The U.S. needs more electricity. But by discouraging critical investment, the EPA’s new rule seeking to limit power plant emissions will make it hard to keep the lights on – while raising energy costs and doing little for the environment.
It is widely accepted that we are in a time of rapidly increasing demand for electricity. Whether it’s for electric vehicles, heat pumps, kitchen appliances, onshoring of manufacturing, crypto, or artificial intelligence, it’s clear that the United States will need to increase its ability to produce electricity. Simultaneously, we continue to see the retirement of older, dispatchable power plants that rely on a physical asset (like natural gas, coal, or oil) to generate electricity, which diminishes our country’s ability to produce electricity at a time when we are relying to a greater extent on favorable weather conditions for power.
Given this contradiction, it would seem logical for policymakers and regulators to encourage investment in new dispatchable assets; however, what we see from the Environmental Protection Agency (EPA) in its new power plant emissions rule is exactly the opposite. In short, this rulemaking will further erode electric grid reliability while likely raising prices (a particularly regressive public policy) and increasing GHG emissions.
CCS Is Promising, But Not There Yet
Numerous third parties point to carbon capture and sequestration (CCS) as a wonderful Best System of Emissions Reduction (BSER). These voices highlight advances in CCS technology and numerous pilot and demonstration projects already underway as proof that CCS technology at the point of production is viable. EPSA doesn’t necessarily disagree. A cursory look at companies that have operated commercial scale power plants in the U.S. with CCS technology, received U.S. Department of Energy awards for CCS, or invested private capital in CCS demonstrates that EPSA members are national leaders in CCS.
What the EPA fails to acknowledge is what happens after the CO2 is captured. In multiples sets of comments to the EPA, EPSA has highlighted the openly hostile posture in many communities, counties, and states – on both the political right and left – to CO2 pipeline development. It is a fallacy to believe that pipeline development, which is out of the hands of merchant generators like EPSA members, will be successful in the timeframes envisioned, and EPSA has identified for the EPA several CO2 pipeline proposals already derailed due to regulatory opposition. Further, the track record of the EPA approving Class VI wells leaves much to be desired, and how useful is a CO2 pipeline if you can’t store the carbon in an appropriate geological repository? Pipeline and storage development are not trivial or petty issues – they represent potentially insurmountable hurdles at a time when the federal government should be removing hurdles and barriers to investment in new dispatchable resources.
Unintended Consequences
The net result of this rulemaking is not pretty. When investment in new, more efficient capacity is denied, grid operators become more reliant on existing (i.e. older) capacity to keep the lights on, assuming excess capacity exists. If excess capacity does not exist, and new entry is denied during times of generator retirements, reliability suffers.
However, if there is excess capacity, the price of the marginal resource remains higher than it would if new, more efficient entry is allowed. Preventing new, competitive investment from reducing the marginal price is a lost opportunity to reduce the burden on ratepayers.
Further, relying on older resources to maintain reliability is not only more expensive, but likely will raise the overall emissions profile. While a facility built decades ago can help keep the lights on, it likely does so at a less efficient heat rate than a new combined cycle natural gas plant. Preventing investment in new power plants will potentially diminish reliability, have an adverse impact on prices, and likely not reduce emissions.
Renewables Can’t Go It Alone
EPSA is mindful of arguments that our nation should only be building renewable energy assets and battery storage to meet our capacity needs. EPSA members are some of the nation’s leading investors in wind, solar, and storage. EPSA members are also mindful that, while renewable energy will continue to comprise a greater share of our nation’s overall electricity production, the volatility between the maximum and minimum output (zero) of renewable energy demands dispatchable resources that operate independent of the weather.
No amount of wishful thinking on the part of anti-fossil voices can alter the reality that, even as natural gas generation becomes a reduced share of annual electricity production, natural gas will remain vital during peak periods – particularly when conditions are unfavorable for solar generation (i.e., when it is cloudy or nighttime, or solar panels are covered in ice and snow) or wind production.
Toward Shared Goals
EPSA shares the EPA’s overarching goal of encouraging a cleaner and more efficient electric grid. Our Policy Principles support efforts to combat climate change through transparent, open, and nondiscriminatory competitive markets that allow all resources to compete to reduce emissions. And today electric power is leading the energy sector in emissions reductions. Unfortunately, this rulemaking doesn’t grasp the realities of the basic components needed to successfully construct a CCS regime and the larger concepts of how electric grids operate. It is disappointing that in crafting this rule, the EPA chose not to listen to actual owners and operators of power plants but rather to those with priorities that overlook energy reliability, affordability, and sustainability.
