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PJM Indicates EPA Greenhouse Gas Rule Cheaper under Region-Wide Program

By Direct Energy Business

PJM is a Regional Transmission Organization (RTO) responsible for the reliable, economic dispatch of generating units in the Mid-Atlantic. The 13 states and the District of Columbia within PJM’s service territory requested that PJM analyze the impacts of the Environmental Protection Agency’s (EPA) Greenhouse Gas (carbon or CO2) rule 111(d).

Rule 111(d) regulates the amount of CO2 that is allowed to be emitted from existing generators and requires gradual reductions in emissions through 2030 to meet a target of 30% below 2005 levels. States are required to submit their plans to meet 111(d) guidelines by June 2016 although they may request a one-year extension or longer if they are working with other states on a multi-state plan.

PJM believes that it has a role to be the provider of unbiased, objective information to the larger community, and PJM operates in a non-profit capacity so it does not have a financial stake or bias. In such spirit, PJM performed the requested analysis. Particularly of interest, PJM analyzed the cost differences based on whether there is a PJM region-wide or state-by-state program to achieve the EPA targets. To perform its analysis properly, PJM also opted to include the impacts of rule 111(b), which sets emission limits of CO2 for new generators, since these new generators will be replacing existing generators that retire.

Under eight different PJM scenarios that include factors such as renewable resource penetration (i.e. solar and wind generation) and forecasted load, the annual increased cost to customers after phased-in reductions are complete ranges between approximately $6 billion and $28 billion, as illustrated to the left1 (Click on chart to view). Percentage-wise this equates to an increase ranging from approximately 12% to 42% of energy costs in the PJM region. 

The region-wide 111(d) program resulted in an annual discount in cost to load of about $9 billion compared to the cost of individual state-based programs, as illustrated in the figure below2. (Click on chart to view).

PJM analysis indicates that compliance with rule 111(d) will be much cheaper in total under a region-wide CO2 program rather than state-by-state programs. However, some states are bigger winners than others and some individual states could even see increased costs. It remains to be seen if the states will opt, or can agree, for the overall cheaper region-wide CO2 program. 

The public comment period on the proposal closed Dec. 1 with support varying widely across the country. The EPA has expressed its intention to issue the final rule in June of 2015 although this deadline will likely slip due to the complexity of the rule and political support.

Check out this nifty video presentation for an EPA description of Rule 111(d). For more information on further PJM analysis as it becomes available, please refer to http://www.pjm.com.

Sources:
1 "EPA's Clean Power Plan Proposal Review of PJM Analyses Preliminary Results", PJM Interconnection, Inc. by Dr. Paul Sotkiewicz and Muhsin Abdur-Rahman, November 17, 2014, P. 28
2 "EPA's Clean Power Plan Proposal Review of PJM Analyses Preliminary Results", PJM Interconnection, Inc. by Dr. Paul Sotkiewicz and Muhsin Abdur-Rahman, November 17, 2014, P. 37

Posted: December 04, 2014

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