A new analysis from the federal government’s energy statisticians finds the Obama administration’s plan to reduce the power sector’s heat-trapping carbon emissions would raise electricity prices 4.9 percent above their current trajectory by 2020.
The Energy Information Administration will release projections today that the draft rule would spur a quick wave of coal plant retirements — 90 gigawatts, rather than 40 GW, between 2014 and 2040. Most of the power plant retirements would happen by 2020, when the first requirements for emissions reductions begin.
EIA says the proposed rule would require "significant investment" to handle rapidly growing supplies of wind, solar and other renewable sources of energy, including for transmission lines and other electric grid infrastructure.
Those investments, as well as the increased use of natural gas, would raise costs. Natural gas prices would go up as a result of increased consumption, but over the long term, renewables would develop, so reliance on natural gas would go back down, and so would electricity prices.
By 2030, electricity prices under the Clean Power Plan would be 4 percent higher than the business-as-usual scenario that assumes the power plant emissions limits aren’t put in place, and by 2040 they would be 2.6 percent higher.
EIA’s report is arguably the most official analysis of the Clean Power Plan’s grid impacts yet, although it includes many caveats. It follows other assessments that have shaped political debate on the rule, including from the North American Electric Reliability Corp. (NERC) and NERA Economic Consulting. NERC said the regulation doesn’t leave enough time to develop infrastructure and warned against widespread power outages. NERA projected electricity rates could increase much more — 12 percent between 2017 and 2031, when compared to NERA’s base-line scenario without the regulation.
Reliability concerns
The analysis shows the rule would shift generation away from baseload coal, nuclear and hydropower, which are located on-site, and toward natural gas, which requires real-time fuel delivery, and renewables, which are intermittent.
For example, the Mid-Atlantic region’s share of on-site power would decline from 71 percent in 2013 to 65 percent in 2020 and 47 percent in 2030, under EIA’s main case for examining the Clean Power Plan. Real-time fuel, like natural gas, would increase from 27 percent in 2013 to 46 percent in 2030. Intermittent fuel would increase from 2 percent to 7 percent.
Those shifts are what critics have said might cause electric reliability concerns. But EIA notes that the model the analysis used (the NEMS Electricity Market Module) isn’t suitable for conducting a formal reliability analysis for a number of reasons.
"There are several ways to mitigate potential issues that may arise from increased reliance on generation using real-time fuels and intermittent renewable generation," EIA added. "For example, regulators may encourage natural gas-fired generators to secure firm pipeline capacity or to reduce or eliminate situations in which insufficient natural gas is available to meet both heating and generation requirements on the coldest days."
The costs of these changes, however, are not reflected in the report and "would likely be borne by electricity consumers," EIA says.
EIA’s report, which comes less than three months before the rule is expected to be finalized, raises concerns that may be addressed in comprehensive energy legislation being crafted in both chambers of Congress.
Bills being assembled in the House and Senate are still taking shape, but key lawmakers in both chambers have emphasized infrastructure needs among the most important aspects of the package. Proposals include setting deadlines on environmental reviews associated with the construction of natural gas pipelines and allowing them to be more easily built across public lands.
Lawmakers also are debating whether to expand the Federal Energy Regulatory Commission’s authority to ease siting of interstate electric transmission lines and how local regulators should evaluate the contributions of distributed generation sources, such as rooftop solar panels in net-metering rate cases.
The House Energy and Commerce Committee is expected to have its energy bill to the House floor by the end of July. The Senate Energy and Natural Resources Committee also hopes to have a bill out of committee before the August recess. It remains to be seen when floor action could come to the upper chamber.
Coal takes a hit
Coal interests are likely to use the report to bemoan the Clean Power Plan’s destructive impacts on the sector.
Without the Clean Power Plan, EIA predicted in April that coal use could see some increases by 2040. It said demand from existing plants could help coal use grow from 925 million short tons in 2013 to 988 million short tons in 2040 (E&ENews PM, April 14).
EIA found in its new analysis that coal production would be 20 percent lower in 2020 and 32 percent lower in 2030 if the Clean Power Plan were implemented.
Higher-cost Appalachian coal production — which has been in decline for years — would drop "sharply" after 2019. While Illinois Basin and Western coal mines are also taking a hit, they do better than Appalachia under the Clean Power Plan and make some gains as demand stays level or increases at remaining coal plants. Still, they don’t recover to their 2013 production levels.
Coal-fired generation under the Clean Power Plan would be 27 percent lower than the business-as-usual case by 2030. Renewable generation would increase over time and would be 53 percent higher than the base line by 2030, according to EIA.
Natural gas-fired generation would be 24 percent higher than the base line by 2020, but it would drop back down to near the base-line level by 2030 due to growing reliance on renewable power. Those figures are highly dependent on supply conditions, EIA said.
Does nuclear see a bump?
EIA didn’t examine the Clean Power Plan’s projected impacts on each state but instead treated the modeling tool’s 22 regions as Clean Power Plan compliance regions.
In addition to the main Clean Power Plan case, the analysis considered three additional scenarios.
One assumed the Clean Power Plan would change to count generation from currently unplanned nuclear capacity toward compliance. In that case, nuclear generation would rise.
In another case, EIA looked at the impacts of extending CO2 reduction targets to cut emissions 45 percent below 2005 levels by 2040 — rather than 30 percent below 2005 levels by 2030. In that case, electricity prices would be 6 percent higher than the base line in 2040, rather than 2.6 percent higher.
The last case assumed that biomass is assigned an emissions rate under the rule, rather than being counted as carbon-neutral.
EIA noted the document is "not a cost-benefit analysis" that considers health and environmental benefits. The agency said its model could not account for many factors, and there is still considerable uncertainty surrounding the proposed rule.
Reporter Jenny Mandel contributed.
