Back in June of this year, I wrote about the proposed Clean Energy Plan and the potential impact it could have on our electricity grid. Now that the EPA has finalized the plan, I will take a look at how this is expected to affect each region.
The Clean Energy Plan has been designed to reduce our energy industry’s carbon footprint and move our country towards a cleaner, more sustainable future. However, there are many different aspects of this plan that could have an adverse effect on energy costs for consumers during the time the plan takes to reach its goals. We will take a look at this geographically as different regions weigh in on how the plan will impact our electricity grids. I will breakdown the potential, as well as the concerns of each region.
Part One: ERCOT – (Texas Region)
ERCOT (Electric Reliability Council of Texas) has released a report that details estimates of the impact that the Clean Power Plan will have on the Texas electricity market. In that report they outline the estimates of between 3,300 – 8,700 MW of capacity that will be forced into retirement due to the plan. These retirements are caused by the inability for the targeted generation plants to conform to the rules and regulations outlined in the plan.
ERCOT is the independent grid operator (ISO) that handles roughly 90% of all electricity in Texas. They are estimating that the results of retiring this much generation over such a short period could result in a major transmission reliability problem in large urban centers. That means places like Dallas and Houston will most likely be the areas affected the most by these changes.
The report goes on to explain that despite the Clean Power Plan’s goal of reducing the impact of our country’s carbon footprint, which was created by our power system, the time table on these changes will strain the ISO’s ability to integrate new, renewable generation alternatives.
The financial burden of these changes will ultimately be shouldered by consumers. ERCOT believes the retiring of these generation units will result in an increase of energy costs by as much as 20% by 2020. That is the immediate impact to consumers. Those figures do not take into account the additional costs of transmission upgrades, costs for new capacity, and investments into energy efficiency.
ERCOT is not reluctant to create alternative energy adjustments to the grid. There has been more than 11 GW of wind capacity recently integrated into the Texas grid, with more alternative generation planned. The issue is not so much about the adjustment of the grid as it is about the pace of these changes. There is only so much change that can happen on an electric grid in only one year without major concerns about the reliability of transmission.
These planned retirements will signify a reduction of almost half of all coal-fired generation in Texas. That represents quite a bit of change to an already old infrastructure. By removing so many existing resources, and attempting to balance the addition of replacement capacity simultaneously can be problematic, as well as costly. This plan will require a major improvement to the existing ERCOT transmission system. As a direct result, consumers of electricity will see significant price increases to implement these changes.
Although there is much up in the air about what will transpire as the Clean Power Plan is implemented, there are a few things that are clear. First and foremost, is this much change seemingly all at once, is cause for concern in the Texas region for consumers. The desired end result is for a cleaner, more sustainable energy grid, however, it is evident that there will be some growing pains along the way.
ERCOT’s report is not recommending to stop the Clean Power Plan. It is, more to the point, in favor of slowing down the implementation of it. Increasing the timeframe will help the region adapt to the changes gradually. This would most likely calm the biggest concern, which is primarily over reliability.
As technology and innovation make way for improvement to our energy grid, there is no way around the fact that this plan will cause energy prices to increase by as much as 20% in Texas. As is the case in all massive infrastructure changes, the burden will ultimately be shouldered by the consumer.
Matt Helland – SVP – NAEA
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