Posts filed under Policy and Legislation

A Drop in the Bucket: The Real Compliance Costs of EPA’s Clean Power Plan

EPA Administrator Gina McCarthy will yet again be before Congress this week vigorously defending her agency’s $8.6 billion fiscal year 2016 budget request. A significant portion of McCarthy’s budget request will be dedicated to pursuing a legally flawed climate plan that won’t result in any meaningful environmental benefit – a questionable path for an agency charged with protecting the environment to be pursuing. What will the plan result in if not environmental benefits? Costs. Staggering electricity costs that risk our energy and economic security.

We won’t hear Administrator McCarthy talk about the costs of her agency’s Clean Power Plan, however, as that territory is a bit too tricky to navigate with her well memorized rhetoric.

The funny thing is, numbers seem to speak for themselves. So we took a look at multiple economic impact models that scrutinized the true costs of EPA’s plan. I don’t think you’ll be surprised to learn that EPA’s estimated compliance cost of $7.2 billion is a drop in the bucket compared to what others found.

Drop in the Bucket Infographic_FB_FINAL_02.25.15

 

 


Model After Model Affirms: The Clean Power Plan Will Raise Electricity Rates

Environmental Protection Agency Administrator Gina McCarthy is on Capitol Hill today to testify about her agency’s fiscal 2016 budget. We expect to hear a lot of back-patting and puffery, for the year ahead is a self-appointed important one at EPA headquarters. The agency will be tasked with carrying out President Obama’s climate change legacy, including the most far-reaching (and costliest) regulation on America’s power sector to date: the Clean Power Plan.

As Administrator McCarthy extolls the virtues of EPA, its mission and its work, she will surely advocate for the agency to receive every dollar requested in the budget draft. What she’ll likely leave out is any reference to the budgets that matter most: those of American families.

Time and time again, EPA has failed to be transparent about the real impact its plan will have on household budgets across the country. EPA claims the CPP will result in a 4.1 to 4.4 percent increase in the cost of electricity. A number of economic impact models, however, of the proposal tell a very different story.

REVISED_ACCCE Infographic_Lamp_EPA_Numbers-v10

While each of the models employ a different approach, the conclusions are the same: EPA vastly underestimated just how much electricity rates will rise under its plan.


Will EPA Ignore FERC Again?

Independent grid operators, elected officials and public utility commissioners have all raised concerns about the potential for power outages if states are forced to comply with the Environmental Protection Agency’s costly and overreaching Clean Power Plan.

Thus far, and not surprisingly, EPA has turned a deaf ear. They do, after all, have a habit of listening only to those whose opinions with which they are comfortable.

GinaShareGraphic

At the request of congressional leaders, the Federal Energy Regulatory Commission—the agency charged with protecting the reliability of our nation’s energy generation and supply system—will host a series of technical conferences weighing the impact of compliance with EPA’s proposal on the electric grid. The conferences kick off today in Washington, D.C.

You would think, as EPA’s Clean Power Plan is more akin to a national energy policy (the job of Congress) than it is to a plan to protect public health (EPA’s actual job), that FERC would be heavily involved with the planning and crafting of the proposal. Not so, according to FERC Commissioner Tony Clark. In a letter to the House Energy and Commerce Committee, Clark wrote, “With regard to FERC staff generally, I believe it unreasonable to conclude that FERC meaningfully or substantially participated in the [Clean Power] plan’s development.” 

EPA has shown little regard for reliability concerns in the past and likely fears that FERC’s direct involvement may interfere with the agency’s knack for employing fuzzy math to underestimate the impacts of its regulations.

While finalizing the Mercury Air and Toxic Standards, EPA claimed that MATS (along with the Cross-State Air Pollution Rule, which was later remanded back to EPA) would cause 9,500 megawatts of coal unit retirements. In contrast, utilities have announced the retirement of 389 coal units—more than 61,000 MW and almost 20 percent of the U.S. coal fleet—as a result of EPA policies. 50,000 MW can be directly attributed to MATS.  You read that right. EPA’s projection for coal retirements due to MATS/CSAPR was only 1/5th the number of actual retirements caused by MATS.

