Reliability Impacts of Power Sector Developments

“You use models to improve your common sense and common sense to improve your models.” – Howard Gruenspecht, Ph.D., Deputy Administrator, US Energy Information Administration

On Tuesday, the Bipartisan Policy Center hosted the second workshop in a three-part series on Environmental Regulation and Electric Sector Reliability. The workshop featured discussion of power sector modeling and analysis, including insights from North American Electric Reliability Corporation, Clean Air Task Force, PJM Interconnection, and ICF International.

Efforts to estimate the impact of EPA regulations on electric sector reliability must navigate a number of uncertainties, including how pending EPA regulatory policies will be structured and implemented; what control technologies will be available and at what cost; the price and supply of other generating fuels (particularly natural gas); and future electricity demand that may be driven by economic growth but moderated by energy efficiency programs.

Dr. Howard Gruenspecht, the Deputy Administrator of US Energy Information Administration put this challenge into perspective when he quipped “You use models to improve your common sense and common sense to improve your models.”

Several of the speakers emphasized that, despite the range of projected generation unit retirements, the forthcoming EPA regulations were not likely to cause an emergency event or blackouts. The most dire forecasts assume the most stringent regulations and compliance schedules, but some speakers suggested that even if these assumptions are true, there will be sufficient excess capacity to maintain system reliability. However, the investments required to achieve compliance and maintain reliability, particularly within the anticipated timeframes, may be costly.

Industry voices, including Bill Tyndall of Duke, John McManus of AEP, and John Shelk of EPSA emphasized that improved policy coordination with a longer time horizon and greater flexibility would allow power companies to develop a more rational plan for retirements, retrofits, and new construction to transition to a cleaner, more robust electric system. They noted the challenge of having to make significant long-term capital investments amidst ongoing uncertainty about how energy and environmental policy, fuel prices, and market conditions will evolve over the lifetime of those investments.

The workshop helped spark discussion about what planning and institutional coordination is needed to ensure the smoothest and lowest-cost transition possible. This discussion will continue at the final workshop, scheduled for January 2011.

To see presentations and video from this workshop, click here.