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Energy Industry Verklempt Over EPA Regs

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The energy industry is pulling out the stops against proposed government regulations.

Remember when the enactment of climate legislation by the 111th Congress seemed within reach? (See here, here and here.) For those of us once sanguine about the prospects, it became an exercise in counting chickens that never hatched.

There were lots of reasons for the reversal, but certainly staunch opposition from the energy industry played a significant role.

Now, with climate legislation off the table (for this year at least), the energy industry appears to be setting its sights on a new target: the U.S. Environmental Protection Agency and its proposed regulations and rules. According to the New York Times, "[coal] industry officials believe they face a hostile administration that could seriously harm their business with a range of new federal regulations in greenhouse gas emissions, mountaintop removal mining, air pollution, coal ash disposal, and mine safety." In the words of one industry official, coal is facing a "regulatory jihad."

If you're facing annihilation by jihadists, you gotta pull out all the stops and the energy industry appears to be doing just that -- pouring tens of millions of dollars into the current election. (See here, here, and here.)

In addition to dollars, the energy industry is marching out a series of reports predicting bad news for the nation's electricity system if EPA goes ahead with its regulatory plans. The basic argument [pdf] is that the new regulations will force utilities to "accelerate the retirement of a significant number of fossil-fueled power plants" with dire consequences. To wit:

  • A May report from the Interstate Natural Gas Association of America concludes that "a number of impending environmental regulations have created uncertainties about the ability of certain coal-fired power plants (utility owned and merchant owned) to remain profitable into the extended future." The trade group predicts that putting into effect two new regulations proposed by EPA would mean the retirement of some 50 gigawatts of coal-fired electrical generating capacity. (The total generating capacity in the United States is currently about 1,100 gigawatts with 340 gigawatts coming from coal [pdf].)
  • An analysis from September by the Scotland-based energy consultancy Wood Mackenzie predicts that up to 60 gigawatts will be retired over the next 10 years from four new regulations.
  • And most recently a report [pdf] released in October by the North American Electric Reliability Corporation (NERC), an industry-funded group that oversees the reliability of the nation's power grid and enforces reliability standards, concludes that the promulgation of four new rules proposed by EPA aimed at protecting air and water quality will cause "up to a 78 GW reduction of coal, oil, and gas-fired generating capacity and potentially undermine the stability of the national grid during periods of peak demand.*

Not surprisingly the Wall Street Journal has also gotten into the act, using the NERC report to blast EPA, the White House, and their "covert program" to use regulations to advance their "carbon agenda." "Supposedly," the editors of the WSJ write, "all this is separate from greenhouse gasses, but the White House and the EPA are clearly targeting fossil fuels and coal in particular to achieve via rule-making what even the Democratic 111th Congress has rejected as legislation. As much as a fifth of the perfectly functioning coal-fired fleet will be forced into early retirement, to be replaced with a largely more expensive energy mix, especially natural gas."

And politicians have not been slow to enter the fray, "declaring war on the regulatory state," as Representative Fred Upton (R-MI) did in a recent op-ed, for its "aggressive actions."

Holy climate conspiracy! Is it really time for Congress to enact articles of war against a federal agency? Well let's take a look.

Stealth Climate Agenda?

According to the WSJ, all the supposed regs being proposed by EPA are just a smoke screen for a stealth campaign to clamp down on greenhouse gas (i.e., carbon) emissions. Let's take a look at the regs actually being discussed:

I don't know about you, but I think a reasonable argument can be made that we need these regulations. For example: Why regs on the disposal of coal ash? Did I hear anyone mention the coal-ash spill in Kingston, Tennessee? And why regs on hazardous pollutants? Well, let's see ... how do you feel about eating fish laced with mercury? In the words of an EPA spokesperson the agency is just "doing its job ... to minimize the pollution."

Power Plant Retirements

OK, there appears to be a general consensus that if EPA's regs go forward, we are looking at retiring 50 to 80 gigawatts of electrical generating capacity in the United States. But will that be as bad as some have made it out to be?

First of all, a significant number of the projected retirements are plants that are old and inefficient. And some of these are on the chopping block anyway ... to the tune of about 45 gigawatts through 2035.

What to Do About Lost Generating Capacity?

Retiring power plants is not the whole story. We can plan and react. Even the authors of the NERC report admit the situation is far from disastrous; given enough time, we can plan for these retirements and act accordingly. How?

  • Excess capacity. We already have a lot of excess capacity in the system: some 100 gigawatts worth. NERC reports [pdf] that the scenario that retires 33 gigawatts by 2015 without replacement would only change the reserve margin** by four percent on average -- putting only one of the eight regions below a 15-percent excess capacity target.
  • New Capacity. There are planned additions already in the works between now and 2013, which would add another 60 gigawatts to capacity.
  • Efficiency. Achievable energy-efficiency scenarios have the potential to reduce energy consumption by seven to 20 percent in 2015.
  • Demand Response. Demand response could reduce peak demand between five and 20 percent (or 45-150 gigawatts) in 2015 depending on what degree of incentives and which programs are deployed.

So let's please get past all the hype about jihads and war and covert programs, and calmly focus on the real question. Do we want to pay what will likely be modest increases in electricity costs for the benefits, including economic ones, of a healthier populace and a healthier environment? Now, discuss amongst yourselves.


* For planning purposes, roughly 15 percent excess capacity is held as a reserve margin to ensure the reliability of supply especially during peak demand. The reserve margin varies by region. More info here [pdf].

** Margin from the Adjusted Potential Capacity Resources (APCR) reserve method [pdf].

In general, the planned and excess capacity is in the right regions to cover the loss in old generating capacity.

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