# Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State and Tribal Implementation Plans

Appendix B: Overview of the U.S. Electric SystemB

- 1 EPA

- 456/D

- 12

- 001 c

Ju ly 201 2

Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State and Tribal Implementation Plans

Appendix B: Overview of the U.S. Electric System

By: U.S. Environmental Protection Agency Office of Air Quality Planning and Standards
Outreach and Information Division Research Triangle Park, North Carolina

U.S. Environmental Protection Agency Office of Air Quality Planning and Standards
Outreach and Information Division Research Triangle Park, North CarolinaB

- 2 

### ACKNOWLEDGMENTS

We would like to acknowledge substantial contributions from members of an inter

- office EPA team that included the Office of Atmospheric Programs, the Office of Policy Analysis and

Review

, the Office of General Counsel and Regions 1 and 6. Th i s document also reflects

commen ts received from a number of stakeholders, including state a n d l o c a l air quality agencies.B

- 3



### Contents

FIGURES

................................ ................................ ................................ ................................ ................................ ..... B

- 4

SECTION B.1: INTRODUCTION

................................ ................................ ................................ ................................ ... B

- 5

SECTION B.2: ABOUT THE U.S. ELECTRIC SYSTEM

................................ ................................ ................................ .... B

- 5

SECTION B.3: HOW THE ELECTRIC SYSTEM WORKS

................................ ................................ ................................ .. B

- 7

SECTION B.4: ROLES AND RESPONSIBILITIES

................................ ................................ ................................ ............ B

- 9

SECTION B.5: LOCATION OF EMISSION REDUCTIONS RELATIVE TO THE SITING OF CLEAN ENERGY RESOURCES

. B

- 10

RE FERENCES

................................ ................................ ................................ ................................ ............................. B

- 12B

- 4



### FIGURES

Figure 1: NERC Interconnections

................................ ................................ ................................ ............................... B

- 6 Figure 2: Flow of Electric Power

................................ ................................ ................................ ................................ B

- 7 Figure 3: Unit Dispatch in a Power System

................................ ................................ ................................ ................ B

- 8B

- 5

SECTION B.1: INTRODUCTION Generating electricity from fossil fuels is the single largest source of anthropogenic carbon dioxide (CO 2 ) emissions in the United States, representing 40 percent of CO 2 emissions in 2009

. 1
It is also the largest source of criteria air pollutants that affect air quality and human health. For these and other reasons there has been growing interest in unders tanding the impacts of

state

- level energy efficiency and renewable energy (EE/RE) policies on emissions from power generation. Much of this interest has come from state environmental regulators interested in including emission reductions from EE/RE polici es in their plans for improving and maintaining air quality.

M any air agencies are already familiar with the electric system, and the roles and responsibilities of energy agencies in their state . For those who want more information on the topic, it is provided here in this appendix as a convenience. For these stakeholders and others working to analyze the effects of clean energy on air pollution emissions, there is a need to:

Understand the electric system Understand how the system is likely to respon d to the introduction of clean energy

resources Conduct analys e s that credibly and accurately represent this interaction and estimates reductions in air pollution

Appendix B is intended to address these needs , in addition to other resources

. 2 It highligh ts the basic workings of the electric system and addresses important issues that arise in energy and

emi ssions planning; most notably quantification of emission benefits for incorporation in S tate
I mplementation P lan s ( SIP)/Tribal Implementation Plan (TIP) (see Appendix I for details on quantification methods ). A key take

- away from this Appendix is that the operation of regional power systems is complex and dynamic, so predicting how these systems will react to new

reso urces

– including EE/RE

– is likewise a complex undertaking.

SECTION B.2: ABOUT THE U.S. ELECTRIC SYSTEM The most common way to generate electricity is to burn fossil fuels to convert water into steam, and to use the steam to spin a turbine that is co nnected to an electric generator. Generators can also be turned by water

– as is the case with hydroelectric power plants

– or by wind turbines. In all cases, the electricity generated at these facilities flows across the transmission and distribution sy stem to where it is needed to meet customer demand in cities
and rural areas.

1 EPA (2011).

2 EPA (2010).B

- 6

The North American electric system is an interconnected network for generating, transmitting, and delivering electricity to consumers. Over the past 100 years, the system developed around a "central station" model that distributes power from large generat ing stations (often located near a fuel source) to customers located in load centers that are hundreds of miles away. The current electricity delivery system was designed and built in the 1950s to move large quantities of power from generators to consumer s at low cost. Despite a recent trend towards more "distributed" power in
which small generation facilities
such as combined heat and power systems are located near loads

, most electric power in
the U.S. continues to be generated at
central

- station facili ties powered by coal, natural gas, nuclear, and hydropower.