During last year’s “polar vortex,” major utility companies like American Electric Power had to run 89 percent of its soon-to-be-retired coal capacity just to meet demand and avoid cascading power outages. Shortly thereafter, FERC Commissioner Philip Moeller issued a wake-up call before the Senate Committee on Energy and Natural Resources, stating, “I was, and remain concerned that EPA’s analysis greatly underestimated the amount of power production that would be retired due to these rules.” Moeller continued, “The experience of this winter strongly suggests that parts of the nation’s bulk power system are in a more precarious situation than I had feared in the past.”

According to EPA’s own projections, the Clean Power Plan will cause significantly more coal retirements than what the agency projected for MATS. An analysis conducted by NERA Economic Consulting projected that at least 45,000 MW more would be forced to retire. That is greater than the entire electricity supply of New England.

It’s no wonder that in Kansas last week, FERC Commissioner Clark, a former legislator and utility regulator in North Dakota, said complying with EPA’s mandate is a “huge decision to make,” and “a little bit like the Affordable Care Act…play ball, and potentially get caught up in it in a way that you may regret later on.”

We’ve already seen the impact of EPA’s regulations on our supply of reliable electricity. Will EPA listen to the experts this time around?

 


New Data Confirms Consumers and Businesses Will Bear the Burden of EPA’s Costly Proposed Carbon Regulations

A new study by NERA Economic Consulting exposes the truth about EPA’s proposed carbon regulations for America’s power plants: the price tag of the plan is unlike anything we’ve seen before and American consumers and businesses will be stuck with the tab.

NERA’s analysis confirms the economic costs of EPA’s plan are staggering, and include:

  • Compliance costs totaling $366 billion or more
  • Annual costs for consumers of $41 billion or more
  • Double-digit electricity price increases in 43 states
  • Peak year electricity price increases exceeding 20 percent in 14 states

These costs are especially concerning when compared to other rules imposed by EPA. As proposed, EPA’s carbon regulations will far outpace the costs of compliance for all EPA rules for power plants in 2010 ($7 billion) and the annual cost of the Mercury and Air Toxics Standards rule ($10 billion), which is already responsible for the planned shutdown of a significant portion of the U.S. coal fleet. EPA’s proposal will rapidly increase coal retirements, shuttering 45,000 megawatts or more of coal-based electricity—more than the entire electricity supply of New England. With most of these retirements projected to occur within the next five years, EPA is sending us down a dangerous path towards weakened electric reliability and power outages during critical times.

Despite these significant costs and threats to reliability, EPA’s proposal would have a meaningless effect on global climate change:  atmospheric CO2 concentrations would be reduced by less than one-half of a percent, equating to reductions in global average temperature of less than 2/100th of a degree, and sea level rise would be reduced by 1/100th of an inch—equal to the thickness of three sheets of paper.

Our fears of economic downturn, weakened electric reliability and rising electricity costs for American families and businesses will become an everyday reality if EPA imposes these dangerous and overreaching regulations. Join us and tell EPA that its “all pain, no gain” regulatory agenda must stop. Submit a comment at www.KeepAmericasPowerOn.org today.

 


Advocating for America’s Power: Week 3

I am back again, energy enthusiasts, and as promised have brought more information. I took a look last week at international reactions to EPA’s new carbon regulations, with a specific focus on Canada and Australia. This week my fellow intern, Joe Singh, and I analyze another area of the globe. Joe has a background in economic policy analysis and is helping ACCCE research the global coal market. As I mentioned last week, EPA’s costly new plan would have virtually no effect on climate change, with less than 1 percent in carbon reductions. The Obama Administration understands this, but believes that if they lead by example carbon-emitting nations like China and India will follow. In his research, Joe points out that assuming these nations will follow our lead is contrary to the growing coal consumption in both these nations.

China, the world’s largest coal consumer with one of the fastest growing economies, has said it will set emission limits. Make no mistake, however, China is not exactly following the administration’s approach. The EPA set state by state targets that would reduce carbon dioxide (CO2) emissions from the electric sector by 30 percent by 2030. China, on the other hand, has instead adopted an emissions intensity target. This emissions intensity target would limit the amount of COemitted for every dollar of economic activity in China, on average. The reason for using emissions intensity rather than absolute emissions is to allow economic growth, which China wishes to maintain. In Joe’s research, he cites an Australian National University report which found that if China maintains its economic growth, even with a significant emissions intensity target in place, COemissions will still grow. Put simply, even if China can meet the targets it sets, its continued economic growth will still result in increased COemissions – not less.

