By Hal Quinn, President & CEO, National Mining Association
The Environmental Protection Agency’s (EPA) proposal to establish carbon dioxide performance standards for existing power plants is a stunning attempt to remake the nation’s entire electric grid at great cost to homes and businesses across the nation. It also threatens the reliability of our electric grid, which is already close to the edge of breaking in large part due to earlier EPA rules that are forcing many base load power plants to close. This latest proposal will push the grid over the edge.
This proposal is one more step in the administration’s policies designed to eliminate low cost and reliable electricity and replace it with more expensive and less reliable sources. Reducing the diversity of our nation’s electricity supply and raising its costs will create a structural barrier for our economic recovery and future growth. Our manufacturing base will become less competitive because of higher electricity and natural gas prices, which will halt the beginnings of a U.S. manufacturing renaissance. Families will have less disposable income as they spend more to light and heat their homes, with seniors, families on fixed incomes and lower-income Americans being hit the hardest.
EPA’s proposal is based upon a complex web of assumptions—many of them implausible—about future energy demand, dramatic shifts in generation sources, adding more intermittent sources for generation and reducing energy use in 48 states. Each of these assumptions—what EPA calls “building blocks”—rests upon a weak foundation.
Increase efficiency at coal base load power plants: Most of the 6 percent efficiency gain EPA assumes comes from deploying recommended operation and maintenance practices. But these practices are already routine and taking place since they make a power plant more profitable. At the same time, earlier rules EPA issued two years ago require extensive retrofits of existing plants that will make them less efficient. The result is closing more coal power plants that are essential to reliable, low-cost electricity.
Re-dispatching from Coal to Natural Gas Power Plants: EPA assumes that natural gas power plants can run at a 70 percent capacity factor without any technical or economic evidence to back that up. EPA’s assumption appears to be based upon plugging into a model an assumed carbon price—one well above those in current carbon trading schemes—rather than any analysis of the technical capabilities of the plants or gas delivery system.
Increased Deployment of Intermittent Generation Sources: The growth of renewable generation is highly dependent upon permitting, financing, transmission access and technical challenges posed by integration of intermittent electricity sources into the grid. There is no indication that EPA has taken those factors into account nor acknowledged, in their plan, the nature of intermittent sources: that their performance is highly variable seasonally and daily.
Energy Efficiency: EPA’s assumption of 1.5 percent growth in energy efficiency year-over-year lacks any credible basis. The gap between the agency’s efficiency wish and technological reality has significant implications for the cost of the rule. Since most of the lowest cost efficiency measures are already in use, the next increment will be more expensive especially in states with the lowest retail power prices.
As each “Building Block” crumbles, it places additional pressure on the remaining ones and takes EPA’s plan from the implausible to the impossible. As much as we hear EPA tout the “flexibility” it is providing states, the proposal places them into an “energy straightjacket” at the outset with each adjustment more painful economically and more risky for system reliability.
What states need is the flexibility to maintain a diverse and reliable generation mix for their citizens’ economic and energy security. The proposal ignores the value of generation diversity to stability in power supplies and prices. This past winter provided warning signals that our bulk power system is at its limit and additional power plant retirements induced by EPA power plant rules issued two years ago will push it over its limit. Businesses and families in many parts of the country paid unprecedented high prices for electricity and saw their heating bills spike as natural gas prices climbed with competing demand among power plants, factories and households.
Coal based power plants supplied 92 percent of the incremental demand for power this winter. What will happen if we experience another cold winter next year or the year after when many of those plants are closed due to EPA’s earlier rules? An analysis performed by Energy Ventures Analysis shows:
- Wholesale power prices would rise 27-55 percent across different regions of the country. No state is spared.
- Businesses and households would pay $35 billion more for natural gas.
- A combination of another cold winter followed by a warmer than usual summer would cost consumers $100 billion in higher electricity and natural gas prices.
These are the consequences of poorly conceived policies and the reason why EPA’s assessment of the economic impacts of its rules inspires little confidence. After all, EPA projected that the agency’s most recent rule that has brought our electric grid to the edge of breaking would cause less than 5,000 megawatts of power capacity to close. As it turns out, it will likely be 10-12 times more. And this is all without the current proposal for carbon dioxide.
Despite the administration’s extensive public relations rollout of the proposal, its costs and risks are real and substantial; the benefits are not. EPA expects far too much when it asks Governors to put their state residents’ economic and energy security at great risk, surrender control of their electricity and energy future; and forfeit their state’s full potential for economic growth. We urge EPA to withdraw the rule.
Learn more about the National Mining Association at www.nma.org.
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