MISO sees CO2 rule cutting coal demand by half

OREANDA-NEWS. The Environmental Protection Agency's (EPA) proposed cuts on CO2 emissions from the power sector could cut electricity generated by coal-fired power plants in the second largest US power grid by more than 50pc in 2030 from baseline projections.

Coal last year accounted for 59pc of generation in the Midcontinent Independent System Operator (MISO), which covers all or parts of 15 states in a region stretching from the Canadian border to the Gulf coast. The grid operator expects coal to still account for 51pc of generation in 2030 under a business-as-usual scenario. But coal's share ranges from 26pc to 35pc under various scenarios for compliance with the federal CO2 plan, based on a report released by MISO ahead of its planning advisory committee meeting tomorrow in Carmel, Indiana.

The projected share of natural gas in the 2030 generation is 20pc under the base case. But gas' share could be as high as 47pc under some scenarios.

MISO last year estimated that 14GW of coal generation will be affected by the Clean Power Plan and projected compliance costs of \\$5bn-\\$8bn/yr.

The results released this week are preliminary since the final version of the Clean Power Plan will be released later this summer. States making up MISO will have until 2016 to file individual implementation plans or negotiate regional compliance options.

MISO has found that regional compliance options would be cheaper than state compliance plans for all scenarios. And the study results indicate that a region-wide compliance strategy will result in a higher coal burn under all scenarios.

But persuading states to cooperate will prove a major challenge. Political leaders and regulators in some MISO states already said they would await the release of the final CO2 reduction proposal to decide whether to comply or to challenge the rule.

"Iowa's joint agency comment [filed with the EPA] says the state maintains the right to look at the final rule and determine whether litigation is necessary. The governor's office will make that decision," Organization of MISO States president and Iowa Utility Board commissioner Libby Jacobs said last week. The organization represents state regulators, who will play a key role in directing the power sector response to the Clean Power Plan.

The proposed rule lists several compliance options and provides states with flexibility in choosing among them and selecting collaboration levels with neighboring states, so long as individual state CO2 emission intensity targets are met.

Complying with state CO2 targets by using the existing generation fleet will cut MISO coal generation by 51pc in 2030 from the projected base line. Scenarios involving replacing coal plants by natural gas-fired generation would cut the coal burn by 53-55pc.

The MISO study determined that the 2030 coal burn would fall by the smallest proportion — 31pc — if the grid members rely heavily on energy efficiency measures and renewable resources.

MISO will release its final analysis of the rule's impacts by mid-2016.