The results of future international negotiations on climate change are uncertain. One can look to the past, however, to provide clues for potential future actions.  In two recent international climate negotiations, agreements could not be reached because of defiance conflict between the developing and developed world. The United States did not ratify the Kyoto Protocol, because it exempted developing nations, like China, from reducing their emissions.  Chinese officials claimed that it was “unfair to expect impoverished people in…developing countries to cut back on energy consumption, which is not even sufficient to meet their basic living conditions.”  China’s resistance to a binding agreement arose again during the Copenhagen conference, which occurred during Obama’s first term in 2009.  In a study available on EPA’s website, Western officials blamed the failure of this conference on China’s opposition to binding global emissions reductions.  This opposition was traced once again to China’s view that emissions reductions are robbing developing nations of their right to industrialize. Considering this climate impasse happened only five years ago, it’s unclear if Chinese willingness to reach a binding agreement has changed.  All of this makes me wonder whether the administration’s plan to reduce COemissions will be enough to overcome a history of failed climate negotiations with China.


EPA Carbon Rule Based on Questionable Calculations of Energy Demand

Lately, we’ve been taking a hard look at some claims made in the roll-out of the Environmental Protection Agency’s carbon regulation for existing power plants. An Opinion Editorial I penned was featured in The Hill today, refuting six unsubstantiated claims and questionable facts. We’ve seen the misleading claims and want to make sure the reality of America’s energy situation doesn’t fall to the wayside. A recent Wall Street Journal article, “What’s the Real Cost of the EPA’s Emissions Cap?” demonstrates the faulty logic and fuzzy math employed by the Environmental Protection Agency (EPA) in setting standards for its greenhouse gas rule.

EPA based its calculations on one fundamentally erroneous assumption: that Americans will use less energy in the future. Conventional wisdom, not to mention the government’s own data, however, tells a very different story. As the piece says, the federal Energy Information Administration (EIA) recently forecast that electricity demand will, in fact, grow 0.9% every year until 2040.

But even if EIA’s data isn’t convincing on its own, conventional wisdom reaffirms that EPA’s postulation falls flat on its face. Simply put, the world in which we live demands more energy. Every day, Americans are using more mobile devices; more electric cars are driving on U.S. roads; and our population continues to rise. And it is low-cost, reliable baseload power from coal that supports economic and societal growth.

EPA is hedging its bets on largely unproven energy efficiency programs that pose enormous cost and implementation challenges. States that have experimented with such measures have yielded, on the whole, less-than-stellar results. The agency’s proposal sets pie-in-the-sky expectations for these programs that, in turn, inflate calculations across the board and set the stage for wholly unrealistic and unachievable standards.

While EPA’s rule clearly misses the mark on many counts, I fear that troubling revelations such as EPA’s calculating method will be unearthed as we more fully probe the measure. EPA needs to get back to reality, readjust its standards using more grounded data and stop misleading the American people about the true costs of its rule.

 


EPA’s Carbon Emissions Rule Missed the Mark for Americans

Yesterday, Environmental Protection Agency (EPA) Administrator Gina McCarthy personally announced the long-awaited proposed rule to reduce emissions from America’s existing power plants. This complex rule has a preamble alone of over 600 pages. We are working our way through the text of the regulation, but a few things became clear from the start.

If this rule is allowed to go into effect, the administration for all intents and purposes, is creating America’s next energy crisis. Coal is one of America’s most vital fuel sources, currently providing nearly 40 percent of our nation’s power. It is also far more stable in pricing and supply than other sources. If we turn away from this natural resource now, we will be ill-prepared for America’s energy needs in the coming years. This could lead to rolling brownouts and blackouts, not to mention volatile price spikes for ratepayers year-round.

The expansive, expensive regulatory agenda put forward by EPA has already become a burden for American consumers and our nation’s economy. Contrary to what EPA tells us, it will be costly to our big cities and our small towns, as all communities grapple with less base load power fueling our electricity grid. It will be costly to our low- and middle-income families for whom electricity bills make up a significant amount of their monthly budgets already. They will continue to see those rates rise. And it will be costly to the hundreds of thousands of Americans who will lose their jobs when these regulations go into effect.

