With the Clean Power Plan out for comment, a lot utilities are scurrying to figure out their game plan — or just how they would work with their state utility regulators to reduce their carbon emissions by 30 percent by 2030, from a 2005 baseline. The general feeling is that the goal is doable but it may take a little more time.
Understandably, the utilities and the state regulators want to find better and cheaper ways of doing business. Their level of enthusiasm, though, differs based on which part of the country they live and which fuels they burn to make electricity. The Northeast and California are leading the charge, having created free market exchanges to buy and sell credits to reduce carbon levels — mechanisms that each say is helping to broaden their generation mixes and to boost their economies.
“In 2005, our percentage of in-state generation [from coal] was as high as 56 percent. As part of the Regional Greenhouse Gas Initiative [RGGI] and coupled with state energy initiatives, we have diversified our fuel mix and reduced our carbon footprint while actually growing our regional economy,” says Kelly Speakes-Backman, public utility commission for the Maryland Public Service Commission. “We have seen our coal generation decrease to 44 percent of our generation mix, while our renewable and natural gas capacities have increased.”
Speakes-Backman, whose interview with this reporter will appear in the November edition of Public Utilities Fortnightly and who is also on the board of directors at RGGI, goes on to say that the cap-and-trade program is hugely successful: In its first three years, it generated $1.6 billion in net economic benefits while also saving customers $1.3 billion, across the region.
EPA has given the states lots of latitude. They must submit their blueprints by 2016 — templates that under the EPA draft would need to be in effect by 2020. The states have a number of options open to them that include having their utilities change-out their coal-fired plants, install energy efficient technologies or trade carbon credits.
Lawsuits have already been filed, although there is not yet a final rule. The key point of contention: While U.S. Supreme Court allows for the regulation of carbon dioxide, it does not give EPA the authority to regulate carbon emissions outside the purview of a given power plant. When that argument is eventually heard, it would likely delay the 2020 implementation date, and perhaps alter the official rule.
Advocates for EPA, however, counter that utilities are already trading credits when it comes to sulfur dioxide that leads to acid rain. That’s a hugely successful cap-and-trade mechanism, they add, pointing out that sulfur dioxide emissions have dramatically fallen by 62 percent since 2000.
California, meantime, is also ahead of EPA’s curve, having implemented both a cap-and-trade program as well as a renewable portfolio standard of 33 percent by 2020. Michael Peevey, the chair of the California Public Utilities Commission, says that this is only the second year in which the trading plan has been in effect and it is thus too soon to know the impact on the state’s carbon emissions.
Overall emissions are falling, he adds, although that is mostly because of the recession and the green energy requirements. Peevey told this writer for a November feature story in Public Utilities Fortnightly that Edison International, Sempra Energy and PG&E Corp. collectively delivered 23 percent renewable energy in 2013. That equates to 2,100 megawatts of new green capacity in 2013.
“The utilities should easily meet the 33 percent target,” says Peevey. He adds that wind energy and geothermal power now make up most of the requirement, although the trend is toward more rooftop solar energy.
Not every utility around the country is as gung-ho. That said, even the utility with one of the most coal-heavy fleets in the country has a can-do attitude: American Electric Power says that EPA’s desire to get its Clean Power Plan underway by 2020 is too aggressive, although it does say that with major investments in continental transmission, green fuels can reach new peaks.
In a recent conference call with investors, Chief Executive Nick Akins said his concern rested mostly with grid reliability — not with the addition of cleaner power generation. His internal team found that if the proposed changes occurred in five years, it would lead to “voltage degradation” and “cascading outages.”
“The 2020 timetable requirements must be dropped and the states be given the flexibility to do the proper analysis to formulate plans,” he told investors. However, the utility did perform an extensive study a few years before the Clean Power Plan was released in June. It examined the levels investment it would take to expand the transmission network so that it would maintain its reliability while notably increasing the amount of green energy.
To that end, the utility concluded that if the North American grid expanded by 9 percent and added 42,000 miles of high voltage 765 kilovolts to the existing existing 450,000 miles that consist of 100 kilovolts, then 40 percent of electricity could come from renewable sources by 2030. That would cost $2 million per mile, or $84 billion over 10 years.
Transmission and smart grid expert Massoud Amin says that this study makes the utility one of the thought leaders on the subject. Calling himself an advocate for greener and more secure energy systems, he goes on to say that he is “sympathetic to AEP’s concerns.”
“Using an accelerated holistic (approach) undertaken by public-private partnerships, with regional stakeholders, we can measure twice, or more, before we cut,” says Amin, an engineering professor and director at the University of Minnesota, and chair of the IEEE Smart Grid, in an interview.
The good news is that critical investments are being made to increase the grid’s capabilities — not just able to handle more bandwidth but also a larger array of fuel sources. It is about better performance, cheaper cost and more environmental and economic security, adds Amin. EPA can therefore achieve its ultimate objectives related to reduced carbon emissions, he emphasizes, although it will take unbiased public-private initiatives, and a slightly longer time line.