Fox Reports Claim That 20% Of “America's Electricity Generating Capacity” Will Come Offline

Kelly Reported Claims That EPA Rules Threaten “A Fifth” Of U.S. Electric Capacity And “Will Lead To Widespread Power Outages.” From the August 24 edition of America Live:

MEGYN KELLY, HOST: Coal industry groups sounding the alarm today that a fifth of America's electricity generating capacity is about to be taken offline thanks to new federal regulations. They say that this will lead to widespread power outages, rolling blackouts, job losses, and skyrocketing energy costs.

Now, this all stems from EPA rules requiring coal companies to slash emissions, and soon. Supporters of those rules cite huge health gains and public safety as justification. But critics are warning it may do more harm than good. [Fox News, America Live, 8/24/11]

Kelly's Claim Echoes Other Conservative Media. On August 22 both the New York Post and Investor's Business Daily outlandishly claimed that the EPA's Cross-State Air Pollution Rule alone could result in the loss of “a fifth of the nation's generating capacity.” [Media Matters, 8/23/11]

In Fact, Fox Is Vastly Overstating Even Industry's Worst Case Estimates

Edison Electric Institute: EPA Regulations Would Retire Up To 18.8 Percent Of “Coal-Fired Electric Capacity.” An analysis by the Edison Electric Institute, which represents electric utilities, concluded that new EPA regulations “would cause the unplanned retirement of 17 to 59 gigawatts (GW) of coal-fired electric capacity (5.4% to 18.8% of the current coal-fired total of about 315 GW) by 2015.” [Congressional Research Service, 8/8/11]

• EEI's Worst Case Estimate Represents 5% Of U.S. Generating Capacity. According to EEI, “the U.S. electric power industry's total installed generating capacity was 1,119,673 megawatts (MW) [1119 GW] as of December 31, 2009.” Retirements of 59 GW of coal-fired capacity would therefore represent 5% of total U.S. generating capacity. [Edison Electric Institute, accessed 8/25/11]

North American Electric Reliability Corporation: EPA Rules Could Result In “A Loss Of Up To 19 Percent Of Fossil Fuel-Fired Steam Capacity.” NERC, an industry group focused on reliability, estimated that the cumulative effect of new EPA rules on power plants “could make 46-76 GW of existing capacity 'economically vulnerable' for retirement or derating by 2015.” The analysis also said the EPA rules could result in “a loss of up to 19 percent of fossil fuel-fired steam capacity in the United States by 2018.” [North American Electric Reliability Corporation, October 2010]

• NERC's Worst Case Estimate Represents 6.7% Of U.S. Generating Capacity. Based on EEI's statement that total U.S. generating capacity is 1119 GW, NERC's high-end estimate of a potential loss of 76 GW represents 6.7% of total electric capacity.

Independent Reports Point Out “Misleading Assumptions” In Industry Estimates

CRS: Industry Claims “Reflect Assumptions ... That Differ Significantly From What EPA Actually May Propose.” A Congressional Research Service report evaluated EEI's and NERC's analyses of the impact on the electricity sector and concluded:

The EEI and other analyses discussed here generally predate EPA's actual proposals and reflect assumptions about stringency and timing (especially for implementation) that differ significantly from what EPA actually may propose or has promulgated. Some of the rules are expected to be expensive; costs of others are likely to be moderate or limited, or they are unknown at this point because a rule has not yet been proposed. Rules when actually proposed or issued may well differ enough that a plant operator's decision about investing in pollution controls or facility retirement will look entirely different from what these analyses project.

[...]

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 in the price of competing fuel--natural gas--continues to be low, almost regardless of EPA rules. [Congressional Research Service, 8/8/11]

Review Of EEI Report Found It Was Based On “Misleading Assumptions” That Never Occurred. From a review of the Edison Electric Institute report by the Analysis Group, an economic consulting firm:

This peer review analysis evaluates the Report's findings in light of the actual proposed Utility Air Toxics and cooling water intake regulations which the Environmental Protection Agency (“EPA”) released in March 2011, two months after EEI issued the Report. We conclude that the Report was based upon worst-case assumptions which have not materialized and upon climate change legislation never enacted into law.

