By: Glen Pisani, Great Eastern Energy
EPA regulations and their potential impact
Regulations proposed by the U.S. Environmental Protection Agency (EPA) could impact coal-fueled power plants and the cost of electricity over the next 10 years.
Many people support the EPA’s regulations to achieve long-term environmental benefits, protect customers and the economy and the reliability of the electric grid. However, the cumulative impacts of the EPA’s current regulatory path have been questioned especially the cost projections and the potential increase of electricity costs throughout the economy.
More than 70% of all U.S. coal plants are already more than 30 years old, which was their original operating lifetime when designed. One-third of these plants went online before 1970. Some plant operators have announced that they will retire some old plants while others are planning to retrofit with modern pollution technology. The electric power industry will need to invest approximately $505 billion in new generation from 2010 to 2030, in order to maintain a reliable supply of electricity. This does not include any additional investment necessary to meet future federal climate change regulations.There are several factors being discussed in this power plant dilemma:
• U.S. coal prices are rising and could be driven much higher by soaring global demand, especially from Asia.
• Coal prices could also be driven higher by supply constraints. The amount of economically recoverable coal reserves may be smaller than previously thought.
• Major coal projects face high, unpredictable construction costs. The cost of building a new coal plant in the United States has roughly doubled in the past five years.
• The cost advantage coal power traditionally enjoyed over cleaner energy options has largely disappeared when it comes to new plants. Power from new coal plants now costs more than power from new gas plants, wind facilities and the best geothermal sites, and much more than investing in energy efficiency.
• Coal power is the largest U.S. carbon pollution source, contributing about one-third of all energy-related emissions and more than the entire surface transportation sector. Coal-fired power plants inevitably will face increasing pressure to dramatically cut emissions to help curb climate change. The cost of generating electricity from new coal plants could increase 11-37% under a range of carbon prices in the future.
• Carbon capture and storage (CCS) retrofits cannot be counted on to affordably cut emissions. Federal studies show that adding CCS to a new plant could increase the cost of generating electricity 36-78%, while retrofitting an existing plant could increase its costs by 330%.
• Federal and state governments are promoting energy efficiency and clean energy sources, which will cut demand for coal power. Twenty-seven states have energy efficiency standards or a standard pending, and several states now require annual reductions in electricity use of at least 2%. Twenty-nine states now have a standard that requires utilities to increase their reliance on renewable energy sources.
Coal-fired plants have historically been one of the cheapest ways to generate electricity, but operating costs are expected to increase significantly because of upgrades needed on older plants to meet new environmental regulations. Although there are many public concerns, it is quite possible that some of the regulations may never get to the table. Nevertheless, it is almost certain that there will be an increase in electricity prices throughout the economy.
Any increases are expected to begin to appear in 2014. If policymakers cannot find additional alternatives to those already on the table, consumers can expect further increases as more expensive forms of generation take on a greater share of the electricity load. Any sudden increase in electricity rates will have an impact on the economy at a time when people and businesses are still struggling.