EPA Rules Hit Target, Produce Casualties

A wave of EPA regulations aimed at degrading coal-fired capacity in the United States is beginning to hit home. According to a recent media report, “a record-high 57 generators will shut down in 2012, representing 9 gigawatts of electrical capacity.” Most of the coal-fired plant closures are expected to occur in the Mid-Atlantic, the Ohio River Valley, and the Southeast.

The news is based on the broader findings of a recent study by the U.S. Energy Information Administration (EIA) that found power plant owners and operators expect to retire nearly 27 gigawatts of coal-fired capacity in the next five years. That is 8.5% of all coal-fired capacity in operation today, much of which provides base-load power to American industries and homes.

Coal plants retire all the time, though, when retrofitting them becomes too expensive or when more efficient units come online. So what’s the big deal, you might ask? Let’s put those closures in context.

According to EIA data, the past five-year period saw only 6.5 gigawatts of coal-fired retirements. Compare that to the 9 gigawatts that will be shuttered in 2012 alone. Looked at another way, four times as many coal plants will close in the next five years as closed in the previous five years. That is a huge blow to the nation’s power production.

There will be those, of course, who argue that stagnant power demand and low natural gas prices, not EPA regulation, are to blame. But power providers have seen dips in demand in years past and natural gas prices have been low before. And for what it’s worth, EIA singles out regulatory policy as a factor conspiring to shut down one of our most stable sources of power.

“The cost of compliance with anticipated and existing Federal environmental regulations such as the Mercury and Air Toxics Standards (MATS) is a factor,” the EIA notes. “Particularly in the case of older, smaller units that are not used heavily, owners may conclude it is more cost efficient to retire plants rather than make additional investments.”

The truth is that many operators would have closed these plants eventually, on a timeline when new, state-of-the-art efficient plants could provide replacement capacity and when long-term planning could minimize the impact to ratepayers. Instead, federal regulations have accelerated this process, forcing operators to prematurely close plants not likely to comply with aggressive new rules. Faced with a short decision-making window, utilities must use whatever options are available, not necessarily the options that would have been in the best interest of their customers in the long-term, had they been provided more time.

There will be those, too, who celebrate these closures. We’re thinking specifically about the Sierra Club with its Beyond Coal campaign. Coal-fired plant closures, in their view, are justified casualties in the war to “save the environment,” notwithstanding two decades of remarkable decreases in major emissions and an overall dip in carbon dioxide emissions. Like isolated Japanese soldiers who didn’t know World War II had ended, many in the environmental industry continue to behave as if the war rages on. Despite convincing evidence that environmental gains and economic growth can exist alongside one another, they wage total warfare because they know nothing else.

The problem is that this war also produces collateral damage. Every time regulations make a coal-fired plant too expensive or too cumbersome to operate, electricity becomes just a little more expensive to generate. Each time a gigawatt of capacity falls off the system, our national power grid becomes a little less reliable. The environmental industry doesn’t mind these outcomes, of course, but you should. In the war on coal, it is consumers who are caught in the crossfire.