Friday, September 27, 2013

EPA Regulations of New Coal-fired Power Plants

I've been dilatory in blogging about EPA's newly proposed regulations that would, in effect, force all new coal-fired power plants (but not power plants burning natural gas) to install moderately expensive carbon-capture-and-sequestration (CCS) technologies. Frankly, I haven't yet found the time to read through the entire proposed rule (here) or its Regulatory Impact Statement (here). But you can read an concise fact sheet about the new rule, here.

What I can say about the new rule at this point is that the cost-benefit analysis part of the Regulatory Impact Statement seems unusually skimpy and reaches the following rosy conclusion that does not seem very strongly supported by the analysis:
5.12 Summary of Costs, Benefits, and Energy Impacts
Under a wide range of electricity market conditions – including EPA’s baseline scenario as well as multiple sensitivity analyses – EPA projects that the industry will choose to construct new units that already meet these standards, regardless of this proposal. As a result, EPA anticipates that the proposed EGU New Source GHG Standards will result in negligible CO2 emission changes, energy impacts, benefits or costs for new units constructed by 2020. Likewise, the Agency does not anticipate any notable impacts on the price of electricity or energy supplies. Additionally, for the reasons described above, the proposed rule is not expected to raise any reliability concerns, since reserve margins will not be impacted and the rule does not impose any requirements on existing facilities.
The presumption that the energy industry will choose to deploy CCS technologies by 2020 regardless of this proposed rule strikes me as beyond presumptuous. And I say that as someone who strongly supports the need for substantial curbs on CO2 emissions from new as well as existing sources.

I also believe the DC Circuit could well overturn the rule on the issue of whether CCS technologies are "available." Little doubt exists that CCS works in theory, and the cost should not be unbearable either for electricity producers or for consumers (especially since most new plants are being built to burn natural gas, which would not require the installation of CCS technology). However, there has been little demonstration of CCS in practice, and a reviewing court could well conclude that the lack of demonstration projects indicates that CCS is not ready for industry-wide regulatory imposition. But it's worth bearing in mind, I wrongly predicted that the DC Circuit would overturn EPA's earlier "tailoring rule" for greenhouse gas emissions (see here).

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