The North American electric system is
divided into four
distinct North American Electric Reliability Corporation ( NERC )

interconnection grids in
the continental United
States and Canada:

e astern grid

, w estern grid , Quebec grid and
the Electric Reliability Council of Texas (ERCOT) (see Figure 1). The generators, power lines, substations, and power distribution system are the responsibility of various utility companies

w orking together under regional oversight to keep each grid operational. Each grid has only limited connections to the other three, but within them electricity is imported and exported continuously among numerous smaller power control areas (PCA).

PCAs are managed by system operators, or transmission organizations, whose main function is to maintain the reliability of the system in their areas (e.g., New England, New York, California). They do this by balancing the electricity supplied by the power plan ts with that demanded by customers. This happens in real

- time, every day of the year. In other words, energy is simultaneously being generated and consumed on each grid in the same quantity. There is very little ability to store electricity, and it is d ifficult for the grid to accommodate large, rapid changes in use and generation. Figure 1 : NERC Interconnections

Source: http://www.nerc.com/fileUploads/File/AboutNERC/maps/NERC_Interconnections_color.jpgB

- 7

SECTION B.3: HOW THE ELECTRIC SYSTEM WORKS Figure 2 depicts the flow of power from the generating station, or power plant, to the transformer and transmission lines through a substation transformer (that reduces voltage) to the distribution lines. It then flows through the pole transformer to the consumer’s servi ce box. Electricity transmission typically refers to power flow between the generating station and a substation, and electricity distribution most often refers to delivery from the substation to
consumers. The flow of e lectricity occurs in accordance wit h the laws of physics

— along paths
of least resistance

— in much the same way that water flows through a network of canals.

Over time in a given location, the consumer demand for power fluctuates significantly. For instance, residential electricity demand typically peaks in the morning and evening when residents are home and operating electricity

- consuming products. In contrast, commercial electricity demand typically peaks during the middle of the day while industrial demand varies by individual firm and type of industry. System planners have to account for these variations as
well as other factors

, such as weather and the availability of individual power plants, all while keeping the system in balance. Fortunately, the aggregate demand of the many juri sdictions across a single grid behaves in a relatively predictable manner.

Figure 2 : Flow of Electric Power

To meet consumer demand, the grid operators rely on a fleet of power plants with different operational characteristics, fuels, and cost structures. Base load plants

, such as nuclear and most coal plants

, operate 24 hours a day and do not readily cycle up and down. They are meant to start up and keep running until maintenance is needed. B ase load units are also characterized by relatively high capital costs , low operating costs, and a ramp

- up process that is typically sl ow, expensive, and results in wear on the generating units. As power demand increases over the course of a day, intermediate and peaking plants come on line. These plants have the physical capability to quickly ramp up power production to meet increasing demand Source: https://reports.energy.gov/BlackoutFinal

- Web.pdfB

- 8

and to rapidly cycle down once that demand dissipates. These plants are often engines or turbines that are fueled by oil or natural gas (see Figure 3).

The decision of which power plants to dispatch and in what order is based in principle on economics, with the lowest

- cost resources dispatched first and the highest cost resources used
last. The last resources to be called upon are referred to as the marginal units, which are typically the most expensive units to run. In some cases in certain parts of the country, these plants can also be among the dirtiest and least eff icient of the power plant fleet.

Renewable energy and EE can affect the dispatch in different ways, though both cause marginal units to run less frequently
and result in fewer air emissions. In the case of efficiency, energy savings occur at the point of consumption resulting in a
reduction in demand on the electric system and a corresponding reduction in emissions from the power plant fleet.

In contrast, RE sources reduce the output from the marginal unit by producing
elect ricity for the power. Thus, a wind farm producing electricity displaces the need for electricity that would have Figure 3 : Unit Dispatch in a Power System

Source: http://www.synapse

- energy.com/Downloads/SynapseReport.2005

- 07.PQA

- EPA.Displaced

- Emissions

- Renewables

and

- Efficienc y

- EPA.04

- 55.pdfB

- 9

otherwise been produced by that marginal unit. Since wind power results in zero emissions, overall emissions from the power plant fleet are r educed (absent a cap on emissions that determines overall pollution levels).

