The confounding complexities of the Clean Power Plan – reliability concerns aired at FERC

Philip A. Wallach

I have previously written about the Clean Power Plan’s democratic legitimacy problems, and the associated political and legal difficulties it is likely to face on its way to implementation. But Thursday, February 19, 2015, I attended a workshop at the Federal Energy Regulatory Commission (FERC) that began to acquaint me with the technical problems that the Obama administration’s signature climate change policy will have to overcome—which are, in short, staggering.

The workshop, which was well-attended by the energy industry, featured an optimistic opening pitch by EPA’s Acting Assistant Administrator for the Office of Air and Radiation, Janet McCabe, in which she insisted that the EPA is on top of all concerns about electric grid reliability that the Clean Power Plan has inspired. She praised the plan’s built-in flexibilities for states devising their compliance strategies and emphasized that her agency would be taking comments seriously during the finalization of the rule (projected, very optimistically, for this summer).

The responses by FERC’s commissioners, as well as from a wide array of representatives from power sector trade groups and state utility regulators, made it clear that not everyone shares the EPA’s sanguine views. Gerry Cauley, the president and CEO of NERC (the North American Electric Reliability Corporation, which is the international regulatory body devoted to ensuring outage-free electric service for Canada, the U.S., and parts of Mexico), put it quite bluntly: reliability issues, highlighted by a recent NERC study, are very real, and should not be shrugged off lightly. The EPA’s pursuit of greenhouse gas emission reductions will involve potential tradeoffs with the cost of electricity for consumers, reliability for consumers, not to mention a host of other conflicting environmental laws that seriously hinder the kind of infrastructure development necessary to meet the plan’s requirements.

The interplay of federal laws set off by the Clean Power Plan is enough to make one’s head spin. As Alexandra Dunn, executive director of the Environmental Council of the States, put it, the plan puts “different solar systems into direct collision.” First and most pressing, many fear the EPA’s proposed rule will force power plant operators into a choice between violating the Clean Air Act or the Federal Power Act, either by emitting beyond their legal allowances or by failing to provide the electricity they have promised to deliver to the grid. No less troubling for states’ ability to craft compliance plans are a host of federal and state environmental statutes that will prevent the development of necessary infrastructure, including new transmission lines needed to integrate new zero-emissions power sources into the grid and natural gas pipelines that will allow states to ramp up their reliance on gas instead of coal (as the Clean Power Plan’s Block 2 urges). The Endangered Species Act, NEPA, an expanded interpretation of the Clean Water Act, and a wide variety of corresponding laws in the states make getting new construction approved very difficult, potentially holding up investments in adaptive infrastructure for years. It can take a remarkable 12-14 years to site a new high-voltage transmission line. Unless federal regulators (and possibly Congress) somehow facilitate streamlined development, it is hard to see how states will be able to achieve big emissions reductions in time to meet the first compliance goals in 2020.

Amidst this cacophony of legal requirements, states are not currently able to plan for compliance with any confidence, and even after the Clean Power Plan is finalized they are likely to hunker down and focus on what they can do within their own borders (not always as straightforward as it sounds) because of the extra layers of complexity added by trying to coordinate across jurisdictions. That is quite problematic from a reliability perspective, though: state borders are not especially meaningful , since it is regional transmission organizations and independent system operators (RTO/ISOs) that work to ensure reliable delivery. But it isn’t yet clear who can play a coordinating role across states, especially once states’ compliance plans are approved and locked in—perhaps FERC, perhaps the RTOs, but the Clean Power Plan in its current incarnation makes no allowance for such continuous updating.

Meanwhile, states fear another kind of legal risk as well: the likelihood that if they make some heretofore voluntary program mandatory in their compliance plan, they enable third parties unhappy with the pace of implementation (i.e., environmental groups) to sue the state to force aggressive implementation. Representatives of the power industry made it very clear that if the final version of the Clean Power Plan fails to address these litigation fears it is likely to discourage states from making any bold experiments, lest their feet be held to the fire to pursue a strategy just when they find out it is not working. In general, for all of the EPA’s professions of flexibility, there was a great deal of anxiety about being locked in to pursuit of whatever strategy is favored circa 2016, even as technological and environmental factors shift in unpredictable ways throughout the 2020s.

Industry’s main request for FERC was that it ensure that there is some mechanism built into the Clean Power Plan that allows reliability concerns to trump emission concerns in some limited situations when states can show that they have made good faith implementation efforts but find themselves constrained by difficult conditions—a so-called “reliability safety valve.” Exactly how this would work remains to be determined, but from a political standpoint it seems imperative that EPA figure out some workable means; it is hard to imagine a bigger catastrophe for the cause of combating global climate change than having the leading rule on the subject cause rolling blackouts or extreme price spikes during moments of high demand.

Finally, there are some very fundamental uncertainties about how the Clean Power Plan actually will function when the rubber hits the road. Nobody is quite sure who has the ultimate responsibility to ensure compliance, and so nobody knows quite who will be caught holding the bag if a state fails to meet its EPA-tailored goal. Since the state environmental agencies are the ones that will be responsible for drafting the compliance plans, you might think they would be held accountable—but frankly most of the heavy lifting may be done by state public utility commissions and it is the power plant operators themselves who are the ultimate target of regulation under § 111(d) of the Clean Air Act. It remains unclear what burdens plants might be asked to bear should a state’s efforts at compliance fall short—or if their states simply refuse to play along with the EPA’s requests and force the federal government to devise its own implementation plan.

To my mind, the most remarkable thing about the whole proceeding is just how inevitable the process seems to all of the regulated interests forced to reckon with nitty-gritty details invisible to the general public. In spite of Republicans’ steadfast antipathy toward the plan and the possibility that legal action or political reversal could halt its implementation, millions of man-hours from lawyers, lobbyists, modelers, and grid specialists are going into trying to achieve the kind of coordination necessary to ensure reliability in this complex, EPA-mediated process of energy sector transformation. All without any clear statutory guidance! Who knows, they may make a passable hash of it yet, and they have little choice but to prepare for the long compliance slog likely ahead. But the whole endeavor has a surreal feel to it; the process goes by its own accord, while obviously superior policy alternatives languish. Both parties should prioritize a major shift in approach, the sooner the better.

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