Southwest Power Pool releases final analysis of draft Clean Power Plan
State compliance approach more costly, less reliable and disrupts efficient markets
LITTLE ROCK, Ark. – Southwest Power Pool (SPP), a regional power grid operator that ensures access to reliable sources of electricity at affordable rates, today released its final analysis of the potential impact of the Environmental Protection Agency’s draft Clean Power Plan. The analysis revealed that a state-by-state compliance approach potentially would result in nearly 40 percent higher costs than a regional approach outlined in a report released in March.
“Our analysis affirmed that a state-by-state compliance approach would be more expensive to administer than a regional approach,” said Lanny Nickell, vice president of engineering for SPP. “A state-by-state solution also would be more disruptive than a regional approach to the significant reliability and economic value that SPP provides to its members as a regional transmission organization.”
The state-by-state approach evaluated by SPP would cost an estimated $3.3 billion annually in new generation capital investment and energy production costs to comply with the draft Clean Power Plan. The assessment did not include the cost of new transmission needed to maintain reliability, gas infrastructure expansion, market enhancements or the transmission congestion and losses that could result from compliance.
SPP's analysis was based on the proposed state carbon-emission reduction goals proposed by the EPA in its draft rulemaking and does not take a position on the appropriateness of those goals or the EPA’s supporting assumptions.
The study revealed up to 15.1 gigawatts of generation beyond current planning assumptions could be at risk of retirement under a state-by-state compliance approach. The study applied a nominal $45 per ton carbon-cost adder to incent dispatch of lower carbon-emitting generation resources. The study also incorporated 5.5 gigawatts of wind resources and 4 gigawatts of gas-fueled resources above currently planned capacity, which includes approximately 4 gigawatts of new wind and 22 gigawatts of new gas resources.
The study concluded that coordinating individual state plans in a regional market where energy flows without respect to state boundaries and benefits are shared regionally will be extremely challenging and risky for states.
SPP’s Strategic Planning Committee directed SPP staff in January to conduct regional and state-by-state compliance assessments of the draft Clean Power Plan after SPP published a reliability impact assessment in October 2014. The reliability assessment found that the draft Clean Power Plan did not allow enough time to build the generation and transmission infrastructure needed to maintain system reliability and avoid severe system overloads that could lead to cascading outages. The draft Clean Power Plan proposes reducing U.S. carbon-dioxide emissions 30 percent from 2005 levels by 2030.
About Southwest Power Pool, Inc.
Southwest Power Pool, Inc. manages the electric grid and wholesale energy market for the central United States. As a regional transmission organization, the nonprofit corporation is mandated by the Federal Energy Regulatory Commission to ensure reliable supplies of power, adequate transmission infrastructure and competitive wholesale electricity prices. Southwest Power Pool and its diverse group of member companies coordinate the flow of electricity across 48,537 miles of high-voltage transmission lines spanning 14 states. The company is headquartered in Little Rock, Ark. Learn more at www.spp.org.