An Opportunity to Rein In the EPA
States will be faced with passing on the
costs of mandated upgrades
By Todd Snitchler
WashingtonTimes.com
In the absence of action by
Congress, the
Environmental Protection Agency (EPA)
has taken dramatic and unprecedented steps to craft
energy policy in this country by issuing new
regulations regarding carbon-dioxide emissions.
These proposed regulations represent a clear and
present danger to the stability of energy costs,
distribution and supply in the United States. It is
time for
Congress to assert its constitutional authority
and restore common sense to our energy policy and
end the
EPA’s ability to legislate through regulation.
The energy landscape in the 21st century is changing
in profound ways. Dramatic changes in environmental
law and regulations, natural-gas supply at
historically low prices and development and
deployment of distributed generation each impact
utilities, customers and suppliers.
In combination, the effect is multiplied. At the
same time, in other ways the industry remains the
same as it has been for more than a century.
Customers seek reliable, low-cost power. Utilities
seek to deliver power and make a reasonable profit
while doing so. Grid authorities continue to manage
supply across the grid and utilize transmission and
generation resources to do so. Suppliers strive to
deliver value to customers who choose their service.
In short, a broad set of changes are at hand that
will profoundly alter the energy and utility world
for generators, utilities, suppliers and customers
alike.
One of the most profound changes will come as a
result of the proposed U.S.
EPA carbon-dioxide rules for both new and
existing generators under Section 111 of the Clean
Air Act. These rules enacted by executive fiat
fundamentally alter the way in which utilities and
power generators will be able to generate
electricity.
First, the carbon-dioxide emissions limits set forth
in the new rule make clear that there will be no new
coal generation constructed in the United States.
Specifically, the rule requires the use of carbon
dioxide capture and sequestration, a technology
that, despite
EPA’s assertion to the contrary, is not
commercially viable. Recent efforts to construct new
generating facilities that comply with new emissions
rules have resulted in dramatic cost overruns and
the units are long delayed in starting operations.
The costs to construct compliant facilities are
staggering.
Second, the proposed rule restricts the amount of
carbon dioxide that can be produced from existing
power plants. These rules in combination could be
the “knockout blow” to coal-fired generation in the
United States. Today, coal-fired generation
represents more than 40 percent of all power
generated in the United States.
In real dollars, there are costs to generators, to
grid operators and to consumers for compliance. At
least two states have performed rate-impact studies,
and the potential increases could be more than 60
percent for retail customers.
In addition to carbon dioxide, there are other
EPA rules that are being developed and
implemented that will also have an impact on the
price and availability of electricity. While
industry is certainly capable of responding to
changing environmental regulations, at some point a
limit is reached both financially and technically —
and we are quickly approaching that limit.
Instead of the
EPA’s current unilateral approach, we first need
a realistic view of supply and demand. The laws of
economics will not be evaded. Supply and demand
curves will continue to intersect, just at different
places on the price curve. Unfortunately, in this
instance the intersection is certain to be at a
higher cost to consumers.
Depending on the structure of the energy
marketplace, state regulators will be faced with
passing on the costs of environmental upgrades to
existing power generators or dealing with higher
prices as supply goes off-line. At the same time,
new generation will be slow to replace the retired
units or be a more costly resource.
In the end, the wish for cheap power with no
environmental impact is truly that — a wish. Wind
has bird-kill, flicker, ice-throws and other issues;
hydro impacts fish habitat and natural river runs;
and solar has critical variability — sunshine —
storage limitations and life-cycle implications if
you consider the environmental impact of the
manufacture and fabrication of the solar panels
themselves.
So what to do about this complicated issue?
Congress must assert its constitutional
authority and address the issue. The vacuum created
by its inaction has empowered an environmental
regulator and environmental advocates to create and
implement a series of policies that should be dealt
with by our elected representatives.
American manufacturing simply is neither willing nor
able to rely exclusively on renewable energy. Steel
mills, automobile assembly lines and refineries do
not wait for the wind to blow or the sun to shine to
do their work. For now at least, storage capacity is
simply insufficient to supply the power needed at
the time it is demanded and at the requisite level
of reliability. Sufficient base-load capacity is
required, and today, coal, natural gas, and nuclear
provide nearly all of the base-load power.
Policymakers should let common sense carry the day.
Everyone favors clean air and clean water — because
we all live in the same environment. In the end, the
answers to the key questions of “how?” “how much?”
and “by when?” need to be answered honestly, fairly
and without demagoguery to ensure that policymakers
have the needed information, understand the critical
issues and points of contention and fully recognize
the ramifications of failing to exercise sound and
reasonable judgment in setting energy policy.
Policymakers then must make sound decisions in the
interest of the United States.
Congress can no longer afford to wait. The
reckless policies of the
EPA — enacted in the vacuum created by
congressional inaction — threaten the very stability
of our electricity grid. The time to act is now.
Todd Snitchler is a member of the Mc-Donald
Hopkins business department counseling clients on
energy policy and regulatory matters.