ERCOT says EPA’s rules may force power failures

Rolling blackouts will be much more likely in Texas next summer should new Environmental Protection Agency rules go into effect on Jan. 1 as planned, according to a report released Thursday by the state’s main electric grid manager.

The rules, which industry says caught it by surprise when they were unveiled in July, could lead to the shuttering of as much as 1,400 megawatts of coal-fired power plants capacity in Texas during the summer and up to 6,000 megawatts during other times of the year, according to the study by the Electric Reliability Council of Texas.

ERCOT has declared power emergencies several times this summer as record demand met unplanned power plant outages. Plant operators say the long, hot summer has meant more wear-and-tear due to longer operating hours for power plants.

On Aug. 4, the state came close to initiating rolling blackouts when the margin between power supply and demand grew too thin.

“Had this incremental reduction been in place in 2011, ERCOT would have experienced rotating outages during days in August,” the grid manager said in the study.

In July, the Environmental Protection Agency issued the final version of its Cross-State Air Pollution Rules, which require reductions in nitrogen oxide, sulfur dioxide and particulate emissions that cross state lines and contribute to ground-level ozone.

An earlier draft version didn’t mention Texas, but under the final rule, more than 25 percent of the reductions would need to come from Texas power plants beginning in January 2012.

Compliance plans being drawn up by power plant owners indicate about 3,000 MW of capacity would be brought offline during the off-peak months of March, April, October and November; and 1,200 to 1,400 MW for the rest of the year, including the peak load months of June, July and August, according to ERCOT.

Taking into account possible increases in maintenance work, the outages could reach 3,000 MW during March and April; 1,200 to 1,400 MW through the summer; and about 5,000 MW during October, November December.

If there are shortages of low-sulfur coal, the October, November and December outages could reach 6,000 MW.

In a statement EPA said its models show Texas has “an ample range of cost-effective emission reductions options for complying with the requirements of this rule without threatening electricity reliability or the continued operation of coal-burning units.”

“We look forward to meeting with ERCOT to discuss and review their analysis of the Cross State Air Pollution Rule,” the EPA statement continues.

A recent research report from Sanford C. Bernstein & Co. says that Texas coal plants could meet the new emissions restrictions if they used their existing scrubber systems for longer periods.

Plants without such scrubbers could meet the new standards by mixing their lignite with lower sulfur coal, the study says, such as that produced in Wyoming’s Powder River Basin. Such moves likely would increase power costs, according to the report.

But in a conference call with reporters Thursday, ERCOT’s system planning manager Warren Lasher said running the scrubbers around-the-clock would not significantly change the overall emissions from the plants since those facilities with the scrubbers already operate them for most hours of the day.

He also said the existing coal supplies and railroad infrastructure may not be sufficient to meet a switch over to low sulfer coal.

“If the implementation deadline… were significantly delayed, it would expand option for maintaining system reliability,” the ERCOT report said.

ERCOT and Texas power plant owners have other options for maintaining grid reliability and responding to the impending measures.

ERCOT could ask power plant operators to bring more units out of mothballs — most of them older natural gas fired units — to have them ready for peak demand.

Four power plants were brought out of mothballs in the last few weeks to help the state through the rest of the summer, while NRG Energy was told by ERCOT this week it could not put another plant into mothballs this winter.

ERCOT could also try to expand two existing programs designed to get commercial customers to cut back usage on short notice during peak demand.

There is also a proposal under discussion to double the price ceiling in the spot power market to $6,000 per megawatt-hour as a way to encourage more power plant operators to fire up their units.

The Sierra of Texas also noted the companies could also meet their emissions goals by taking part in a NOx and SOx emissions trading program that accompanies the new EPA rules.

The threat of power reliability problems could create political pressure to delay the implementation of the new rules, however, says Kevin Book and Chase Hutto, principals in the energy policy consulting firm Clearview Energy Partners.

President Barack Obama may feel like he needs to continue to stand by the EPA time frame to satisfy some of his core constituents, while the last minute addition of Texas to the rules may give Republican House members the incentive to block the measure in the courts even before next year’s elections.

“For a president pinned between a green base and an anemic recovery, the best political outcome may be for the White House to stand behind EPA rules as eithe rCongress or the Courts intervenes to delay them,” the analysts wrote.