EPA ‘clean coal’ rule would increase power prices by 70 or 80 percent

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Michael Bastasch DCNF Managing Editor
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An Obama administration official has said that the new clean coal rules could increase electricity prices by as much as 80 percent.

Dr. Julio Friedmann, the deputy assistant secretary for clean coal at the Department of Energy, told House lawmakers that the first generation of carbon capture and storage technology would increase wholesale electricity prices by “70 or 80 percent.”

The Obama administration’s plan to fight global warming includes limiting carbon dioxide from new power plants. In order for new coal-fired power plants to be built, however, they would need to install costly carbon capture and storage (CCS) technology.

“The precise number will vary, but for first generation we project $70-90 per ton (on the wholesale price of electricity),” Friedmann said. “For second generation, it will be more like a $40-50/ton price. Second generation of demonstrations will begin in a few years, but won’t be until middle of the next decade (2022-2025) that we will have lessons learned and cost savings.”

Friedmann added that these high costs could not be made up by power companies through increased production volumes.

“At a coal gasification facility, the cost of electricity may be increased by 40 percent; at a pulverized coal power plant, by upwards of 80 percent. This is what DOE’s own documents tell us,” Pennsylvania Republican Rep. Tim Murphy said in his opening statement.

Second generation technologies would reduce those electricity price increase, but power prices would still be substantially higher than they would otherwise from coal plants using second generation CCS.

Friedmann said that electricity prices would rise so much is because the price of coal is so low. Wholesale power prices would rise up to 80 percent if coal plants opt to install CCS, but retail prices would vary by market.

The Environmental Protection Agency’s mandate that new coal plants use CCS to reduce carbon emissions have been met with fierce resistance by lawmakers, coal states and the coal industry. Coal supporters argue that CCS is unproven technology, and the imposition of such technology violates federal law.

The Environmental Policy Act of 2005 prevents the EPA from using government-backed CCS projects to demonstrate that the technology is commercially proven. But the agency still went ahead with mandating CCS, citing three government-backed CCS projects as justification for their requirement.

“In typical EPA fashion, they’re putting the cart before the horse to advance their environmental policy agenda,” said Louisiana Republican Sen. David Vitter. “They’re moving forward with a controversial rule to regulate carbon based on technology that isn’t commercially available. Not only is this wrongheaded, it’s beyond the scope of their legal authority.”

Democrats, however, argue that the mandate for coal plants to use CCS is necessary because power providers would not adopt the costly technology on their own.

“Without a mandate we’re not going to get carbon pollution controls on coal,” said California Democratic Rep. Henry Waxman during a House hearing on CCS technology on Tuesday.

“It is unlikely that they would deploy CCS technology,” Friedmann agreed, adding that power companies would not get a return on their investment without the mandate and government support. There are currently no operating commercial-scale coal plants using CCS in the U.S.

The Obama administration has also said that the U.S. needs to adopt CCS to become a leader in clean coal technology which can then be exported abroad, benefitting American companies. Indeed, Friedmann told House lawmakers that Japan and China are interested in “clean coal” technology.

But the coal industry says that mandating CCS will simply push the coal industry out of the U.S., costing jobs and economic growth.

“By requiring CCS, EPA is placing a de facto ban on the construction of new coal-fueled power plants, handing over leadership of the development of CCS, and an estimated $1 trillion in economic benefits, to countries like China,” said Laura Sheehan, spokeswoman for the American Coalition for Clean Coal Electricity.

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