The Report does not adequately distinguish between the non-environmental drivers of changes in the electricity industry and the various EPA rulemakings. There is also inadequate discussion of the non-traditional alternatives available to meet system requirements, or of various initiatives underway to strengthen the resiliency and reliability of the electricity network. The Report's excessively conservative and often misleading assumptions affect EEI's modeling results.

[...]

Although not apparent from the labels used for the different scenarios, all of the facility retirement scenarios contain one or more of the following assumptions that were unreasonable at the time that EEI's consultants conducted their study: (1) that the Waxman-Markey climate change bill passed both houses of Congress, despite the fact that the legislation failed over ten months ago; (2) that EPA would impose a one-size-fits-all cooling tower requirement on U.S. power plants over the course of the next decade, despite the fact that EPA Administrator Jackson confirmed in an December 16, 2010 letter to Congress that EPA rejected a one-size-fits-all approach (a position that now can be seen in the new regulations proposed in March 2011); or (3) that industry could not use less costly, alternative technologies and resource options to reduce air toxics emissions despite the fact that many coal plants already do use these technologies and many utilities now use different options to meet customers' reliability requirements. [Analysis Group, May 2011, emphasis original, in-text citations removed for clarity]

Reports: Coal Plant Retirements Do Not Necessitate Blackouts

CRS: Old, Dirty Coal Plants Will Be Replaced By Natural Gas. The CRS report noted that “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 gas combined cycle plants constructed in the last decade, muting reliability concerns.” The report also stated:

The units that would retire are the least economic and/or those currently operating with minimal pollution controls. As noted in Figure 5, there are 110 GW of coal-fired plants (about one-third of all coal-fired capacity) that began operating between 1940 and 1969, and two-thirds of these plants do not have scrubbers. These are the prime candidates for retirement.

In many cases, these older plants are not base-load plants, so their significance as a percentage of coal-fired generation is less than one might assume from adding up their nominal capacity. In a presentation to congressional staff, Sue Tierney, a formal Assistant Secretary of Energy, presented data showing that the pre-1970 units operating without emission controls are in use only 41% of the time.

[...]

Some of these units will be replaced by new capacity, of which some will be coal-fired, but most replacements are likely to be natural gas combined cycle units. Even before the advent of the “train-wreck” rules, very few coal-fired plants were being built. As shown in Figure 6, since 1990, more than 80% of new capacity has been natural gas-fired. These plants are highly efficient; they are cost-competitive with coal; and they emit no SO2, no mercury, and no other hazardous air pollutants.

[...]

In short, the “train wreck” facing the coal-fired electric generating industry, to the extent that it exists, is being caused by cheap, abundant natural gas as much as by EPA regulations. As John Rowe, Chairman and CEO of Exelon Corporation, recently stated: “These regulations will not kill coal... In fact, modeling done on the impacts of these rules shows that up to 50% of retirements are due to the current economics of the plant due to natural gas and coal prices.” [Congressional Research Service, 8/8/11]

FBR Capital Markets Analysis: Retirement Of 45 GW Would Have Little Effect On Reserve Power. From the CRS report:

In the early 2000s, in response to the NOx SIP Call, the industry installed 96 GW of SCR in a five-year period while successfully maintaining system reliability. This was a “much more capital and manpower intensive effort” than the Utility MACT will be, according to David Foerter, the group's Executive Director.

If necessary, as shown in Figure 6, the industry is capable of adding new generating capacity in a short time. From 2000-2003, electric companies added over 200 GW of new capacity, far more than any of the analyses suggest will be needed in the 2011-2017 timeframe.

A December 2010 analysis by FBR Capital Markets concluded that even the incremental retirement of 45 GW by 2014 (which appears to be more than EPA's rules will effect) would have little effect on electricity reserve margins: “Summer reserve margins are currently 26% across the U.S. and are likely to decline only to 24% by 2014 in a draconian scenario in which 45 GW of generation is retired.” FBR offers the caveat that electricity reserve margins are a regional, not a national matter; but its analysis of eight NERC regions found reserve margins of 16.8% to 37.8% under its “draconian” 2014 scenario.

