Executives with Arkansas' two electricity-grid operators said Wednesday that proposed federal air-quality standards likely cannot be met in the required time frame and that some coal plants would have to close.
The two were among the speakers at a meeting at the Arkansas Department of Environmental Quality's offices in North Little Rock to discuss proposals by the federal Environmental Protection Agency to lower carbon emissions nationally.
There are more than 300 coal plants in the service area covered by Midcontinent Independent System Operator, said Todd Hillman, vice president of the company's south region.
Because of the EPA's proposed rules, "about 14 gigawatts of coal in the [Midcontinent area] is going to have to be retired," Hillman said. That equals 14,000 megawatts of electricity generation, or almost three times the combined output of the five major coal-fired plants in Arkansas.
In Arkansas, Midcontinent, based in Carmel, Ind., oversees the electricity grid for Entergy Arkansas. It operates the electricity grid for utilities in parts of 15 states and one Canadian province.
Arkansas faces the fifth-highest rate of required reduction in carbon emissions proposed by the EPA. The EPA sought a national reduction of 30 percent of carbon emissions by 2030. Arkansas, however, is targeted to reduce its carbon emissions 41 percent by 2020 and 44 percent by 2030, based on 2005 emission levels.
Meeting those requirements by 2020 seems impossible, said Lanny Nickell, vice president of engineering at Little Rock-based Southwest Power Pool. Southwest Power Pool is the electricity-grid operator for utilities in parts of nine states, including Arkansas.
Southwest Power Pool requires its member utilities to have reserve generation equal to 13.6 percent above their electricity requirements, Nickell said.
In the early stages of the EPA's compliance timeline, the agency is requiring that outdated coal plants be replaced with new-generation plants and the transmission lines necessary to carry the new power, Nickell said.
"That scenario looks so bad that it is indicative of a blackout situation," Nickell said. "What that tells you, essentially, is that you can't do that. You have to have a lot of replacement generation capacity, and you have to have time to do it. You can't simply rely on existing capacity."
Nickell noted that the EPA gives the states until 2018 to have their plans approved to meet the federal standards. But a huge portion of the standards must be met by 2020. Building new natural gas plants to replace closed coal plants, as well as the transmission system for those plants, cannot be done in two years, Nickell said.
Arkansas coal plants include the 528-megawatt Flint Creek plant near Gentry, which opened in 1978; the 1,659-megawatt White Bluff plant near Redfield, with two boilers that opened in 1980 and 1981; the 1,678-megawatt Independence plant near Newark, with two boilers that opened in 1983 and 1984; the 670-megawatt Plum Point plant near Osceola, which opened in 2011; and the 600-megawatt John W. Turk plant near Fulton, which opened in 2012.
The Flint Creek and Turk plants are operated and co-owned by Southwestern Electric Power Co. Entergy operates and is a co-owner of the White Bluff and Independence plants. The Plum Point facility has multiple owners.
David Cruthirds, a Houston regulatory lawyer and publisher of energy newsletter "The Cruthirds Report," stressed that the EPA's standards are only proposals now.
"EPA will probably hold firm on some [rules] and may have to yield on others," Cruthirds said. "And there will be litigation. I guarantee somebody is not going to like the outcome, whether it is a state or [owners of coal plants]. If they've already had billions of dollars of investments, what do they have to lose to spend another $1 million to fight it in court?"
Scott Weaver, an executive with American Electric Power, SWEPCO's parent company, said the bottom line is that some states' plans may not be approved by the agency until the middle of 2019.
"And if you have to get that plan in place by 2020, that is just a very, very tight timeline," Weaver said.
There are still many uncertainties concerning the EPA's proposed plan, said Jennifer Macedonia, a senior adviser with the Bipartisan Policy Center, a nonprofit organization formed by four former majority leaders in the U.S. Senate.
"No one can say this is exactly what it will cost or this is exactly what this will do [to electricity generation]," Macedonia said. "There is no one answer. We don't know what Arkansas officials are going to decide or what will happen in the final [EPA] rule."
Business on 10/02/2014