EPA’s Regulatory ‘Trifecta’ Imperils the Texas Power Grid
Partly because of cheap and abundant natural gas, more than 30,000 megawatts of coal-fired electric power generation have been retired nationwide since 2005 with another 30,000 megawatts likely to go offline in the decade ahead. Still, coal today accounts for nearly 40 percent of all the electricity generated in America. In Texas, coal plants produce about 35 percent of the state’s electric power.
No fan of hydrocarbons, the Obama administration is often accused of waging a “war against coal.” This may or may not be the case. But without question the current “trifecta” of proposed U.S. Environmental Protection Agency regulations to fight climate change and improve air quality will hasten coal’s demise, especially its use for electric power generation. The result could be impaired grid reliability and higher electricity prices with negligible environmental benefits.
In January, the EPA intends to issue a final rule controlling carbon emissions from new power plants, and by next summer it will issue standards for reducing emissions from existing power plants. The proposed rules would mandate a 38 percent overall reduction in emissions for Texas’ power plants by 2030. These standards are so restrictive they will likely block the construction of new coal-fired power plants in Texas and elsewhere unless they utilize novel and expensive technology to capture carbon. The newest and most advanced coal-fired generators in Texas can’t meet the proposed emissions limit of 1,100 pounds of CO2 per megawatt hour for new power plants.
An analysis by the Electric Reliability Council of Texas, the state’s power grid operator, estimates the carbon-emissions rules could force the retirement of half of Texas’ coal-burning capacity while pushing up wholesale electricity rates as much as 20 percent. Because Texas has an increasing demand for electric power, the forced shutdowns of coal plants could affect the power grid. A study by the Southwest Power Pool, which operates in nine states, reaches a similar conclusion.
To make matters worse, on Nov. 24 the EPA rejected parts of Texas’ regional haze plan, with the result that 14 coal-burning generating units in the state will be required to install or improve controls that limit emissions of sulfur dioxide. According to the Texas Commission Environmental Quality, complying with the requirements would cost “more than $2 billion for a negligible increase in visibility” in national parks and wilderness areas while having consequential impacts on the state’s power grid.
The third leg of the “anti-carbon” trifecta is an ambitious plan unveiled by the Obama administration on Nov. 26 to slash ozone pollution. The EPA wants to cut the allowable threshold for ground-level ozone by as much as 20 percent, from 75 parts per billion to 60 parts per billion. According to an analysis by the National Association of Manufacturers, the rule would cost businesses $270 billion a year, making it the most expensive regulation in history. To comply with the proposed standard, states like Texas might have to limit development and operations of energy-intensive industries that use fossil fuels, such as refineries and power plants.
If, as a result of this trifecta of new regulations, coal is eliminated or severely curtailed from the power generation mix, the consequences in terms of higher energy costs and compromised grid reliability could be serious. The new standards could also derail America’s nascent industrial revival while eroding the competitiveness of U.S. manufacturers. Hundreds of thousands of jobs are at risk – not a happy prospect in an economy with 9 million workers currently unemployed and millions more underemployed or discouraged from even looking for work.
Improper and excessively costly regulation of greenhouse gases, sulfur dioxide and ozone will reduce the diversity of Texas’ and the nation’s energy sources, holding ratepayers hostage to volatile natural gas prices and intermittent renewables like wind and solar.
Policymakers and regulators must acknowledge that America, by itself, can do little to fight climate change. Greenhouse gas emissions in the U.S. today are at a 20-year low, even though the economy is more than 50 percent larger. The only effective way to improve air quality and slow global warming is through a coordinated strategy involving all of the planet’s economies. Otherwise, any marginal reductions in America as a result of shuttering coal plants in Texas and other states will be more than offset by rising emissions in China, India, Brazil, and other fast-growing economies around the world.
Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University.
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- On December 15, 2014