Call to Order and Roll Call
The 2nd meeting of the 2015 Federal Environmental Regulation Impact Assessment Task Force was held on Monday, October 19, 2015, at 1:00 PM, in Room 131 of the Capitol Annex. Senator Jared Carpenter, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Jared Carpenter, Co-Chair; Representative Jim Gooch Jr., Co-Chair; Senator Brandon Smith; Representatives Tim Couch and Fitz Steele; Rodney Andrews, Jason Bentley, Jeff Derouen, Greg Higdon, Dave Moss, Len Peters, and James See.
Guests: John N. Moura, Director, Reliability Assessment and System Analysis, and Janet Sena, Senior Vice President and Director of Policy and External Affairs, North American Electric Reliability Corporation.
LRC Staff: D. Todd Littlefield, Committee Staff Administrator; Janine Coy-Geeslin; and Kate Talley, Committee Assistant.
John Moura appeared before the committee to speak about potential impacts on reliability perspectives on the Clean Power Plan (CPP). The North American Electric Reliability Corporation (NERC) has been conducting reliability assessments since 1965. After the Energy Policy Act of 2005, NERC established and enforced mandatory reliability standards. NERC also assesses current and future reliability, and system event analysis.
Reliability assessments are done annually and look out 10 years to ensure resource adequacy and operating reliability, transmission adequacy, and demand forecasts. Over 1,800 stakeholders come together to share data to create a plan that NERC follows.
The initial CPP rule caused two major concerns for NERC. One centered around timing and the other was reliability assurance. There was an increase in total reduction from 30 percent to 32 percent in the final CPP rule, which may be difficult for some states to attain. There are also significant increases in renewable energy and energy efficiency within the Clean Energy Incentive Plan. The EPA projects trading to be a large mitigating factor for attaining compliance goals.
NERC met with the EPA prior to the final rule to discuss some of the challenges regarding reliability. They were pleased that the EPA developed a provision for states to demonstrate consideration for reliability, mechanisms for states to seek revisions to plans for unanticipated and significant reliability changes, and a 90-day reliability safety valve to address unanticipated or other extraordinary circumstances.
Essential Reliability Services (ERS) are the building blocks of reliability and are inherently provided by baseload generators such as coal, gas, and conventional generators. ERS must be maintained when building new generation that uses solar and wind resources. As variable resource generation replaces baseload generation, ERS will be strained. Market options, new technology, and basic requirements are some solutions to help maintain reliability, though the cost of these solutions are unresolved and need to be determined.
In November 2014, NERC conducted an Initial Reliability Review of the EPA’s CPP. It highlighted potential reliability impacts such as accelerated changes to the resource mix, the impacts on ERS characteristics and increased dependency on natural gas, displacement or retirement of baseload capacity, expansion of natural gas and variable resources, and potential transmission needs. It also served as a platform to inform policy discussions on bulk-power systems reliability. In the Phase I analysis, NERC performed a resource adequacy evaluation to determine if there is enough generation to serve future demands and also looked at transmission implications to determine what upgrades are necessary. Kentucky is going to need more transmission. Construction of infrastructure takes a lot of time. As an example, a new urban, 20 mile, 115kV transmission line takes 64 months to complete. The reliance on gas-fired generation is growing based on gas prices that have been at relative, historic lows and the CPP accelerates this reliance.
NERC is working on a comprehensive guidance document together with recommendations and guidance for states in regards to the CPP. It will address the roles and responsibilities of all the planning agencies and reliability authorities. It will emphasize implications of the reliability assurance provision and address future characteristics of resources. It will describe how planning reserve margin and ancillary service requirements are impacted by the resource mix change and address the need to maintain adequate ERS. Lessons learned will be provided from other systems that have experienced similar significant shifts, such as in Ontario where there were several challenges and deadlines had to be constantly moved back. It will address implications of increased distributed resources and control changes as well as discuss potential options for solutions, including technologies that can support reliability. The guidance document will be ready in January 2016 and Phase II of the CPP analysis is scheduled to be completed in March 2016.
There are a lot of changes happening in the industry and the CPP focuses on the acceleration of those changes that need to be made. The future holds a lot of uncertainty in dealing with nuclear power, carbon regulations, fracking, climate trends, and data analytics. Emerging reliability issues bring new technical and political challenges as well. NERC has the ability to study and assess these reliability issues.
In response to a question from Greg Higdon regarding lead-time for infrastructure, Mr. Moura said construction on generation facilities, transmission lines, and natural gas pipelines are real-time project based. There was no feedback available in the plan construct.
In response to a question from Jeff Derouen, Mr. Moura said there will only be one comprehensive guidance document for all 50 states.
In response to questions from Representative Gooch, Mr. Moura said $13 billion was lost in productivity as well as 13 lives in the 2003 blackout. At the time, state estimators were not available to look at the grid and see how it was working. Since then, there has not been a single transmission violation from a vegetation standard. The polar vortex was an interesting precursor to the future. Future scenarios show us that non-firm gas customers will not receive gas, some current generators will be retired, gas-fired generators are difficult to start in cold weather and controls can freeze. These scenarios show us weak points and vulnerabilities where we need to focus.
In response to questions from Representative Gooch, Mr. Moura said a big picture solution is necessary. Diversifying resources and implementing new policies and practices for how these resources are connected is key. Worrying about peak times of use is good for older systems, but with new systems, maintenance is often performed during off-peak times and that is when vulnerability occurs.
In response to a question from Representative Steele, Mr. Moura said NERC’s reliability standards will keep the lights on. The challenge faced is dealing with political pressures.
In response to a question from Len Peters, Mr. Moura said NERC had no formal role with the EPA while they were preparing the CPP. However, they did comment and provide technical guidance on an informal basis.
In response to questions from Mr. Derouen, Mr. Moura said NERC does not have any role in initiating the reliability safety valve. It is a 90-day period that is rarely useful. The annual reliability assessments, composed by industry participants, look at reliability every year. This provides oversight for any coming issues and policy uncertainty. It’s unfair to have an organization choose which rule to violate, and this is why reliability standards are important.
In response to a question from Mr. Higdon, Mr. Moura said NERC does not focus on the affordability of reliability. NERC does not set up trading plans, but they do help discuss the risks in plans, such as becoming a rate-based state or mass-based state.
In response to a question from Mr. Derouen, Mr. Moura said mandatory reliability standards need to be incorporated into plans and operations. These standards set a baseline for states to decide what size margin needs to be set for inclement occurrences.
In response to a question from James See, Mr. Moura said the TPL standard is critical to reliability. The standard says that if any one element needs to be disconnected, the system will not be impacted.
In response to a question from Senator Smith, Mr. Moura said the EPA listened to NERC’s comments regarding reliability. The timeline for compliance was extended two years as well as having reliability assurance provisions incorporated into the plan.
Janet Sena thanked the committee for the opportunity to appear. NERC is a resource for challenges like the CPP and available to help with any questions.
Minutes for August 24, 2015
Upon motion by Representative Gooch and second by Representative Steele, the minutes for the August 24, 2015, meeting were approved by voice vote, without objection.
The meeting adjourned at 2:33.