This theory of “economic dispatch” predicts that any new resource will shift upward all resources above it in the dispatch order, thereby reducing demand on the marginal unit (t he most expensive unit needed to meet demand)

. Actual plant dispatch, however, is frequently more complicated than the representation in Figure 3 for three main reasons:

Transmission constraints may require system operators to dispatch certain units tha t are more expensive than other available units. It is time consuming to start and stop many types of large generating units. Limitations on unit “ramp

- up rates” also force system operators to keep some units running during periods when they are not need ed (in order to have the units available when they are needed). These are referred to as load following, or intermediate units, and are often running at a lower and less efficient rate while not producing any power for input into the grid. System operat ors do not treat generating units as single entities in the dispatch process. Instead, plant owners in competitive markets typically bid the power from an individual generating unit into a smaller number of “blocks” that are instead bid into the grid.

Be cause actual unit dispatch often looks very different from the ideal shown in Figure 3, environmental regulators and others should be aware of how these electric

- system realities are represented in control

- measure estimates of emission reductions

.



### SECTION B.4: ROLES AND RESPONSIBILITIES In the electric system

, four entities have key roles and responsibilities:

State energy offices Public utility offices or service commissions Vertically integrated utility companies Regional transmission organizations and independent system operators

State energy offices perform a number of functions:

Assist in achieving state energy

- related environmental goals Ensure that the needs and issues of industry, business, and residential energy

consumers are c onsidered during energy policy and program development

Aid businesses in using energy effectively, modernizing industry

, and retaining and creating jobs Help residential and other low

- level energy consumers meet their energy needs through

cost

- effective and energy efficient solutionsB

- 10

Demonstrate the application of cost

- effective advanced EE / RE and other clean energy technologies With other state agencies

, deploy technologies to reduce energy consumption and meet

energy

- related environmental goals

Public utility or service commissions act as governing bodies that :

R egulate the rates and services of a public utility that provide essential services, including energy

Overs ee and evaluat e EE/RE policies

Ensure reliable utility service at fair, just, a nd reasonable rates

Ensure that the facilities necessary to meet future growth can be financed on
reasonable and fair terms Encourage harmony between utility companies and their customers Foster planned growth of public utility services Coordinate energy supply facilities with the state's development Cooperate with other states and the federal government in providing interstate and intrastate public utility service and reliability of energy supply

Vertically integrated utility companies:

O versee the entire chain of power delivery

Produc e electricity through the operation of power plants Deliver power to residential, commercial

, and institutional customers

Regional transmission operators and independent system operators provide several services:

Serve as grid operators, coordinating th e power grid to ensure reliable delivery of two

thirds of the electricity used in the United States to two

- thirds of its population Match generation to load instantaneously to keep supply and demand for electricity i n balance
Provide non

- discriminatory transmission access, and facilitat e competition among wholesale suppliers to improve transmission service and provide fair electricity prices
Schedule the use of transmission lines Manage the interconnection of new gene ration and monitor the markets to ensure fairness and neutrality for all participants



### SECTION B.5 : LOCATION OF EMISSION REDUCTIONS RELATIVE TO THE
SITING OF CLEAN ENERGY RESOURCES The goal of clean energy policies in the SIP planning context is typica lly to reduce emissions
within the jurisdiction where the policies are implemented. To achieve this goal, all (or a portion of) the emission reductions from EE/RE must occur in a location that affects air qualityB

- 11

in the implementing jurisdiction. The environmental regulator can take steps to ensure that the analysis supporting such a policy accounts for the interconnected and dynamic nature of the power system, and that it examines the possibility that the benefit s of clean energy policies may not be completely realized within the jurisdiction of interest.

This can be illustrated by the example of a state with a renewable portfolio standard requiring utilities to buy a fixed percentage of their electricity from r enewable energy facilities. If a local utility signs an energy

- purchase contract with the nearest renewable facility, the state may find it difficult to correlate wind power produced by that wind farm to a corresponding reduction in electric output and em issions from specific fossil

- fuel generators. The implementing state
needs to ensure that the emission reductions occur at an up wind or nearby facility, which affects the implementing state’s air quality. For this reason, it is critically important to

un derstand and accurately predict how the regional power grid is likely to behave when assessing the emission benefits from clean energy resources.B

- 12



### REFERENCES

EPA (2010). Assessing the Multiple Benefits of Clean Energy: A Resource for States

. February 2010.
Available online at < http://www.epa.gov/statelocalclimate/resources/benefits.html >

EPA (2011). Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990

- 2009 . April 2011. Available
online at < http://epa.gov/climatechange/emissions/usinventoryreport.html >13 United States
Environmental Protection Agency Office of Air Quality Planning and Standards
Outreach and Information Division Research Triangle Park, NC Publication No. EPA

- 456/D

- 12

- 001c July 2012