reductions will require closing coal plants and, in parallel, building new natural gaspower plants, natural gas pipelines, renewable generation, and electric transmission.

It’s important to remember that all new infrastructure must be planned, permitted, approved by state officials, reviewed for reliability impacts, and constructed. Completing a natural gas pipeline can take five years; the planning, siting, and construction of new natural gas power plants require four years; and completing a transmission line takes up to eight years.

As recently noted by the North American Electric Reliability Corporation (NERC)—the entitymandated by federal law with maintaining the reliability of the power grid—these time frames are, in some cases, best-case scenarios. Longer transmission lines have recently taken more than 10 years to complete—from planning, siting, and permitting, through construction.  In addition to threatening reliability, the proposed 2020 interim targets may sharply increase electricity prices for customers if major changes have to be implemented quickly.

My home state, Michigan, illustrates the conflict between the proposed guidelines and electricreliability that FERC needs to help EPA address. The 2020 target requires Michigan to achieveapproximately 75 percent of its 2030 reduction by 2020, despite the fact that our state plan to address the regulation is unlikely to be finalized until 2017 or 2018. Among the issues we will have to manage are the retirement of on the order of 60 percent of the state’s coal-fired generation, the approval and building of new gas generation, renewable generation, gas pipelineinfrastructure and electric transmission. This conflict is not unique to Michigan—it is faced by the majority of states.

Before the Clean Power Plan is finalized, it is critical that EPA recognize the complexities of operating and maintaining a reliable electric grid and include a more reasonable glide path to 2030 emission reduction goals that maintain reliability at a reasonable cost. Unless the 2020 interim goals are eliminated or substantially revised, states simply cannot achieve significant emission reductions without jeopardizing reliability and sharply increasing rates.

It is critically important that stakeholders and agencies tasked with ensuring reliable and affordable electricity for customers, including FERC, provide feedback to EPA on the time required to design, plan, permit, and construct replacement generation and new or expanded transmission lines and pipelines. FERC also must work with EPA to make clear how the interconnected power system operates, what is required to ensure its reliable operation, and how long necessary changes to the system will take.

Finally, EPA should keep in mind the importance of the existing nuclear fleet when it comes to maintaining reliability and reducing emissions. The proposed rule relies on the existing nuclear fleet to achieve emission reductions, but does not include any mechanism to incent its continued operation in the face of challenging economics. Similarly, the guidelines do not recognize the value of new and imported zero-emissions sources of hydropower, including hydropower imported from Canada. The nation cannot achieve its carbon-reduction goals without the continued operation of the existing nuclear fleet and new and existing hydro plants.

EPA’s Clean Power Plan must respect how the electric system works and provide adequate time to make the necessary changes to achieve carbon emission reductions that ensure the continued clean, reliable, affordable operation of our nation’s electric grid for the benefit of all customers.


Gerry Anderson is Chairman and CEO of DTE Energy. His views represent a consensus among members of the Edison Electric Institute (EEI), the association that represents all U.S. investor-owned electric companies.