A new report released Friday by the U.S. Energy Information Administration is reinvigorating a common debate in Washington over how to calculate projected economic impacts of regulations.
The report, written at the request of House Science and Technology Chairman Lamar Smith (R., Texas), concludes that a proposed Environmental Protection Agency rule cutting carbon emissions from power plants will, by 2020, cause electricity prices to go up by 4.9% and drive more than double the amount of coal-fired electricity to go offline than what EIA predicts would occur without the rule.
That sounds a lot like the criticism coming from congressional Republicans and the energy industry, both of whom are fighting the rule and are pointing to EIA’s report as evidence it will hurt the economy.
Looking closely at the numbers shows a more complicated picture.
First, the basics of the rule: Proposed in June 2014 and expected to become final in August, the draft EPA rule calls for a 30% cut in power-plant carbon emissions by 2030 based on emissions levels in 2005. It’s the centerpiece of President Barack Obama’s efforts to address climate change, which he hopes to leaves as a legacy of his time in the White House.
The two agencies agree that electricity prices—how much you pay per kilowatt hour on your electricity bill—will go up under the rule. The two agencies diverge over how much energy efficiency and lower electricity demand will affect electricity bills, which is the number of kilowatt hours you use times the retail electricity price and represents ultimately how much you pay.
EIA predicts that under the rule, retail electricity prices will go up by 4.9% by 2020 and 4% by 2030. That’s a little lower than what EPA projects will happen in an economic analysis it released alongside the proposed rule in June. It said then that electricity prices would go up by between 3.6% and 6.5% by 2020 and between 2.7% and 3.1% by 2030.
EPA predicts that electricity bills that households must ultimately pay will rise between 1.1% and 3.2% by 2020 but ultimately decrease by up to 8.7% by 2030, driven by energy efficiency and lower electricity demand.
EIA, on the other hand, predicts electricity bills will rise by 3% by 2030 even considering energy efficiency and lower electricity demand.
“The issue is how much demand reduction occurs because of energy efficiency programs,” said Howard Gruenspecht, deputy administrator of EIA, on Friday. “In our framework, we let the modeling drive that and we just didn’t get that much of a reduction in residential and commercial energy demand as EPA did.”
The other headline-catching statistic was about how many coal-fired power plants will be retired, a common point of contention that gets at the heart of what congressional Republicans decry as Mr. Obama’s “war on coal.”
The EIA report found that under EPA’s proposed rule, projected retirements of coal-fired electricity between now and 2040 would be 90 gigawatts, with most of that going offline by 2020. EIA currently estimates that 40 gigawatts of coal electricity will retire by 2040 without EPA’s rule, driven by cheap natural gas prices and other EPA rules.
In its analysis released last year, EPA predicted that between 46 and 49 gigawatts of coal electricity would be retired under its carbon rule by 2030, which would be on top of the retirements already expected under the business-as-usual scenario laid out by EIA, which is the 40 gigawatts of retiring coal.
In other words, EPA predicts that between 86 and 89 gigawatts of coal will be retired over the next several years under its climate rule, which is nearly identical to what EIA predicted in its report Friday.
For context, the total capacity of the U.S. electricity system in February was approximately 1,000 gigawatts, according to EIA data, so we’re talking about 9% of the electricity grid.
See the article here.
- On May 25, 2015