Unfortunately for the American public and the coal industry, the EPA has finalized its so-called “Clean Power Plan” and other rules affecting existing and new power plants. It is now clear that these regulations will cause electricity prices to rise considerably and cause potential brown outs and black outs due to a less reliable electric grid. EPA purports to have made changes to deal with reliability issues that arose from its earlier proposed plan, but the changes to the proposed Clean Power Plan will just make the rule more costly. This is particularly true since it upped the mandated carbon dioxide reduction by electric power plants by 9 percent, now requiring states to reduce carbon dioxide emissions by 32 percent from 2005 levels by 2030. The original proposed amount was a 30-percent reduction.
EPA sees its finalized plan resulting in renewable energy garnering a 28 percent share of electricity generation in 2030, up from 22 percent in its proposed plan, while coal generation falls to 27 percent, down from about 40 percent today. EPA’s analysis of the proposed plan expected coal generation’s share to drop to 31 percent in 2030. An analysis of the earlier proposed plan using EPA’s own modeling showed the impact of that plan to affect global temperature by a mere 0.02 degrees Celsius in the year 2100, an almost undetectable amount.
Other Changes to the So-Called Clean Power Plan
In the proposed version of the plan, the compliance strategy was to use natural gas more extensively in the near term and then to deploy new renewable technologies (wind and solar) in the intermediate and longer-term. However, the revised plan keeps the share of natural gas the same as today and turns to renewable energy more quickly. It allows two extra years for the first compliance period—2022 rather than 2020, if the state requests it. Furthering encouraging renewable deployment, the revised plan offers credits to states that increase renewable energy (wind and solar) in 2020 and 2021. Those credits can be used by the states to offset carbon dioxide emissions emitted during the compliance period–from 2022 through 2030. This credit would double if the renewable energy and efficiency programs are developed in low-income communities.
EPA argues that the extension of the compliance period to 2022 and up to an extra 2 years for each state to submit its plan if they request it (2018 rather than September 2016) takes care of the excessive comments it received regarding the demise of the U.S. electric power grid and the reliability of the U.S. electric power system. The EPA received over 4 million public comments on its proposed plan.
According to EPA, the finalized rule will provide states with additional compliance options. New and under construction nuclear generation will now count toward meeting state emission reduction goals. Nuclear reactors under construction in Tennessee, South Carolina and Georgia will get credit toward compliance, a change from the original proposal. The final rule also encourages regional compliance plans, carbon capture and storage, energy efficiency and natural gas use.
The Finalized Plan Does Not Comport with Reality
It is difficult to believe that any plan that requires new construction of utility plants, and prematurely retiring existing plants — mainly coal-fired plants — could actually save consumers money. In a recent study, IER found that even a new natural gas combined cycle unit on an annual cost of operation basis would be almost twice as expensive as an existing coal-fired unit to operate and that a new wind unit would be two to three times as expensive.
Further and analysis of the proposed plan by the Energy Information Administration (EIA) that included EPA’s other regulations affecting power plants (e.g. Mercury and Air Toxic Standard) showed that residential electricity prices would be 16 percent higher in 2030 than they are today. EIA’s analysis estimated that a total of 90 gigawatts of coal-fired capacity would be retired by 2030, 50 gigawatts more than its reference case level and that coal-fired generation in 2030 would fall to 25 percent of total generation—less than EPA’s new forecast of its final rule.
Further, when compared against EIA’s reference case, cumulative economic costs over the proposed plan’s 2020 to 2030 compliance period totaled $1.23 trillion in lost GDP (in 2014 dollars). The peak annual loss of $159 billion is expected to occur in 2025; the average annual GDP loss over the compliance period is estimated at $112 billion. According to EIA modeling results, it will cost an average of $199 in lost economic growth for each ton of carbon dioxide reduced between 2020 and 2030. When different government agencies provide conflicting analyses, it is hard to find credibility in EPA’s optimistic results in support of its rule.
And remember, these costs to the American public and the economy would provide just a 0.02 degree Centigrade benefit in temperature in 2100 based on EPA models.
The World is Not Following in EPA’s Foot Steps
China added 39 gigawatts of coal-fired capacity in 2014 — 3 gigawatts more than it added in 2013, which is equivalent to three 1,000 megawatt units every four weeks. At the peak, from 2005 through 2011, China added about two 600-megawatt coal plants a week, for 7 straight years. And, China is expected to add the equivalent of a new 600-megawatt plant every 10 days for the next 10 years. The new coal plants that China is constructing are more efficient and cleaner than their old coal-fired plants.
China consumes more than 4 billion tons of coal each year, compared to less than 1 billion tons in the United States and 600 million tons in the European Union. China surpassed the United States to become the largest global carbon dioxide emitter in 2007, and it is on track to double annual U.S. carbon dioxide emissions by 2017. By 2040, China’s coal power fleet is expected to be 50 percent larger than it is today and these power plants typically operate for 40 years or more.
Japan plans to build 43 coal-fired power projects to replace its shuttered nuclear units due to the accident at the Fukushima nuclear plant caused by the tsunami and earthquake that hit the country in 2011. Further, Japan is financing $1 billion in loans for coal-fired plants in Indonesia and $630 million in loans for coal-fired plants in India and Bangladesh. Japan is using climate finance funds for the projects since these new coal-fired plants are less polluting than older coal-fired plants and therefore qualify as clean energy. Japan believes that the promotion of high-efficiency coal-fired power plants is one of the “realistic, pragmatic and effective approaches” to deal with climate change.
The “global renaissance of coal” goes beyond China to countries like India, Indonesia and Vietnam. Piyush Goyal, India’s Minister of State for Power, Coal, and New and Renewable Energy, for example, intends to double his nation’s coal production by the year 2019 to meet domestic energy requirements. The reason for this major use of coal is to provide electrification to millions that are without it. For example, an estimated 400 million Indians–roughly 31 percent of the country’s population lack access to electricity. And those that have access regularly experience rolling blackouts, power outages, and curtailments.
India is the third largest consumer of electricity in the world, behind the United States and China. Coal-fired plants in India account for 60 percent of the country’s installed generation capacity. The nation also ranks as the third largest in coal production. With a greatly expanding population (India’s population grew by over 200 million between 2004 and 2012), it needs coal to supply the needs of its citizens.
The “Clean Power Plan” in its final form is no more beneficial to Americans than its proposed version that EPA issued last year. It will kill the U.S. coal industry—only to allow other countries to benefit from coal’s affordability and reliability. It will cost billions to replace existing electricity capacity with new intermittent renewable technologies for little gain since temperatures will be reduced by just 0.02 degrees Centigrade by 2100. The plan is all pain and no gain, which is why an increasing number of governors are informing the EPA that they do not intend to comply with their demands to rewrite state laws on electricity and cause harm to their economies.