Energy markets see EPA climate rule’s survival ‘unlikely’
The two largest federally overseen electric markets with the largest amounts of coal said Monday that Obama-era climate regulations have met their match in the Trump administration.
“Since its introduction as a proposed rule, the [Clean Power Plan] has garnered a significant amount of opposition, and the current political environment makes it unlikely that it will survive in its current form,” said PJM Interconnection and the Midcontinent Independent System Operator, or MISO, in a new joint study of the plan issued Monday.
The Environmental Protection Agency developed the plan as part of former President Barack Obama’s broad agenda to combat climate change. President Trump has made scuttling the regulations a top promise in his first 100 days in office, and he is expected to issue an executive order this week directing the EPA to withdraw the plan.
The regulation is being reviewed by a federal appeals court after it was sued by 28 states attorneys general and hundreds of groups and energy companies because they say the plan oversteps the EPA’s authority under the law. The Trump order is expected to ask the court to hold its ruling in abeyance until the EPA reviews the climate plan’s constitutionality and compliance with the Clean Air Act.
Although the EPA’s climate plan continues to be “controversial,” the market operators said it’s “only one of many policy and market drivers that states are faced with as they think about current and future electric supply,” according to the study’s executive summary.
PJM and MISO regulate a sprawling transmission system that covers more than half the country, from Montana to New Jersey and Washington. They are overseen by Washington’s grid watchdog, the Federal Energy Regulatory Commission.
The big operators said the new study was a useful exercise, despite the current political climate, because the EPA plan serves as an important “stress test” to see how much the grid can withstand before experiencing major distortions and jumps in costs for consumers.
“The observations in this report are not recommendations for complying with the [plan],” the summary said. “However, states, utilities and other entities can consider the observations made from this analysis within the specific context of the [Clean Power Plan] or in a broader context as they consider other policy goals that can influence already dynamic economic interactions in electric markets.”
The study alludes to the fact that a number of states are considering retiring coal and nuclear power plants because of the low cost of natural gas, which is challenging the grid in new ways. At the same time, states are incorporating more wind and solar than ever, which presents other challenges for keeping the lights on, even without the Clean Power Plan closing coal plants in favor of cleaner energy, and raising energy prices, critics of the plan have warned.
One of the key takeaways from the study is that states should collaborate more, not less, in facing their energy challenges. “Disconnected state policies can drive significant economic distortions along the seam [between markets and states] and exacerbate transmission cost impacts,” the study said.