Many coal-fired electricity generating plants may be vestiges of the past – that is if the U.S. Environmental Protection Agency (EPA) has its way. Disappearing with them would be some of the lowest cost electricity in the region.
The EPA is proposing several regulations that would accelerate the retirement, or shutting down, of many coal-fired power plants. These rules would require existing power generators to either install extremely expensive environmental controls at existing plants or retire them. Sound good? It depends on your point of view.
Coal-burning plants are part of the backbone of our nation’s generation fleet and are the source of much low-cost electricity. They comprise about 45 percent of the generation nationally and about 40 percent of the generation that we use here in Southern Maryland. The EPA rules for reducing coal plant emissions would require significant investment to upgrade plants that do not comply with the emissions standards. It is estimated that this could cost the electricity generation industry from $60-120 billion by 2018.
With such significant costs, the proposed EPA rules would likely affect the capital asset decisions made by generating plant owners, as well as their financial condition, their credit quality and cost of borrowing. On balance, owners may find it economically preferable to retire the plants.
The key EPA rulemaking proceedings that could result in coal plant retirements or forced retrofits are the Clean Air Transport Rule (which regulates NOx and SO2), the Tailoring Rule and Guidance on Best Available Control Technology (which regulates greenhouse gases), the Coal Ash Disposal Regulation, the Hazardous Air Pollutant/Mercury Rules, and the Cooling Water Rules. ACES Power Marketing (APM), SMECO’s agent for purchasing power, evaluated the potential impact of these rules and consider 234 coal units in the Eastern Interconnection (the power grid of roughly the eastern half of the U.S.) and 61 units in the PJM Interconnection (the power grid extending roughly from Chicago to Maryland, Delaware and New Jersey) to be at risk of forced retirement. Based on this estimate, APM suggests that power prices throughout the Eastern Interconnection may be expected to increase by an average of 5 percent by 2014 and 15 percent by 2018.
The price of electricity may not be the only victim – reliability of the bulk power system may also suffer. As plants are retired, the generation capacity to meet the demand for electricity will be reduced, and so will the reserves available to back up plants that experience outages during the course of a year. Without back-up, the likelihood that demand will exceed the available supply (especially in times of peak usage) becomes more real.
We all value clean air and water, and we need to do what we can to ensure that they are there for generations to come. Despite its size, though, America is but a small piece of the clean air and water puzzle and many experts agree that significant impact can be achieved only through a thoughtful, coordinated global effort. But as America moves forward, either through these proposed EPA rules or something else, our national effort comes with a price tag. The first may be the retirement of low-cost coal plants. And that, too, comes with a price.
