On December 1, 2011, the Department of Energy (“DOE”) and EPA presented a united front in announcing the release of a DOE report, Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations, which shows the EPA’s Cross-State Air Pollution Rule (“CSAPR”) and the Mercury and Air Toxics Standards (“MATS”) will not affect grid reliability. The report made the following conclusions:
- The timeline to construct new generation and retrofit older units in response to the EPA’s air quality rules are comparable to the EPA’s currently proposed timelines;
- The overall supply-demand balance for electric power in each region examined would be adequate under the new air quality rules, but further studies are necessary to examine local constraints; and
- There are mechanisms in place to address reliability issues for specific plants or on a local basis.
DOE and EPA announced the release of the DOE report on a conference call with DOE’s Assistant Secretary for Policy and International Affairs, David Sandalow and EPA’s Air Chief, Gina McCarthy. Sandalow spoke about the report itself, and he explained that the DOE report used a stricter air quality model than what is expected in the proposed rules. He said that even with the stricter model, the report shows that grid reliability can be maintained under the new EPA rules. McCarthy declared that EPA is now confident that the air quality rules can be implemented using the proposed timelines, and she said the rules are affordable and achievable while maintaining national reliability.
During the conference call, Sandalow stated that the DOE report shows there will not be a compromise on ensuring resource adequacy by implementing the EPA rules. In addition, there are many mechanisms in place that will allow the agency to address any issues that arise in the future. Sandalow reminded the audience that as a last resort, DOE does have authority under section 202(c) of the Federal Power Act to order generators to run. Sandalow and another DOE representative, Rick Duke, explained:
- DOE will work collaboratively with all stakeholders to address any reliability concerns;
- DOE used the NIMS model to create their report; and
- The North American Electric Reliability Corporation’s (“NERC”) report on reliability did not use realistic scenarios, and even in the NERC report, the outlook for the next few years is similar to the DOE report.
McCarthy spoke second, and she emphasized that the EPA rules are a matter of public health, and the public health costs require these air quality rules be put in place. McCarthy mimicked Sandalow’s comments and said the following:
- The technology to be compliant under the EPA rules is available and affordable;
- Reliability has never been an issue for the EPA in the past forty years, and McCarthy is confident the “lights will stay on” under the new air quality regime;
- McCarthy said EPA can address individual issues as they arise;
- When asked about several Texas issues, McCarthy reiterated that the current proposed timelines are all reasonable, and Texas had notice that the state would be included in the rules. Further, she stated that EPA will work with regions to address concerns without jeopardizing reliability;
- EPA has given states the opportunity to add a fourth year of compliance if necessary;
- In regards to a NERC report that questions reliability under the EPA rules, McCarthy made even stronger statements that NERC used faulty scenarios and based their report on some rules that are not even proposed;
- McCarthy said she hopes Cross State Air Pollution Rule (“CSAPR”) will be finalized in early 2012;
- McCarthy acknowledged there may be localized reliability concerns, but she said EPA will work with the Federal Energy Regulatory Commission (“FERC”), DOE and the local planning authorities to address those issues; and
- McCarthy would not speculate as to whether the utility industry would need more time or if an executive order from the President is needed to provide more time for compliance.
A link to the full DOE report is available here.