Other studies suggest that proper planning can prevent a train wreck, even in worst-case scenarios. Much depends on whether individual utilities have already begun planning for the implementation of the rules, including lining up engineers to design modifications, and conducting preliminary discussions with permitting authorities and grid operators regarding the required steps. [Congressional Research Service, 8/8/11]

Bipartisan Policy Center: “Scenarios In Which Electric System Reliability Is Broadly Affected Are Unlikely To Occur.” A Bipartisan Policy Center report on the impact of EPA regulations on electric system reliability identified tools available to address localized reliability risk. The report also stated:

BPC analysis indicates that scenarios in which electric system reliability is broadly affected are unlikely to occur. Previous national assessments of the combined effects of EPA regulations reach different conclusions, in part because they make quite different assumptions about the stringency and timing of new requirements and about the availability and difficulty of implementing control technologies. In some cases these assumptions deviate from the specifics of EPA's recent proposals in meaningful ways. Moreover, market factors, such as low natural gas prices, are as relevant as EPA regulations in driving coal plant retirements. [Bipartisan Policy Center, 6/13/11]

CRA Study: “Electric System Reliability Can Be Maintained” With Clean Air Transport Rule And Utility MACT Rule. From a 2010 report by Charles River Associates assessing EPA's Clean Air Transport Rule and the proposed regulation of toxic air pollutants from coal and oil fired power plants:

[W]e conclude that electric system reliability can be maintained while the industry complies with EPA's air regulations. The number of projected coal plant retirements nationwide is relatively small compared to historical US net additions of generation capacity, and the electric sector has demonstrated repeatedly the ability to expand the generation fleet at a rate well in excess of projected capacity needs. Although we predict that a handful of areas will have de minimis or modest shortfalls due to predicted retirements, adequate reserve margins can be maintained by better utilizing existing supply capacity, installing new generation, and increasing load management. Additionally, existing federal statutory, state regulatory, and regional transmission organization (RTO) market safeguards can be utilized to maintain a reliable electric system. [Charles River Associates, 12/16/10]

M.J. Bradley & Associates Report: “Without Threatening Electric Reliability, The Industry Is Well-Positioned” To Meet EPA Requirements. From a report conducted by M.J. Bradley & Associates for the Clean Energy Group:

In this paper, we highlight the impact of EPA's upcoming air regulations, with a focus on the issue of possible power plant retirements on electric reliability. We conclude that, without threatening electric reliability, the industry is well-positioned to respond to EPA's proposed road map to “help millions of Americans breathe easier, live healthier,” provided that EPA, the industry and other agencies take practical steps to plan for the implementation of these regulations and adopt appropriate regulatory approaches. [M.J. Bradley & Associates, August 2010]

Power Company Execs: “For Over A Decade, Companies Have Recognized That The Industry Would Need To Install Controls.” In a letter to the editor of the Wall Street Journal, executives representing several major power companies stated:

Your editorial “The EPA Permitorium” (Nov. 22) mischaracterizes the EPA's air-quality regulations. These are required under the Clean Air Act, which a bipartisan Congress and a Republican president amended in 1990, and many are in response to court orders requiring the EPA to fix regulations that courts ruled invalid.

The electric sector has known that these rules were coming. Many companies, including ours, have already invested in modern air-pollution control technologies and cleaner and more efficient power plants. For over a decade, companies have recognized that the industry would need to install controls to comply with the act's air toxicity requirements, and the technology exists to cost effectively control such emissions, including mercury and acid gases. The EPA is now under a court deadline to finalize that rule before the end of 2011 because of the previous delays.

To suggest that plants are retiring because of the EPA's regulations fails to recognize that lower power prices and depressed demand are the primary retirement drivers. The units retiring are generally small, old and inefficient. These retirements are long overdue. [Wall Street Journal, 12/8/10]