This proposal is one more step in the administration’s policies designed to eliminate low-cost and reliable electricity and replace it with more expensive and less reliable sources. Reducing the diversity of our nation’s electricity supply and raising its costs will create a structural barrier for our economic recovery and future growth. Our manufacturing base will become less competitive because of higher electricity and natural gas prices, putting an incipient U.S. manufacturing renaissance at risk. Families will have less disposable income as they spend more to light, cool and heat their homes. Not just coal communities, but seniors, families on fixed incomes, and lower-income Americans will be hit the hardest.

These bad results spring from bad assumptions. The EPA’s proposal is based on a complex web of largely implausible assumptions called “building blocks” in EPA speak. And these rest on a weak foundation. For example:

  • Increase efficiency at coal base-load power plants: Most of the 6% efficiency gain the EPA assumes comes from routine operation and maintenance practices, which are already taking place since they make a power plant more profitable. The EPA doesn’t need to show utilities how to make more money.
  • Re-dispatching from coal to natural gas power plants: The EPA assumes that natural gas power plants can run at a 70% capacity factor — without any technical or economic evidence to back that up.
  • Increased deployment of intermittent generation sources: The growth of renewable generation is highly dependent upon permitting, financing, transmission access and technical challenges. Renewables are called “intermittent” for a reason.
  • Energy efficiency: The EPA’s assumption of 1.5% growth in energy efficiency year-over-year exposes the enormous gap between its wishes and reality. The lowest cost efficiency measures are already in use, leaving only more expensive ones.

 

As each “building block” crumbles, it places additional pressure on the remaining ones and takes the EPA’s plan from the implausible to the impossible. The EPA promises the states “flexibility” but, in fact, binds them into an “energy straightjacket” with each adjustment more painful economically and more risky for system reliability.

The flexibility states need is a diverse and reliable generation mix — precisely what the EPA takes away when it takes coal away. The agency ignores warning signals that grid reliability is already at risk, thanks to power plant retirements triggered by its rules issued two years ago. This winter, coal-based power plants supplied 92% of the incremental demand for power. What will happen a year or two from now during another cold winter when many of those plants are closed due to the EPA’s earlier rules? An analysis performed by Energy Ventures Analysis shows:

  • Wholesale power prices would rise 27-55% across different regions of the country. No state is spared.
  • Businesses and households would pay $35 billion more for natural gas.
  • Another cold winter followed by a warmer than usual summer would cost consumers $100 billion in higher electricity and natural gas prices.

 

And this is all without the current proposal for carbon dioxide that will surely result in more retirements.

Much is still unknown about this climate rule and how it can be implemented, but one thing is already certain: the costs and the risks are real and substantial; the benefits are not. NMA urges the EPA to withdraw it.