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Clean Power Plan:

Impact on Transmission Planning, Development and Reliability Flora Flygt

Strategic Planning & Policy Advisor

EnergyTech 2015 – November 30, 2015

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ATC Introduction

• 1st multi-state, transmission-only utility

• More than 9,530 miles of lines and 530 substations

• Diverse ownership base

– IOUs, municipals and cooperatives

• Member of Mid-Continent Independent System Operator (MISO)

– 1st economic and Multi-Value Projects in MISO

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• Since 2001, ATC has provided reliable transmission service and economic savings in our footprint – Upgraded or built more than 2,300 miles of transmission lines;

improved 155 existing and built 15 new substations

– Saved customers more than $100 million annually in reduced energy costs with access to markets, reduced losses

– Estimate reduced losses will save 250,000 tons of CO2 annually

• DATC partnership founded in 2011 on a vision of transmission as enabler of efficient energy markets – Committed to delivering a strong portfolio of reliability, economic

and public policy benefits nationally

ATC’s Focus

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Overview of the CPP Final Rule

• Proposes state-specific CO2 limits – Both emission rates (CO2 emissions per megawatt-hour of

electricity produced) and mass-based (total absolute tons of CO2)

• Addresses CO2 emissions from existing fossil-fired plants • Uses “Best System of Emission Reduction (BSER) ….adequately

demonstrated” – Weighted average of coal plant limit and natural gas plant limit

• Allows states significant flexibility in how they meet the goals • EPA will implement Federal Plan for those states who do not

submit approvable plan

CPP Final Rule Timeline

June 2014

Draft rule issued

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Oct 2014

EPA comment deadline

Aug 2015

Final rule issued

Sep 2016

Initial state filings due

Sep 2019

EPA must approve/

disapprove

Jan

2025-2027

Interim goals in effect

January 2030+

Final goals in effect

Sep 2018

Final state plans due

Jan

2022-2024

Interim goals in effect

Jan

2028-2029

Interim goals in effect

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Final CPP Required Reductions

Source: The Brattle Group

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Final CPP Goal Example: Wisconsin

Source: Public Service Commission of Wisconsin

Emissions from Electric Sector Only

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• Setting the State goals – Now set by applying limits on CO2 emitted from coal/oil

plants and natural gas plants – CO2 limits were developed for each Interconnection – Limits applied to the generation mix in each state – Impact: smoothing reductions

• Building blocks – Three, not four; focused on supply side measures – Heat rate improvements reduced from 6% to 2.1-4.3% – Natural gas plants run at 75% of “net summer capacity” – Renewables included only; no nuclear in calculations

Key changes (1): Proposed to Final Rule

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Key changes (2): Proposed to Final Rule

• Implementation begins in 2022, not 2020

• Three interim periods: 2022-2024, 2025-2027, 2028-2029

• Additional provisions to address reliability – States must show they have considered reliability in their

state plans – States can amend their plans if there are reliability

concerns – Rule includes reliability safety valve – MOU between EPA, FERC and DOE to monitor and assure

reliability

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Key changes (3): Proposed to Final Rule

• “Trading ready” mechanisms – Formal agreements between states no longer required – Individual power plants may use creditable out-of-state

reductions to achieve required CO2 reductions without the need for up-front interstate agreements

• Mass-based CO2 targets developed by EPA for each state

• Early energy efficiency credits available (optional) – 2020 and 2021 – Renewable energy and energy efficiency projects in low

income areas will be awarded emission rate credits or allowances

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Key changes (4): Proposed to Final Rule

• State plans – Must describe how reliability impacts have been

considered, including consultation with an appropriate reliability or planning agency

– Must file by 9/6/2016 but may be “initial” filing requesting extension to 2018

– Choose one of two types of plans • Source based “emission standard” plan or “state measures” plan that has

backstop emission standards

– Must demonstrate outreach efforts to low income communities, people of color and tribal communities

– Must describe impacts on low income communities

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• Transmission

– EPA believes they have provided time for needed infrastructure to be built

– Any needs can and will be dealt with through normal planning and development processes

• Reliability

– EPA has entered into MOU with DOE and FERC to track reliability as the plans are developed

– EPA has stated that EGUs may run over their allowed time for reliability purposes as long as the emissions are reduced somewhere else

– Is reliability safety valve

– EPA expects use of RSV to “be extremely rare”

– Expect it to “ensure the absence of adverse energy impacts”

Transmission & Reliability

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• ERCOT – Estimated retirement of 4 GW of coal capacity – Exceed thermal capacities on 330 miles of transmission and 11

transformers

• SPP – Up to 13.9 GW of generation at risk for retirement (draft rule analysis) – $600 million/year increased energy costs and $13.3 billion in total capital

costs; annual compliance costs = $2.9 billion

• PJM – At-risk generation of 6 GW, 16 GW and 32 GW studied

• MISO – Additional 14 GW of generation at risk – $55 billion in NPV additional costs with regional approach and non-

building block

– Multi-billion dollar transmission build-out needed in the scenarios studied

Impacts on Generation Mix & Reliability

Additional Approaches to Meeting CO2 Targets

• Co-firing or switching to natural gas • Carbon capture and sequestration

• New natural gas combined cycle generation (NGCC) • Heat rate improvements for fossil generators

• Co-firing lower carbon fuels • Transmission efficiency improvements

– “Just as end-use energy efficiency can reduce mass emissions from affected EGUs, so can transmission upgrades.”

• Energy storage technology • Retirements

• Market based trading programs

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Views on Clean Power Plan (CPP)

• ATC does not take a position on merits of CPP • The company is solely focused on transmission

issues – Maintaining reliability of the transmission system – Ensuring transmission is considered in compliance

plans – Supporting regional and inter-regional planning

processes to identify projects needed for CPP – Ensuring that competitive processes are capable to

efficiently identify developers for regionally cost-shared projects in time to meet compliance deadlines

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Reliability Considerations

• ATC’s primary position is that the reliability of the transmission system must be preserved – Decisions to retire plants, interconnect new plants, use

existing plants differently must consider impacts on grid

– Revisions in final rule – e.g., Reliability Safety Valve – step in right direction, but long-term consideration still needed

• Timing is a key issue – Transmission generally takes 5 to 10 years to construct

– State compliance plans are due between 2016 and 2018

– Interim compliance begins in 2022

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Planning Considerations • Transmission should be considered as part of the solution

– Interconnection of new resources – Access to regional resources and energy markets

• ATC supports MISO’s efforts to study the impact of CPP and to identify potentially needed transmission – Scenario analysis enables the identification of what facilities

might be necessary under broad range of outcomes – MISO should coordinate with neighboring planning regions to

explore what inter-regional projects might be needed

• Competitive bidding processes should be refined to avoid any unnecessary delays in identifying developers for regionally cost-shared projects needed for CPP

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Ultimately …

• Reliability of the transmission system must be preserved

• Transmission should be considered as part of solution

• RTO planning processes should be leveraged now to get a jump on identifying transmission that might be needed

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