Policy Feature Issue: Proposed EPA Regulations Threaten to Drive Up Electricity Prices

Policy • October 30, 2013

On September 20, 2013, the EPA announced proposed greenhouse gas standards for new fossil fuel-fired power plants.[1]  If finalized, it will mark the first time a uniform national standard on power plant carbon dioxide emissions has been imposed.  The proposed regulations create separate emissions limits for new natural gas plants and for coal fuel-fired plants.[2]  The regulations would impose a de facto ban on new coal plants in the U.S.  Although the EPA asserts that coal plants can use carbon capture and storage (CCS) technologies to meet the standard, the new emissions levels are impossible for coal plants to meet using currently available technology.  The necessary CCS technologies are cost prohibitive and have not been demonstrated at any commercial scale power plant.  The impact of these regulations, which would effectively eliminate coal as a source of future electricity generation, will extend far beyond the twenty-five states where coal is mined.[3]  Coal is the largest source of electric power generated in the U.S. and a mandated shift away from this reliable energy source will restrict access to one of our nation’s most abundant and affordable resources, threatening higher energy prices nationwide.

The recently proposed regulations are the latest in a suite of EPA regulations affecting the nation’s coal-fired power plants, and are only the beginning of the Administration’s efforts to set carbon emissions standards for the nation’s fleet of power plants.  In June of 2013, President Obama announced his Climate Action Plan and issued a Presidential Memorandum directing EPA to also propose greenhouse gas regulations for existing fuel-fired power plants by June of 2014.  These actions reflect the Administration’s expansive interpretation of its authorities under the Clean Air Act and they threaten to significantly increase energy costs, harming American businesses and families.

On October 15, 2013, the Supreme Court agreed to hear challenges to the EPA’s authority to regulate greenhouse gas emissions from stationary sources—namely power plants and factories.[4]  Consideration of these challenges will provide an opportunity for the Court to reign-in the Administration’s expansive regulatory agenda.

Facts You Need to Know:

  • Coal was the largest source of electricity generated in the U.S. in 2012, producing 37.4% of all electricity nationwide.[5]
  • Its role in generating U.S. electricity is expected to increase, as it is expected to produce 40.5% of the nation’s electricity in 2014.  This projection does not take into account the impacts of new regulations that could hamper coal energy production.[6]
  • Coal is used to generate electricity in 48 states” and it supplies “at least one quarter of the electricity in 29 states.”[7]
  • EPA regulations have already been cited as contributing to the closure of over 300 individual coal-fired electric generating units across 33 states.[8]
  • While EPA has proposed to mandate CCS for any new coal-fired power plants in America, there are no full-scale commercial power plants with the CCS technologies that would be needed to meet the proposed standard anywhere in the world.[9]
  • The U.S. Energy Information Administration has estimated that adding CCS technologies for a new coal-fired power plant could increase capital costs by up to 60%.[10]
  • The recently proposed regulations would limit emissions from new coal-fired power plants to 1,100 pounds of carbon emissions per megawatt hour—a standard that no coal-fired power plant in the world currently can meet.
  • Despite the presumed goal of the EPA’s recently proposed standard, EPA’s own analysis “projects that this proposed rule will result in negligible CO2 emission changes . . . .”[11]
  • Notwithstanding EPA’s assertions, a recent analysis finds that if coal power were phased out over a twenty-year period, the first sixteen years could see electricity prices rise by 20%.[12]
  • Seventeen state Attorneys General recently stated that “The elimination of coal as a fuel for new electric generation would have highly concerning implications for electricity prices and for the economy and job-creation in general, as well as the competitiveness of American manufacturing.”[13]

 


[2] The carbon emissions limit proposed for new natural gas plants is 1,000 pounds of carbon emissions per megawatt hour for larger units and 1,100 pounds of carbon emissions per megawatt hour for smaller units.  The limit proposed for new fossil fuel-fired plants is 1,100 pounds of carbon emissions per megawatt hour.  Id. at 15-16.

[3] American Coalition for Clean Coal Electricity: Coal Facts (Oct. 17, 2013).

[5] American Coalition for Clean Coal Electricity: Coal Facts (Oct. 17, 2013).

[6] Id.

[7] Id.

[8] Coal Unit Shutdowns, American Coalition for Clean Coal Electricity (Oct. 15, 2013).

[9] In its Proposed Rule announced in September 2013, EPA does not identify any currently operating commercial scale power plants that are equipped with the CCS technologies that would meet the requirements of the proposed rule.  

[10] See EIA Report: Capital Cost for Electricity Plants at Table 1 (Apr.12, 2013).  Additionally, the Department of Energy’s National Energy Technology Laboratory has estimated that using today’s commercially available technologies could add 35-80 % to the cost of generating electricity from coal plants. See 77 Fed. Reg. 22392 (Apr. 13, 2012) at 22415-22416.

[12] David W. Kreutzer, Nicolas D. Loris, and Kevin D. Dayaratna, Cost of a Climate Policy: The Economic Impact of Obama’s Climate Action Plan, Heritage Foundation (June 27, 2013).

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