Reliable, low-cost power drives America’s economy, creating hundreds of thousands of jobs both directly and indirectly tied to the power generation industry. The total cost of the cumulative lost jobs and unemployed American workers are a huge price to pay for negligible environmental improvements.  A recent paper released by ACCCE finds that the climate benefits of reducing carbon from America’s coal fleet are negligible. By 2050, eliminating our coal-based power plants would result in only 1% reduction in atmospheric CO2 concentration.

As I said yesterday, President Obama and EPA have chosen political expediency over practical reality as they unveiled energy standards devoid of commonsense. I look forward to weighing in on this proposed rule over the coming months and hope we can craft a final rule that makes far more sense for American than the one that has been proposed.

 


CO2-Enhanced Oil Recovery: What it is and why it’s important.

Carbon Capture and Storage, or CCS, is an important technology for reducing the greenhouse gas emissions from coal-fueled power plants and other industrial sources.  CCS is a three part process wherein, CO2, a greenhouse gas, is captured from a plant’s emissions stream, transported in a pipeline, and stored in the subsurface.  While the technology holds significant promise, it is many years from being commercially available.  As the U.S. Department of Energy (DOE) and its industrial partners undertake efforts to demonstrate the technology, most projects look to CO2 enhanced oil recovery (CO2-EOR) to store their captured CO2.

Basics of CO2-EOR:

Some oilfields that have gone through conventional oil production are amenable to processes that produce additional oil.  One such process is the injection of CO2 into the depleted oilfield.  Injected CO2 helps produce additional oil by raising the pressures of the formation which holds the oil and by reacting with the oil, making it easier to move.  When the oil and CO2 are produced at the surface, the CO2 is separated from the oil and re-injected into the formation.  Some CO2 remains in the subsurface permanently.  CO2-EOR operations tend to operate like closed-loop system, with CO2 either remaining in the subsurface, or being re-injected instead of being released into the atmosphere.  The EOR industry has several decades of experience conducting CO2-EOR operations with CO2 from naturally occurring sources.

Potential for CO2-EOR:

As part of the DOE’s effort to develop CCS technology, it published the fourth updated of their “United States Carbon Utilization and Storage Atlas” (Atlas).  The Atlas attempts to quantify the amount of CO2 storage resource in various geologies across the U.S. and Western Canada.  DOE estimates that nearly 250 billion tons of CO2 can be stored in depleted oil and gas formations.  This estimate does not account for economic or regulatory barriers that will limit the number of fields amenable to CO2-EOR.  It is worth noting that around two thirds of this potential is in the southwestern United States.

Regulatory Framework of CO2-EOR:

All injections in the US are regulated under the Safe Drinking Water Act.  Pursuant to that law, EPA has promulgated regulations for CO2-EOR operations through their Underground Injection Control (UIC) program.  Responsibility for implementing these regulations, commonly referred to as “Class II” regulations, has been delegated to state agencies in most instances.  These regulations cover construction and operation conditions, as well as other aspects of CO2-EOR operations.  Additional regulation of CO2-EOR operations is part of EPA’s broader effort to quantify CO2 emissions across the economy, the Mandatory Reporting Rule.  For each sector of the economy, EPA has developed a different subpart.  For CO2-EOR, EPA has promulgated the tiered approach of subparts RR and UU.  For conventional CO2-EOR operations, the less rigorous subpart UU applies.  Subpart RR requires more robust monitoring for those operators that are required to provide additional monitoring data because they seek to permanently store CO2.

Importance of EOR in Demonstrating CCS:

CO2-EOR is playing an important role in the demonstration of CCS technology at coal-fueled power plants.  DOE is supporting five CCS demonstration projects at coal-fueled power plants.  Of those five projects, four plan to integrate CO2-EOR as the storage component of the project, including the only project that is under construction.  The reason is simple, project developers can be paid by EOR operators for the CO2 that they generate.  This economic benefit is important to the technology development because it can begin to reduce the overall cost of implementing a CCS project.  The revenue from CO2-EOR, however, is not enough to account for the approximately $1 billion cost of installing CCS on a single 600 MW coal-fueled power plant.  In combination with grants and tax incentives, CO2-EOR plays an significant role in demonstrating this important technology.

 

Visit www.AmericasPower.org to learn more about clean coal technology and how coal is fueling the future of American energy.