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A new Congressional Research Service (CRS) report says utility industry claims that pending Environmental Protection Agency rules for power plants will create an economic “train wreck” are exaggerated.  The August 8 CRS report states:

Because EPA has yet to propose or finalize many of its clean air regulations, industry-sponsored studies predicting economic calamity effectively underestimate the complexities of the regulatory process and overstate the near-term impact of many of the regulatory actions.

The costs of the rules may be large, but, in most cases, the benefits are larger, especially estimated public health benefits.  Regulations are likely to change in the coming months and, once finalized, facilities will have “several years before being required to comply.

The studies sponsored by industry groups (EEI and NERC) were written before EPA proposed most of the rules whose impacts they analyze, and they assumed that the rules would impose more stringent requirements than EPA proposed in many cases.

The primary impacts of many of the rules will largely be on coal-fired plants more than 40 years old that have not, until now, installed state-of-the-art pollution controls. Many of these plants are inefficient and are being replaced by more efficient combined cycle natural gas plants, a development likely to be encouraged if the price of competing fuel — natural gas — continues to be low, almost regardless of EPA rules.  Many utilities have installed the necessary technology to comply with the regulations...those plants costs will be minimal.

In reality, evaluating regulatory impacts, compliance costs, and possible retirement decisions depends on facility-specific considerations — micro, not macro. Utilities and states will be affected differently. There is a substantial amount of excess generation capacity at present, due in part to the recession and also due to the large number of natural gas combined cycle plants constructed in the last decade, muting reliability concerns.
Congressional Republicans and GOP presidential candidates are ringing the 'train wreck' bell about EPA regulations aimed at reducing greenhouse gas emissions and other air pollutants. House Marjority Leader Eric Cantor (R-VA) is leading the effort to block or delay the rules. But CRS says the public health benefits of the regulations — which EPA says would prevent thousands of premature deaths and illnesses — outweigh the costs.

The report analyzes studies by the Edison Electric Institute and the North American Electric Reliability Corporation that say EPA’s regulations amount to a “train wreck” that will hobble the economic recovery. EPA opponents have long pointed to the studies in objecting to the rules.

The report also dismisses concerns that the regulations will result in the shuttering of coal-fired power plants. American Electric Power and other utilities have said the pending rules will force the closure of plants.

The report says that industry studies go about evaluating the costs of EPA rules all wrong. The studies can’t accurately predict costs on a national or regional level because they are site-specific, the report says. (GPACE, 8/19/2011)