Report: EPA Regulations To Raise Power Costs 37 Percent By 2020
Environmental Protection Agency rules will only force electricity prices up even higher as the agency finalizes a slew of regulations aimed at the power sector, according to a new report.
The report by Energy Ventures Analysis found that the EPA underestimates how much its power plant regulatory regime will raise electricity and natural gas prices by imposing new regulations on power plants, most recently being the agency’s rules to cut carbon dioxide emissions from new and existing power plants.
These new rules to tackle global warming, combined with other rules to reduce more traditional air pollutants, will dramatically increase Americans’ utility bills by 2020, according to EVA’s report, which was sponsored by the coal company Peabody Energy.
“Annual power and gas costs for residential, commercial and industrial customers in America would be $284 billion higher ($173 billion in real terms) in 2020 compared to 2012 — a 60% (37%) increase,” the EVA report found.
The EPA’s so-called Clean Power Plan to reduce emissions from existing power plants aims to reduce carbon dioxide emissions from the power sector 30 percent below 2005 levels by 2030. The EPA says its plan will result in “approximately 46 to 49 GW of additional coal-fired generation” being “removed from operation by 2020.”
On top of this the “decrease in coal-fired power will also cause natural gas prices to rise up to 11.5 percent as an additional 1.2 trillion cubic feet of natural gas is used to make up for the lack of coal power in 2020,” EPA said. “Average retail electricity prices are projected to increase in the contiguous U.S. by 5.9% to 6.5% in 2020.”
The Energy Information Administration estimates that 50 gigawatts of coal-fired power are slated to shutdown by 2020, mainly because of an EPA rule targeting mercury emissions. This means that the Clean Power Plan could nearly double the amount of coal-fired capacity being retired by 2020.
Retiring coal-fired generators and using more natural gas-fired power and green energy comes at a cost, however, as new energy infrastructure must be built to accommodate the shift and gas prices rise as demand increases.
“The cost of electricity and natural gas will be impacted in large part due to an almost 135% increase in the wholesale price of natural gas (100% in real dollars), from $2.82/mmbtu in 2012 to approximately $6.60/mmbtu ($5.63) in 2020,” EVa reports. “These increases are due to baseline market and policy impacts between 2012 and 2020 as well as significantly increased pressure on gas prices resulting from recent EPA regulations on the power sector and the proposed [Clean Power Plan].”
U.S. industry would be hit the hardest, seeing their electricity and gas costs soar 64 percent by 2020 over 2012 costs. EVA notes that skyrocketing “operational costs in the industrial sector are of particular concern for energy intensive industries in the U.S. such as aluminum, steel and chemicals manufacturing, which require low energy prices to compete.”
“Industrial power consumers would be expected to pass energy cost increases on to their customers, affecting the costs of goods purchased by American consumers over and above increased monthly utility bills,” EVA reports.
“The EPA’s collection of regulations will force American families, businesses and manufacturers to shoulder the burden it stands to create,” said Chad Kolton, spokesman for the Partnership for a Better Energy Future — which opposes the EPA’s Clean Power Plan.
“Today’s report from EVA is consistent with what industry has been saying for months — the EPA’s regulatory agenda will do significant damage to the American economy,” Kolton said.
Environmental groups, however, have said the Clean Power Plan — and pretty much all major EPA rules in the last six years — are necessary to protecting public health and the environment. Activists have spent a large amount of energy, in particular, protecting the Clean Power Plan which they see as the centerpiece of President Obama’s climate agenda.
The Natural Resources Defense Council recently published a report saying the Clean Power Plan will actually save Americans money while fighting global warming. NRDC argues, in contrast to EVA, that EPA’s plan overestimates the compliance costs of cutting carbon dioxide emissions.
“It’s clear that EPA has ample room to significantly strengthen the Clean Power Plan, making deeper cuts to dangerous carbon pollution from power plants at a reasonable cost,” said Starla Yeh, the report’s co-author and NRDC policy analyst.
“It can do so relying more on energy efficiency and clean energy—such as wind and solar energy — which can help slash America’s biggest source of heat-trapping pollution,” Yeh said.
NRDC’s report argues that EPA overestimated the cost of increasing energy efficiency in the power sector by double what current projections are and overestimated the cost of green energy use by 50 percent.
Taking these factors into account, NRDC argues the Clean Power Plan will save Americans between $6.4 billion and $9.4 billion from energy efficiency by 2030 — well above EPA projected savings of up to $8.8 billion by that year.
“In 2030, energy efficiency savings could total 140 terawatt-hours more than what EPA projected,” NRDC reports. “Renewable generation could be 171 terawatt-hours higher than EPA’s projections. Collectively, that’s equivalent to the electricity used by 29 million homes in one year—roughly the population of the New York and Chicago metropolitan areas together.”
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