Navigant Research Blog

Will Coal Plant Retirements and Fracking Threaten Electric Reliability?

James McCray — December 17, 2014

The implications of the rapid retirement of much of the U.S. coal generation fleet are just coming to light, and transmission operators and generation utilities are actively discussing and planning on contingencies that could cause a real threat to reliability and availability in many regions across the nation.  (The issues around retiring and decommissioning coal plants were discussed in Navigant Research’s research brief, Coal Plant Decommissioning.)  Compounding the threat of coal generation plant retirements is a short-term shortage of coal in many regions of the nation.

The U.S. Environmental Protection Agency (EPA) announced its proposed Clean Power Plan (CPP) rule in June 2014.  It’s expected that the final rule will be announced in June 2015.  The CPP targets CO2 emissions by existing fossil-fueled electric generation and sets targeted reductions for each state.  The plan, as currently proposed, mandates 30% reductions in carbon emissions by 2030 from 2005 levels.

The proposed plan also gives each state flexibility to develop its own approach as to how it will meet the targets, including retiring problematic coal and other fossil fuel generation, adding renewables, such as wind or solar generation, or increasing levels of demand response and energy efficiency programs, which the recent EPA mandates may accelerate.

Time to Plan

Most people do not understand the issues that will arise in the Midwest and the southeastern United States as a result of coal generation plant retirements.  The North American Electric Reliability Corporation (NERC) discusses the implications at length in a recent paper on the impact of generation plant retirements based on the CPP.  NERC concludes the paper by suggesting that states immediately start operational and planning scenario studies, addressing resource adequacy, transmission adequacy, dynamic stability, and  economic and reliability impacts.  This must be done to demonstrate reliability and to ensure that plans of action are technically achievable within the stated time requirements.  “States that largely rely on fossil-fuel resources might need to make significant changes to their power systems to meet the EPA’s target for carbon reductions while maintaining system reliability,” the NERC authors conclude.

Supplies Down

In the near term, another related reliability threat is looming: the availability of coal to fuel the generation plants operating today.  Having formed a new trade group called the Western Coal Traffic League, Midwestern utilities are frustrated because their normal coal supplies from western U.S. coal producers have kept utilities from rebuilding stockpiles burned during last year’s cold winter. Compounding the effect, record harvests, economic growth, and growing oil shipments from the country’s booming oil fracking industry in in the upper Midwest are constraining the rail system.

The effective implementation of the CPP, along with tight supplies of coal, will make for an interesting winter in many parts of the United States.

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