Guest Op-Ed: EPA’s New Power Plant Carbon Rules Would Mean Lights Out for MISO

By Isaac Orr and Mitch Rolling

Winter blackouts could be the fate of millions of Americans living in the Midcontinent Independent Systems Operator (MISO) region, an electric grid stretching from Minnesota to Mississippi, because of the Biden Administration’s Environmental Protection Agency (EPA) regulations on carbon dioxide emissions from power plants, and the Inflation Reduction Act (IRA).

These policies will fundamentally transform the American electric grid from one that relies primarily on coal, natural gas, and nuclear power to one that is reliant upon the performance of weather-dependent wind and solar to show up when they are needed most. Our recent analysis of EPA’s rules suggests this is a recipe for disaster.

EPA’s Carbon Rules

In May of 2023, the Biden EPA proposed new carbon dioxide regulations on new and existing coal and natural gas power plants. EPA claims the proposed rules will not force coal or natural gas-fired power plants to shut down. Rather, these facilities can remain operational past 2040 if they reduce their emissions using carbon capture and sequestration equipment or, in the case of natural gas plants operating in a baseload capacity, co-firing with so-called “green hydrogen.”

However, our analysis, which uses EPA’s own modeling assumptions for the amount of installed capacity on the MISO system, found EPA’s modeling suggests the agency believes its regulations and the IRA subsidies for wind and solar will induce massive changes to the regional electric grid, which you can see in Figure 1 below.

Essentially, EPA’s modeling suggests nearly all the coal plants currently working to keep the lights on in MISO will be shuttered by 2035, and all of the existing nuclear plants on the system will be shuttered by 2055. These power plants will be replaced largely by wind turbines and solar panels, with smaller installations of battery storage facilities and new natural gas plants operating in a peaking role.

Several stakeholders, including four of the largest grid operators in the U.S., have noted that EPA’s heavy reliance on wind, solar, and battery storage is worrisome for grid reliability. As recently as last week, wind generation in MISO essentially disappeared for long stretches as the grid was estimated to hit new all-time highs for demand, which you can see in Figure 2.

Attempting to keep the lights on while replacing dispatchable coal and natural gas plants with intermittent wind, solar, and storage will not be easy or cheap, but this is the strategy the Biden administration claims will be the least costly way to reduce carbon dioxide emissions.

However, it is important to note that EPA never analyzed how its carbon regulations would affect the reliability of the electric grid; it simply assumes it is reliable. If it had analyzed its own assumptions, it would have realized that its modeled MISO grid would cause massive capacity shortfalls, which is the technical term for rolling blackouts.

Lights Out for MISO

Figure 1 shows how much installed capacity EPA believes will be in service in each of its modeled years thanks to the EPA carbon regulations and the IRA. We can’t know how wind turbines and solar panels will perform from week to week, let alone years into the future, but we can compare the installed capacity in Figure 1 to historical hourly fluctuations in electricity demand and wind and solar output to stress test EPA’s assumptions.

Our thought process was this: If EPA’s grid of the future can’t handle conditions we’ve already seen in 2019, 2020, 2021, and 2022, we shouldn’t trust it to manage conditions in the future. Our modeling found that EPA’s grid was not able to keep the lights on using any of these historical comparison years (HCYs) and that some of the capacity shortfalls that would occur would be absolutely massive.

One of the blackouts was so large that it accounted for 20 percent of the electricity demand on the grid, enough to simultaneously black out the entire states of Wisconsin and Minnesota in January, which you can see in Figure 3.

Losing access to electricity, and therefore home heating, during one of the coldest months of the year in the Midwest could easily have deadly consequences, as we saw with the Texas blackouts of 2021. Blackouts are also economically costly, potentially resulting in billions of dollars of lost economic activity and damage to buildings and equipment.

However, one advantage MISO has over Texas is that it has a larger footprint and would be more able to roll the outages over a larger geographic area, theoretically ensuring that no one area is forced to bear the entire brunt of the outage, reducing the potential for mortality and economic losses.

Why Does EPA’s Modeled Grid Produce Blackouts?

Massive capacity shortfalls occur in our modeling for two reasons. One, wind and solar are not producing enough electricity to keep the grid balanced. Two, there is not enough dispatchable capacity on EPA’s system to ensure the lights stay on even if there is virtually zero electricity being generated by wind or solar.

While EPA’s modeling also built new peaking natural gas plants, it didn’t build nearly enough to replace retiring coal plants and meet future growing electricity demand when the wind isn’t blowing and the sun isn’t shining. As a result, EPA is gambling with the fate of the electric grid by relying on wind and solar to show up when they are needed most. These are long odds.

The Cost of Preventing Blackouts

EPA’s modeled grid is so unreliable that it is not a realistic basis for understanding the financial impact of the proposed carbon rules.

Building enough additional capacity to meet EPA’s emissions reductions and prevent rolling blackouts will require a massive increase in power plant capacity that comes at a significant cost. Our modeling found achieving these two criteria would necessitate a 32 percent increase in installed capacity compared to EPA’s assumptions, which you can see in Figure 4.

Building this capacity would cost MISO ratepayers an additional $246 billion ($7.7 billion annually) compared to EPA’s assumed grid, causing electricity prices for families and businesses to increase by approximately 32 percent. This equates to approximately $170 every year for each of the 45 million people living in the MISO region. For a family of four, this is $680 per year.

Conclusion

EPA’s modeling clearly needs improvement. Proposing rules that will fundamentally transform the entire electric grid without performing simple reliability analyses is the exact definition of leaping before looking, and the American people should not be forced to suffer the consequences of such uninformed rulemaking.

If you are interested in reading more of our comments, click here for a one-pager, and here for the full report.

As always, please feel free to email [email protected] and [email protected] for questions, comments, or scathing rebuttal.