EPA regulations are forcing hundreds of coal-fired generators to prematurely retire, but replacing the existing coal fleet with new wind farms and natural gas-fired plants will burden Americans with higher cost electricity, according to a new study.
The free-market Institute for Energy Research has released a new report showing that electricity from new wind farms is three times more expensive than power generated from existing coal plants and four times costlier than electricity from today’s nuclear fleet. IER’s study also shows that electricity from new natural gas plants is nearly twice as expensive as power from existing coal plants.
“This study helps us understand the cost impacts of shutting down existing power plants and replacing them with new ones,” Travis Fisher, an energy policy expert at IER, told The Daily Caller News Foundation.
IER’s study is meant to serve as a policy guide for policymakers in the face of EPA regulations. The idea is to show government officials the true cost of retiring coal and nuclear plants and replacing them with new wind farms and natural gas plants — something government data doesn’t show.
“The Energy Information Administration’s (EIA) estimates of the levelized cost of electricity only compare the costs of new plants to each other, not to the existing generation fleet,” Fisher told TheDCNF. “But the EPA is shutting down power plants as we speak, and to date there has been no way for policymakers to compare the cost of electricity from new and existing units.”
EPA regulations are slated to shutter 110 gigawatts of electric generating capacity in the coming years, mostly from coal, and neither the agency nor the Energy Department (which houses EIA) have data showing the economic trade-offs associated with getting electricity from costlier sources.
“This report solves that problem and shows that electricity from even the lowest-cost new plants is about twice as expensive as from existing coal and nuclear plants, on average,” Fisher said.
EIA data has been used by green energy proponents to show that wind energy is more cost-effective than coal or even natural gas for electricity generation. But IER’s report found this to be misleading, since EIA data doesn’t take into account the intermittent nature of wind power and the fact that it’s largely replacing cheaper coal power.
New wind farms and natural gas plants have higher costs because of the they begin operating with the “full burden of construction debt and equity investment to repay,” according to IER’s study. On the other hand, existing plants have already repaid some or all of their debts off, they have lower fixed costs.
“If regulators or lawmakers induce power plants to retire earlier than they would have otherwise, the price of electricity must increase to pay for the incremental cost of replacement capacity,” IER’s report found. “Almost all existing power plants have lower fixed costs than and similar variable costs to their most likely replacements.”
“Most existing coal, natural gas, nuclear, and hydroelectric generation resources could continue producing electricity for decades at a far lower cost than could any potential new generation resources,” the report found.
“When electricity from an existing electric generating plant costs less to produce than the electricity from the new plant technology expected to be constructed to replace it—and yet we retire and replace the existing plant despite the higher costs—ratepayers must expect the cost of future electricity to rise faster than it would have if we had instead kept existing power plants in service,” IER’s report added.
“An unprecedented amount of generating capacity is set to close due to ongoing renewables policies, undervalued capacity markets, currently low natural gas prices, and additional environmental regulations,” the report concluded. “In the absence of even some of these factors, most existing power plants would remain operational, helping keep electricity costs low for many years or decades into the future.”
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