PJM on CPP: The Sky is Not Falling

Critics of the Obama Administration’s Clean Power Plan have claimed, among other things, that its imposition would result in power plant retirements, blackouts, and electricity price spikes. Those fears have helped fuel legislative opposition to CPP here in Pennsylvania.

As Chicken Little would say: “The sky is falling!”

But a new analysis by PJM Interconnection LLC, the operator of the largest U.S. power market that covers a 13-state region (including Pennsylvania), says the fears about the CPP are not only overblown – they’re non-existent.

EPA’s Final Clean Power Plan: Compliance Pathways Economic and Reliability Analysis concludes that PJM can meet the requirements of the Clean Power Plan with no disruptions in electricity supply and at little additional cost to customers – in fact, with a wholesale electricity price rise of between just 1.1% and 3.3%.

The report’s key findings include:

• The CO2 emissions reduction goals of the Clean Power Plan can be achieved within the PJM footprint under each of the seven compliance pathways studied.
• Regardless of the compliance pathway, resource adequacy is maintained in the PJM footprint
• Running a security-constrained economic dispatch model for the year 2025 shows that total congestion declines under every compliance pathway relative to the reference scenario.
• The cost of compliance for the entire PJM region differs according to the compliance pathway chosen, but regional compliance leads to lower costs than does individual state compliance under both mass-based and rate-based compliance pathways.
• Rate-based compliance pathways result in lower wholesale energy but higher capacity market prices across the PJM footprint than the reference case and mass-based compliance pathways because resources with production subsidies submit energy offers below their cost of production.
• The compliance cost of the rate-based pathways is sensitive to the ability of energy efficiency to be measured and verified so it may earn emissions rate credits.
• Under mass-based compliance, all resources subject to the Clean Power Plan face an additional cost for emissions in the form of allowances, which results in energy market offers at least as great, or greater than, their actual fuel and variable operations and maintenance costs.

The PJM report finds that low natural gas prices will continue to drive the retirement of higher-polluting coal-fired power plants and reduce the cost of meeting the CPP requirements.

When it comes to the impact of the CPP, the sky is not falling. The CPP has, in fact, become a low throw. Smartly done, we can grow our energy economy and meet – even exceed – its carbon emission reduction requirements.

John Quigley

Senior Fellow, Kleinman Center

John Quigley is a senior fellow at the Kleinman Center and previously served on the Center’s Advisory Board. He served as Secretary of the PA Department of Environmental Protection and of the PA Department of Conservation and Natural Resources.