Energy Study Finds That EPA's Clean Power Plan Will Not Jeopardize the Reliability of US Power System

Date:February 19, 2015

  • Industry's "standard operating procedures" -- including planning, training, investment, and rapid response -- will help to address and ameliorate issues as they arise
  • Electric system has successfully responded to previous challenges, including deregulation and new regulations
  • Industry executives are optimistic -- majority say EPA should stand by emission targets or make them even more aggressive

Boston, MA, and Washington, DC -- The design and implementation of the US Environmental Protection Agency's (EPA) Clean Power Plan, which is intended to reduce the US electric system's CO2 emissions by 30 percent from 2005 levels by 2030, will not jeopardize or compromise the reliability of the US power system, according to a study by Analysis Group energy experts. The report, "Electric System Reliability and EPA's Clean Power Plan: Tools and Practices," addresses the impact of ongoing changes in the energy industry for stakeholders and offers recommendations to ensure reliability. 

The report demonstrates that "the industry, its reliability regulators, and the States have a wide variety of existing and modified tools at their disposal to help as they develop, formalize, and implement their respective State Plans." In particular, it notes that, "These two responsibilities -- assuring electric system reliability while taking the actions required under law to reduce CO2 emissions from existing power plants -- are compatible, and need not be in tension with each other as long as parties act in timely ways." 

The Analysis Group team, led by Senior Advisor Susan Tierney, Vice President Paul Hibbard, and Manager Craig Aubuchon, analyzed the meaning of electric system reliability for key stakeholders, the concerns of commentators related to the EPA Clean Power Plan, and options to ensure that the plan is implemented in conjunction with electric system reliability. In evaluating potential concerns related to the plan, the report notes that, in fact, "[A] recent survey of more than 400 utility executives nationwide found that more than 60 percent felt optimistic about the Clean Power Plan and felt that EPA should either hold to its current emissions reduction targets or make them more aggressive."

In its findings, the report notes that the energy industry's past experience and ongoing efforts should address many of the concerns raised in the nearly four million comments that have been received by the EPA: "Many of the reliability issues identified in public comments are not new -- the industry has responded successfully and effectively to similar challenges in the past. And for several years, some of the trends that commenters note must now be addressed in response to the Clean Power Plan are actually developments that have been underway for many years -- and that are currently being addressed." 

Moreover, the report notes, many of the most striking concerns ignore the historical reality of public policy and industry action: "many of these comments tend to assume inflexible implementation and present worst case scenarios, with an exaggerated cause-and-effect relationship. Moreover, many comments … tend to assume that policy makers, regulators, and market participants will stand on the sidelines until it is too late to act. The history of the electric system and its ability to respond to previous challenges including industry deregulation and previous Clean Air Act regulations … prove that this is highly unlikely. These challenges will be solved by the dynamic interplay of regulators and market forces with many solutions proceeding in parallel." The authors point out ways that states ultimately have significant flexibility in how they structure their plans to reduce pollution from their power sectors, and note that this flexibility will support reliability.

Analysis Group previously released two other related reports examining the ability of states to implement the EPA's Clean Power Plan and implications for electric reliability. One of those studies, "EPA's Clean Power Plan: States' Tools for Reducing Costs and Increasing Benefits to Consumers," concluded that states are, in fact, well positioned to implement the plan. The other study, "Greenhouse Gas Emission Reductions From Existing Power Plants: Options to Ensure Electric System Reliability," described the context for evolving reliability practices in the industry.

About Analysis Group
Analysis Group's more than 500 professionals provide economic, financial, and business strategy consulting to leading law firms, corporations, and government agencies. The firm's 11 offices are located in Boston, Chicago, Dallas, Denver, Los Angeles, Menlo Park, New York, San Francisco, and Washington, DC; and internationally in Montreal and Beijing.