GAO: EPA Rules To Retire More Coal Plants Than We Thought

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Michael Bastasch DCNF Managing Editor
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The number of coal-fired power plants slated to be shut down in the coming years is higher than the federal government anticipated, according to the Government Accountability Office.

GAO found that power companies have already or plan to retire 13 percent of the country’s coal-fired power capacity through 2025 due to federal environmental rules — above the GAO’s 2012 prediction that only between 2 and 12 percent of the country’s coal capacity would retire through 2025.

But the retirements could go even further, GAO noted, as the Energy Department’s statistics arm projects retirements “from 2012 through 2020 could reach approximately 50,000 MW or about 16 percent of net summer generating capacity available at the end of 2012.”

These planned coal plant retirements are, at least in part, due to Environmental Protection Agency Regulations governing air and water emissions from power plants. In particular, the EPA’s Mercury Air Toxic Standard, or MATS, was estimated to shutter 4.7 gigawatts (about 11 percent) of coal-fired power — a low-ball estimate at this point.

The government watchdog also found that federal agencies have only taken “initial steps” to make sure EPA rules wouldn’t harm the reliability of the electrical grid.

The GAO notes that federal agencies “have taken initial steps collectively and individually to monitor industry progress responding to EPA regulations including jointly conducting regular meetings with key industry stakeholders,” but past and upcoming “actions on the four existing regulations, as well as EPA’s recently proposed regulations to reduce carbon dioxide emissions from existing generating units, may require additional agency effort to monitor industry’s progress in responding to the regulations and any potential impacts on reliability.”

The GAO’s report has reinforced concerns from Republicans that the EPA’s air pollution rules are closing down too many coal plants and threatening the viability of the electrical grid.

“Plant retirements are higher than projected. Electricity prices are rising,” said Alaska Republican Sen. Lisa Murkowski, who asked the GAO to investigate agency actions on grid reliability. “Even factors beyond our control – such as last winter’s weather – are on a collision course with the shutdowns caused in part by new federal regulations.”

Last winter parts of the U.S. were in peril of going dark when frigid weather and snowstorms ravaged the country. As more coal plants are shut down, parts of the country heavily reliant on the fuel for electricity could find themselves in a tough position if generating capacity is taken offline without any consideration for its effect on electricity service.

“Despite it all, the agencies in charge still have not fully adopted GAO’s recommendation for a formal, documented process to protect reliability,” Murkowski said. “In reading this report, their actions come across as a check-the-box exercise, rather than a robust effort to protect families, consumers, and businesses across the country.”

The GAO’s report, however, did not take into account a recent EPA rule that regulates carbon dioxide emissions from existing coal-fired power plants. The EPA’s own analysis found this rule would force up to 19 percent of the U.S. coal-fired capacity to shut down and cut coal production by up to 28 percent. The rule would also raise retail electricity by as much as 6.5 percent by 2020.

“Under the provisions of this rule, EPA projects that approximately 46 to 49 GW of additional coal-fired generation (about 19% of all coal-fired capacity and 4.6% of total generation capacity in 2020) may be removed from operation by 2020,” the EPA says in its regulatory impact analysis.

The EPA denies that all the closures are the result of its regulatory actions.

“EPA’s analysis focuses on the amount of capacity that may retire in response to our actions, it is a reflection of what we think is caused by the regulation itself, and not intended to be an estimate for the broader trends in the industry,” an agency spokeswoman told The Daily Caller News Foundation. “There are a number of contributing factors that have led to recent announcements of retirements.”

“For example, average natural gas prices delivered to the electric power sector hit a 14 year low in 2012, while average coal prices hit a 25 year high (according EIA),” the EPA continued. “At the same time, electric demand has been flat, and new renewables and NGCCs were brought online.”

“The final MATS was released at the end of 2011, just as this transition was occurring,” the EPA told TheDCNF. “All these factors contributed to economic decisions to retire some plants, who could no longer compete as they once had.”

The agency spokeswoman concluded, “GAO itself acknowledges that these factors contributed to why their own estimate of retirements is below what we’re seeing today.”

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