In my July column, I discussed the U.S. Environmental Protection Agency’s (EPA’s) proposed carbon rule for existing power plants. In conclusion, I stated that the proposed rule required a healthy and robust wires system to implement many of the EPA’s carbon reduction “building blocks.” After digging deeper into the rule and considering its potential ramifications further, I have become more convinced that a healthy (physically, financially and technically) T&D wires system is critical to the successful implementation of the proposed rule.
Though the EPA estimates that 30% of the nation’s electricity will still come from coal-fired plants in the target year 2030, it is carbon-intensive coal that is in the EPA’s crosshairs. Not surprisingly, states and other parties with significant coal mining or coal-fired generation interests have come out hard against the rule. Opponents are charging that the rule will shutter coal mines, close coal-fired generating stations and cost the nation jobs. The U.S. Chamber of Commerce estimated that rule will cost 200,000 jobs annually and increase electricity costs by US$289 billion by 2030. Like the opening salvo to the court challenges certain to follow, other opponents have just declared the rule to be blatantly illegal.
Interestingly, the rule has garnered support from an unexpected quarter. In Senate hearings, four former republican EPA heads voiced their support for the EPA’s actions. In her testimony, President George W. Bush’s first EPA administrator, Christine Todd Whitman, spoke of the potential staying power of the rule when she said, “EPA does have the authority. The law says so; the Supreme Court has said so twice. That matter should now, I believe, be put to rest.” The public also seems to favor the rule. According to a recent Wall Street Journal/NBC poll, 67% of respondents “strongly supported” or “somewhat supported” the carbon-reduction effort.
Other proponents continued to tout the proposed rule’s flexibility as a good thing. Others are not so sure. Speaking before a National Association of Regulatory Utility Commissioners summer meeting, PJM Interconnection’s Chief Economist Paul Sotkiewicz said, “There’s so much flexibility that’s been given that dare I say in some ways it’s almost ill-defined.”
The situation may remain ill-defined until the state plans near final approval. Though the rule-making process may naturally entail some uncertainty, one outcome is clear: If the rule becomes fully implemented, the future electric generation fuel mix will be more dependent upon natural gas. To obtain the EPA 2030 goals, less carbon-intensive natural gas must do the heavy lifting in the short term. This is because natural gas is the only acceptable fuel that can take over coal’s historical baseload function. Technically, nuclear could do the job if it could overcome many public perception and financial risk issues.
All that said, government-mandated fuel switching tends to make me nervous. Does anyone remember the 1978 Fuel Use Act? That federal law all but banned the use of natural gas in new baseload power plants. The same law encouraged the development of many of the same coal plants that today’s carbon rule is now proposing to replace with natural gas generation. I believe the lesson that we should take from the 1978 Fuel Use Act is that even well-intended government actions can produce unintended consequences that may only surface much later. In 1978, the government moved electricity production from natural gas to coal and nuclear because of energy security concerns. Today, the government is moving electric production from coal to natural gas because of climate change concerns. As the development of this carbon rule proceeds, we should seriously consider, to the best of our ability, the unintended consequences today’s actions will have upon the electric energy system 30 years from now.
So why is the T&D grid important to any of this? It is important because it allows end-use customers to access a diverse energy portfolio along with other energy transport services. It allows access to different energy resource from various locations. This diversity becomes critically important if renewable energy resources are to be a larger part of a future energy mix. Wind and solar production profiles can vary significantly by resource and by location. Taking this effect into account can result in a blended renewable energy portfolio that may prove easier to accommodate than a single renewable source at a single location. The T&D grid also provides distributed renewable energy resources access to energy markets when local production exceeds local energy requirements. Even the ability to sell demand-response services cannot occur without the grid. If the nation is truly interested in reducing the carbon content in electricity, the T&D grid will be needed to allow customers to access future nuclear generation.
As we define our electric future, there is one unintended consequence we must diligently avoid: We should take no action today that will render the T&D grid incapable of providing the critical functions that future generations will require tomorrow. The full implementation of the proposed carbon rule will make avoiding this outcome all the more crucial.