Green Technology

A Reliable Grid Depends On Rapid Clean Energy Deployment — EPA’s Proposed Standards Help Accelerate That Shift


The comment period for the Environmental Protection Agency (EPA)’s proposed greenhouse gas emissions standards for power plants closed on August 8, and headlines indicate that the industry is fractured. The regulations are intended to set performance standards for fossil fuel-fired power plants including new gas plants, existing coal plants, and existing gas plants.

One of the key concerns raised by some grid operators and utilities is that the gas standards, in particular, could impact grid reliability by chilling the market for new gas plants and limiting the ability of the existing gas fleet to generate when needed. But our analysis shows that rather than compromising reliability, the standards support the economic transition underway toward cleaner reliability options and reduce emissions in a critical step toward a decarbonized electricity future. They provide significant flexibility for gas plants to continue to operate in ways that provide grid reliability services if needed, while encouraging a shift toward a more diverse set of resources that can reduce the risk of relying heavily on uncontrolled fossil fuel plants.

EPA’s proposed gas standards — both new and existing — are structured to have the most impact on plants that are large and run frequently. For new gas, plants that run at less than an annual capacity factor of 20 percent can comply with proposed standards with normal, efficient operation. New plants that plan to operate more often will need to reduce emissions to a rate that is consistent with either blending gas with hydrogen (30 percent by 2032, then 96 percent by 2038) or installing carbon capture (CCS) technology by 2035. For existing gas plants, the same emissions rates are required by 2032 or 2035, but the standard only applies to large and frequently run units: those that have an annual capacity factor greater than 50 percent and are larger than 300 megawatts (MW).

Existing gas plant impacts, today

When we look at the data on operations of plants today, we see that existing gas plants would not have to significantly change operations to reduce their emissions in line with the EPA’s proposed performance standards. The standards provide flexibility for gas plants to play their current role in supporting grid reliability.

Across the 470 gigawatts (GW) of total existing capacity in gas combustion turbines and combined-cycle power plants, nearly 80 percent of electric generating units are not impacted by the proposed standards because they fall below the 300 MW size limit or already operate with capacity factor below 50 percent (Exhibit 1). Of the remaining units that are subject to the proposed standards, many operate with capacity factor near the 50 percent threshold and could comply with only minor changes in annual operation. A small fraction, 6 percent of units, then remain that would likely have to reduce capacity factor by more than 20 percent or invest in emissions reduction technology by 2032 or 2035.

Exhibit 1: Impacts of proposed EPA regulations on existing gas capacity, in aggregate.

The conclusions from our aggregate summary (Exhibit 1) generally apply to individual companies (Exhibit 2) as well: over 90 percent of gas plant owners already operate a majority of their gas capacity in a way that meets proposed EPA standards. While some individual companies may at first appear to be significantly impacted based on size and capacity factor thresholds, many would be able to meet standards with minor changes in operation.

For example, 46 percent of gas capacity owned by Florida Power & Light Co. currently meets criteria of “large and frequently used,” but 97 percent of capacity could fall below the criteria for additional emissions reduction if plants between 50–70 percent capacity factor reduce operations to below a 50 percent capacity factor. The remaining 3 percent of gas capacity for Florida Power & Light will indeed need to operate much differently than it currently does — or to be modified with hydrogen or CCS technology — by 2032. There will also likely be significant changes to how the fleet operates — including a reduction in capacity factors — before 2032, as investment in clean energy accelerates.

Exhibit 2: Impacts of proposed EPA regulations on existing gas capacity, by company.

The future role of gas in the power sector

Looking at the operations of plants today only tells half the story. The grid will look substantially different in 2032–2035 when compliance with the proposed gas standards comes into effect.

Two comprehensive, national studies conducted by the National Renewable Energy Laboratory (NREL) and the University of California, Berkeley offer insight into the role gas might play in maintaining reliability in a grid that makes substantial progress toward decarbonization by that time frame. While NREL’s study looks at the impacts of the Inflation Reduction Act on power sector build-out and operations and Berkeley’s 2035 Report looks at cost-effective pathways for achieving 90 percent clean electricity by 2035, both demonstrate viable pathways for grid reliability with operations and gas capacity factors consistent with EPA’s proposed performance standards and emission guidelines.

In both studies, achieving a clean and reliable grid primarily relies on rapidly accelerating the deployment of wind, solar, and storage. In the 2035 Report, the 90 percent clean resource mix was able to reliably meet demand across 7 years of historical data in hourly production cost simulations as part of the study’s extreme event analysis. Both studies show modest additions of new gas, 8–11 gigawatts of additional capacity compared to today’s fleet, compared with hundreds of gigawatts of new renewables.

In these highly renewable grids, modeling shows that role that existing gas plays in supporting reliability is not likely to be hindered by the EPA’s proposed emissions limits. In NREL’s most conservative scenario, a low gas price scenario, they fall to about 40 percent by 2030, down 12 percentage points from today. In the least conservative scenario, where clean energy costs come down at an accelerated rate, they fall to about 10 percent. Across all scenarios that NREL modeled, average combined-cycle capacity factors decline over time to averages well below the 50 percent threshold for existing plants in proposed EPA standards.

While the debate continues into the fall, there are several options that grid operators and utilities can use today to cost-effectively support grid reliability, without planning to rely on uncontrolled fossil fuel plants:

With EPA’s proposed standards, the US electricity system can continue the march toward this diverse set of carbon-free resources and progress beyond exclusive reliance on fossil plants for reliability.

Note on methodology: Existing gas capacity, ownership, and capacity factor data for this article came from EIA forms 860 and 923, accessed through the Public Utility Data Liberation Project. Generator-level capacity and generation data was converted to owner- and EPA unit-level data, then used to calculate capacity factor.

By Lauren Shwisberg, Gabriella Tosado, and Jon Rea © 2022 Rocky Mountain Institute. Published with permission. Originally posted on RMI Outlet.


 


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