NERC Issues Phase II Reliability Assessment

Last week, the North American Electric Reliability Corporation (NERC) issued its Phase II assessment of potential reliability impacts of EPA’s final Clean Power Plan (CPP).  While the report acknowledges that there is on-going CPP-related litigation, it assumes, for purposes of the analysis, that that the CPP is implemented as outlined in the final rule.  NERC’s Phase II report follows on its April 2015 Phase I report, which assessed potential reliability impacts of the proposed CPP, and its January 2016 guidance on reliability considerations for state regulators to consider when formulating state implementation plans.

In the analysis, NERC examines potential resource adequacy and reliability risks that result from the following five scenarios (a reference cases and four sensitivity cases) over the 2016-2030 time period:

  • Reference Case, which assumes no CPP and represents the business-as-usual approach;
  • Base Case, which identifies the direct impacts to the resources mix as a result of CPP implementation and assumes that, with the exception of the Regional Greenhouse Gas Initiative (RGGI) states, allowance trading will only occur intra-state;
  • National Trading Case, which includes the assumption that states will fully optimize allowance trading and trade on a national scale;
  • High Renewable Penetration Case, which models the development of an additional 26-28 GW of renewable energy capacity (mostly in MISO) as compared to the Base Case; and
  • Accelerated Nuclear Retirements Case, which includes the assumption that existing nuclear units may retire at a rate earlier than predicted by the U.S. Energy Information Administration.

On the basis of its modeling, NERC concludes that “the CPP is expected to accelerate a fundamental change in the electricity generation mix in the United States and transform grid-level reliability services, diversity, and flexibility,” but that there will be a large integration of renewables regardless of the CPP.  NERC also finds that trading of allowances under a national trading program could result in greater coal and less natural gas use, but it is likely that the actual trading program will fall somewhere between the base case (limited to intra-state trading) and the national trading program case.  NERC further finds that the expected resource mix changes under all of the scenarios will require additional pipeline and transmission infrastructure development.

NERC’s recommendations include the following:

  • Planning for new transmission and natural gas pipeline infrastructure should already be underway because such infrastructure will be needed regardless of whether the CPP is implemented;
  • Regional planning coordinators and transmission planners should conduct more granular and localized system reliability assessments to provide greater guidance to states and stakeholders as to what will be required to ensure reliability;
  • States should plan for and include a sufficient level of frequency support, ramping capability, and voltage control in order to maintain reliability in light of the large amounts of renewable generation that are expected to come on-line;
  • State implementation plans should retain adequate reserve margins; and
  • EPA, DOE and FERC should continue to work together with transmission planners, planning coordinators, state environmental offices, and state utility commissions (among other stakeholders) to ensure that state plan submittals address and resolve any reliability issues that may result from CPP compliance.
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