Apr 13, 2015 - 3:45pm

The People Who Keep Our Lights On Tell Us EPA’s Carbon Regulations Will Cost Billions


Senior Editor, Digital Content

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Photo credit: Scott Eells/Bloomberg.

The changes to electricity production and transmission required by EPA’s carbon regulations will amount to billions in additional costs for electricity producers and higher prices for consumers.

An analysis of EPA’s carbon regulations by the Southwest Power Pool (SPP), a regional grid operator covering parts of 14 states, found that the regulations will mean $2.9 billion yearly in additional capital and electricity production costs. What’s more, nearly 14 additional gigawatts of affordable, dependable coal-fired electricity generation will be retired.

Since it gets most of its electricity from coal, it’s no surprise that SPP has big problems with EPA’s carbon regulations, but New York’s power grid operator, which gets a sliver of its electricity from coal, is also worried, a recent Wall Street Journal editorial notes [subscription required]:

To take one example, the northeast blackout of 2003 cost about $13 billion, and the New York Independent Systems Operator now reports that the EPA’s reductions “cannot be sustained while maintaining reliable electric service to New York City.” It calls the plan “inherently unreasonable” that “no amount of flexibility can fix.” This is not Texas talking.

Along with the additional costs, EPA's plan runs into permitting obstacles, Warner Baxter, Chairman and CEO of power provider Ameren, writes in The Wall Street Journal [subscription required]:

For example, if a new gas-fired power plant must be built to meet the EPA’s 2020 interim target, all permitting and development would need to be completed by 2017. But that is impossible because state compliance plans might not even be submitted to the EPA until 2017 or 2018, and the agency has said it may take up to a year to approve them.

New pipelines and power lines will also have to be built to fuel new power plants and transport the electricity generated:

Beyond that, opening new natural-gas plants, as well as operating existing plants at higher levels, will require new pipeline infrastructure, and building natural-gas pipelines often takes five years or longer. More transmission lines will likely be needed to connect the new capacity to the grid. These projects can take 5-15 years.

Baxter concludes that meeting EPA’s 2020 interim carbon emission targets “are simply not achievable.”

This adds to the mounting opinion of power grid experts that EPA's carbon regulations will mean "all pain for no gain."

UPDATE: Rufus (@Rufus_GB) reminds me on Twitter that none of us should be surprised by EPA's actions. Then-Senator Barack Obama in 2008 told us electricity prices would "necessarily skyrocket."

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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.