A new Environmental Protection Agency (EPA) rule is either a rush to regulate or chickens coming home to roost. But it’s certainly going to raise your electric bill.
EPA’s most expensive power plant clean air initiative ever is scheduled for a final decision on implementation in November. Opponents say its hasty enactment will raise electricity prices 20-25% in coal-dependent regions like the Midwest and South. Proponents say the rule was authorized in 1990 and has been in process since 2000, giving industry decades to prepare, and areas with big costs got two decades of cheap power by avoiding pollution controls.
Amid heightened political debates over whether the new rules will cost jobs, a broader and still-unsettled debate over the cost of the rules to utilities and ratepayers has been obscured. Current estimates still leave extensive room for debate.
Watch Out For The MACT
The new rule, called Utility MACT (maximum achievable control technology), limits emissions of mercury and hazardous pollutants like arsenic emitted when coal and oil are burned in electric generating plants. But with the few remaining oil plants and one-third of the U.S. coal fleet over 40 years old, many old plants will be too expensive to retrofit, and could be shut down permanently.
It’s unclear how many shutdowns will occur regardless of EPA decisions, and how many will be accelerated by this and other new EPA rules. In 2008, a study by the Brattle Group concluded that utilities would build 214 gigawatts (GW) of new or replacement capacity, at a cost of nearly $700 billion, by 2030 without new federal rules.
Older plants tend to be small and inefficient, but they are paid for, and exempt from installing pollution controls unless owners modify them in a process called a “retrofit”. At that point, the law requires the latest, and most expensive, controls.
As a result, 103 GW of the 340 GW U.S. coal fleet lack any controls at all, according to Credit Suisse analyst Dan Eggers. The rest have some combination of emissions “scrubbers,” and nitrogen and particulate removal devices.
MACT requires each plant to remove pollutants at the same rate as the best comparable facility. While some plants can meet proposed MACT limits with existing controls many cannot. EPA estimates the retrofits and replacements will cost $10.9 billion a year by 2015, with an average ratepayer increase of 3.7%.
EPA contends that every dollar spent will bring $13 in benefits – citing avoided respiratory illnesses, premature deaths and health damages from mercury and other toxins.
At a June 7 debate sponsored by the Environmental Law Institute, former EPA air official Jeff Holmstead and Scott Segal, lawyers representing coal interests with Bracewell Giuliani, said EPA’s analysis shows nearly all claimed MACT benefits stem from limiting particulate matter. Since that’s already regulated under EPA’s National Ambient Air Quality Standards or NAAQS, they argued the new rule is unjustified, and being rushed needlessly into law.
Segal also argued that the $10.9 billion cost estimate is too low by billions, and said one study shows the average electric rate increase in coal-dependent areas will be 23.5%.
John Walke of the Natural Resources Defense Council said the NAAQS would take 10-15 years longer to achieve results than the MACT, meaning continued public health damage. Michael Bradley, executive director of the Clean Energy Group, said the rule limits particulate matter because that’s what carries toxic pollutants.
Not Everyone’s Problem?
Bradley estimated the MACT rule would prompt utilities to retire about 15 GW of coal capacity in addition to 50 GW that would be retired anyway. He said members of his group – Calpine, Constellation, Exelon, NextEra Energy, National Grid, Pacific Gas & Electric, and Public Service Enterprise Group – have 33 coal plants that already meet the MACT standard.
EPA is under court order to get the new MACT rule out by November. Assessing MACT’s real impact is complicated further by other EPA initiatives coincidentally slated to take effect in the coming two years: tougher limits for sulfur and nitrogen oxides, greenhouse gas limits, possible regulation of coal ash as hazardous waste, and a clean water rule that requires large plants to install cooling towers or similar technology.
Together, they may make even more coal capacity uneconomic. But industry experts warn that, with compliance required in the next five years, the industry will be unable to install control equipment or build replacement capacity fast enough, and compliance timetables should be extended to minimize costs.
