The issue
With electricity demand increasing and available reserve margins declining, the addition of new generation capacity is necessary to meet our increasingly digital lives. In addition, older, less efficient plants will be retired to meet new environmental mandates and that capacity will need to be replaced. The question lies in what type of infrastructure will be built and how much it will cost. This is an issue that will not only be taken up in utility company boardrooms, but also in legislative halls as pending clean energy legislation will play a big role in determining what the answers are.
What the stakes are
The decision of what new generating facilities to build is affected by a number of factors including construction and maintenance costs, fuel type and price, siting requirements, and transmission needs. Utilities perform vigorous resource planning to determine when and what type of facilities are needed to meet capacity obligations at a reasonable cost to ratepayers.
Additionally, the generation industry is facing uncertainties around, not only future climate change/carbon legislation but, also, emerging U.S. EPA regulations for SO2, NOx, mercury and other metals and compounds deemed Hazardous Air Pollutants (HAPs), as well as the disposal of Coal Combustion Residuals (CCR) such as flyash and bottom ash. These uncertainties, including regulation scope, necessary remediation, and implementation timing, make long-range planning difficult. Depending on such legislative and regulatory outcomes, many existing plants may need costly retrofits such as flue gas desulfurization (scrubbers), selective catalytic reduction and/or activated carbon injection, as well as, carbon capture and storage. The alternative will be to shut down these plants if the costs are not economically justified. New plants may require additional efficiencies and advanced environmental control capabilities. Variable resources such as solar require back up generation for periods when the sun isn’t shining. Many also require significant transmission investment to bring the power from remote areas where resources are greatest to load centers where power is needed.
As Defined by NERC
Variability: The output of variable generation changes according to the availability of the primary fuel resulting in fluctuations in the plant output on all time scales.
Uncertainty: The magnitude and timing of variable generation output is less predictable than for conventional generation.
Without the certainty of federal environmental mandates, including adoption of a federal Renewable Portfolio Standard, state public utility commissions may hesitate to provide cost recovery for higher cost technologies. Without regulatory support, utilities cannot make the billions of dollars in investment necessary to complete these low-carbon projects.
Due to long lead times to site and build generation (upwards of 6-8 years for advanced coal and 10-12 years for nuclear), utilities, regulators, and other policy makers must work together to create a regulatory environment where resource planning decisions made today are not judged in hindsight when new legislation or regulation is promulgated.
2009 EPRI Prism Analysis
SOURCE: www.epri.com
The role of EE and DR
Energy efficiency and demand response can undoubtedly decrease the demand growth rate and delay the need for new infrastructure, but will not, by themselves, eliminate the need for new generation to meet increased demand and replace the existing aging infrastructure.
AEP position
AEP’s Mountaineer Plant - New Haven, WV
AEP supports regulations that achieve long-term environmental benefits while considering the impacts on customers,
the economy and system reliability. Environmental regulation must be approached in a coordinated, realistic and cost-effective manner.
Regulations must provide appropriate flexibility to achieve the desired emission reductions while managing customer costs.
A thoughtful phased-in approach will achieve similar environmental benefits with significantly less economic and reliability impact.
