Institute for Energy Research

STUDY: Assessing Emerging Policy Threats to the U.S. Power Grid

February 24, 2015

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Executive Summary


Reliable, affordable electricity is critical to our well-being and essential to modern life. But today, threats to the reliability of the power grid are numerous: cyber-attacks, weather, and accidents. Fortunately, the most significant threat is also the most avoidable—bad policy. Federal and state policies are already increasing electricity bills around the country, and the worst effects are yet to come. The federal government, and particularly the U.S. Environmental Protection Agency, is promulgating regulations that will reduce the reliability of the power grid with little thought of the consequences. In fact, these policies threaten to take offline 130 gigawatts of reliable electricity generation sources—enough to meet the electricity needs of more than 105 million Americans, or one-third of the population of the entire United States. Reforming policies that threaten grid reliability should be a top priority for policymakers.


American homes and businesses depend on reliable electricity. We use it to energize everything from our lights and appliances to our computers and the data centers that give us the Internet. Because so much of what we do every day depends on having access to reliable power, threats to the consistent delivery of electricity put modern life itself at risk. Such threats take many forms. Some originate from things beyond our control— such as cyber attacks and extreme weather —and we can seek to defend against and mitigate those threats. Others result from accidental error, such as the transmission line failure that resulted in a major blackout of the Northeastern U.S. in 2003. Smart planning and the use of best practices in the electricity industry can minimize these accidents, but they are an unavoidable part of a society powered by a complex system of electricity delivery.

In contrast, some emerging threats are completely avoidable. These threats come from a different kind of error—bad policy. Currently, a host of federal and state regulations, subsidies, and mandates threaten to undermine the reliability of the U.S. power grid by taking offline over 130 gigawatts of reliable power, which is enough to meet the residential electricity needs of more than 105 million Americans. New stresses on the electricity delivery system are coming primarily from two types of policies:

1) Regulations that directly shut down reliable sources of electricity, such as coal and nuclear power, and

2) Subsidies and mandates that force increased amounts of unreliable sources of electricity on the grid, such as wind and solar power, and undermine the normal operation of reliable power plants.

Together, these two types of policies create a much less reliable grid and increase the chances of a major blackout.

This year, the Environmental Protection Agency (EPA) is slated to finalize a regulation that closes reliable power plants and forces the use of unreliable sources of electricity. With this wide-ranging carbon dioxide regulation under Section 111(d) of the Clean Air Act—called the Existing Source Rule—EPA threatens simultaneously to shut down vast swaths of reliable electricity generation across America and impose a federal mandate for renewable energy. Affected utilities and grid operators are pushing back on the rule and asking for extra time to comply. However, pushing back deadlines does not solve the most important problem with the Existing Source Rule, which is EPA’s disregard for electric reliability.

With this one regulation, EPA will be able to exercise unprecedented control over the electric grid. In turn, grid reliability will suffer because reliability is neither a priority for EPA nor one of EPA’s statutory obligations. Some have referred to the Existing Source Rule as a federal takeover of the electric grid because EPA is proposing to turn electricity markets on their head by mandating a radical shift away from economic dispatch (the tried-and-true method of balancing the grid while minimizing costs by selecting reliable generators on a least-cost basis) and towards environmental dispatch (choosing generation sources based on their carbon dioxide emissions rather than their reliability and cost).

EPA is charging ahead with the Existing Source Rule and other grid-threatening regulations despite vocal opposition from independent grid experts. The North American Electric Reliability Corporation— the group of reliability experts designated by the federal government to oversee the power grid—continues to raise questions about the effect of EPA rules on the grid. It is unclear whether EPA will address these reliability problems before finalizing its rules. Electricity policy in the U.S. deserves to be reevaluated. In fact, if federal and state policymakers intentionally set out to cause havoc for grid operators and hurt grid reliability, they would be hard pressed to do better than the current policy trajectory.

Dozens of policies handicap electric reliability by favoring unreliable sources of power, undercutting reliable sources, or both. From state-level renewable energy mandates, to the wind production tax credit, to multiple EPA rules targeting coal-fired power plants, to—yes—blocking the Keystone XL pipeline, bad policy threatens to wreck America’s power grid. Fortunately, policymakers have every opportunity to address these threats.

For those who want to ensure that Americans have access to reliable electricity long into the future, the time has come to push back against policies that hurt grid reliability. It is time to repeal regulations that shut down reliable sources of power and to remove massive subsidies for unreliable power sources. Today’s electricity policy is a risky nationwide experiment in burning the candle at both ends— something has to give. That means reliability problems and blackouts if emerging policy threats go un-checked. Policymakers should choose now to put the U.S. power grid back on track and to ensure reliable electricity for years to come.

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