Power Grid Operator: EPA Climate Plan Would Raise Costs

As Texas regulators weigh a response to President Obama’s proposal to combat climate change, the operator of the state’s main electric grid says the plan would raise energy costs and threaten reliability – particularly in the next few years.

In an analysis released Monday, the Electric Reliability Council of Texas (ERCOT) said the plan — which requires states to shift from coal-power to cut carbon emissions — would significantly increase power prices in the next few years. But those extra costs would fall in the next decades as Texans reaped long-term savings from investments in solar power and energy efficiency. 

Under the federal proposal, Texas would need to slash carbon emissions from its power plants by as much as 195 billion pounds of carbon dioxide in the next 18 years, according to a Texas Tribune analysis. That 43 percent reduction is among the larger percentage of cuts required among states.

The EPA suggests that Texas could meet its goal though a combination of actions: making coal plants more efficient, switching to cleaner-burning natural gas, adding more renewable resources and bolstering energy efficiency. Texas would have until 2016 to submit a plan to meet its carbon target.

The ERCOT analysis comes as Texas regulators prepare to file formal comments to the EPA ahead of the Dec. 1 public comment deadline.

The state’s Republican leadership has loudly panned the proposal and is expected to sue once it becomes final. But behind the scenes, state regulators are examining how Texas might meet its carbon target.

The analysis compared how the grid would fare under several scenarios, all of which would speed up the shutdowns of coal-fired power plants — some of the worst polluters in the country. 

Under the cheapest scenario, coal would generate just 16 percent of Texas’ power by 2029 — compared with 29 percent under normal market conditions. (In 2013, coal powered about 37 percent of the ERCOT grid.) Natural gas, wind and solar power would pick up the slack. That shift would increase electricity bills by 14 percent by 2020, according to the analysis. By 2029, however, that added cost would fall to 5 percent.

Power prices would probably grow if Texas chose to adopt a "cap and trade" program – a scheme in which companies bid on the right to pollute. 

The federal plan would also threaten reliability, the council said, as Texas leaned more on intermittent wind and solar fuels (the wind doesn’t always blow and the sun doesn’t always shine).

“Given what we see today, the risk of rotating outages increases,” Warren Lasher, director of system planning at ERCOT, said Monday in a media call.

The changes would hit coal-dependent communities around Dallas and Houston particularly hard, Lasher said. Those areas would quickly need new power lines to connect with new power sources. That could prove costly. For instance, officials project a major transmission project for the Houston area to total $590 million. 

“All of those costs could ultimately be born by consumers in the power bills,” Lasher said.

The grid's biggest challenges would come in the next decade, the council said. But investments in energy efficiency and wind and solar plants — which cost nothing to fuel — could ultimately lower prices over time.

Lasher said the council would like the EPA to allow more flexibility to states that run into reliability problems.

Proponents of the climate plan called ERCOT’s assessment overly pessimistic – particularly on the issue of reliability.

“Innovative power companies in the state are already proving that a low-carbon energy portfolio does not equal an unreliable power grid,” Jim Marston, director of the Environmental Defense Fund’s Texas office, said in a new release. “Several electric utilities in the state have been preparing for a low-carbon future by retiring inefficient, water-intensive coal plants, installing more solar energy, and adopting more energy management programs.”

Several Texas utilities have suggested they are well positioned to meet the proposed rules.