May 22, 2014 - 3:00pm

Regulations Will Send Electricity Costs Soaring

Senior Editor, Digital Content

Obama: My Plan Makes Electricity Rates Skyrocket

Thanks to Obama administration policies, it will likely cost more to keep the lights on. The Associated Press reports that partly because of increased regulations that are forcing coal-fired power plants to close:

the Energy Department predicts retail power prices will rise 4 percent on average this year, the biggest increase since 2008. By 2020, prices are expected to climb an additional 13 percent, a forecast that does not include the costs of coming environmental rules.

With EPA about to unleash a costly set of greenhouse gas regulations for existing power plants, don’t expect things to improve. Dan Byers, senior director for policy for the U.S. Chamber of Commerce’s Institute for 21st Century Energy, recently told a Wyoming audience, "We anticipate it to be unprecedented in complexity and cost."

These impending regulations follow EPA’s costly greenhouse gas emissions rules for new power plants. A Department of Energy official told the House of Representatives subcommittee earlier this year that EPA-mandated carbon capture and sequestrations (CCS) technology for new coal-fired power plants could increase wholesale electricity prices by 70% to 80%.

It appears President Obama is keeping this campaign pledge.

Since electricity is integral to our economy, these regulatory attacks on coal, a reliable energy source, will push business costs up. The AP story points to Indiana’s Rochester Metal Products that uses massive amounts of electricity to melt scrap iron:

“As Indiana’s price of electricity becomes less and less competitive, so do we,” says Doug Smith, the company’s maintenance and engineering manager.

Higher electricity costs will also hit everyone who has a smartphone in their pocket.  Having instant access to all photos, videos, and music in the cloud requires data centers running 24/7. Like factories, these too are big electricity users. According to Dr. Jonathan Koomey, they accounted for 2% of all electricity used in the United States in 2010, and their electricity use has increased by 36% from 2005 to 2010. [H/t Robert Bryce]

As Mark Mills writes, our digital economy needs reliable, affordable electricity to function:

The principle business of the tech community is anchored in bits. But all bits are electrons (or their quantum cousins, photons) and thus the Internet's monthly exabytes of data traffic consumes vast quantities of electricity. And coal remains the principle source of electricity for the U.S. and the world.

Companies such as Amazon, eBay, Facebook, Google, HP, IBM, Microsoft, Oracle, Rackspace, Salesforce, Twitter, and Yahoo, consume huge amounts of electricity from the grid, where over 85% of electricity comes from coal, natural gas, and uranium. The inescapable fact is that hydrocarbons utterly dominate the information-communications-technology (ICT) energy supply chain where coal is, on average, the biggest player supplying 40% of domestic electricity.

Americans, even those worried about greenhouse gas emissions, expect our phones, tablets, and computers to be able to do more, access more data, and do it faster. All this requires moving more bits, which means more electricity will need to be produced. Allowing EPA to effectively reject coal as a fuel source will stifle innovation, economic growth, and job creation.

In the overall energy mix, renewables (solar, wind, hydro) have their place, but fossil fuels like coal and natural gas, along with nuclear, are the most-reliable sources for baseload electricity generation. Reliable, affordable energy has powered the American economy for decades, and it’s what we’ll need for continued economic and technological progress.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.