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EPA's Clean Power Plan

What is the EPA's Clean Power Plan (CPP)? It is a cap and trade scheme intended to reduce emissions from existing power generators such as coal generators. It was proposed by the EPA in June, 2014, and the final rule was unveiled by President Obama on August 15, 2015. The final version of the plan aims to reduce carbon dioxide (CO2) emissions from electrical power generation to 32 percent below 2005 (not 2015) levels by 2030.

The final plan sets targets for CO2 for each state, and each state is to submit a State Implementation Plan (SIP) by 2018, assuming the state is granted an extension by the end of 2016. Failure to have a SIP approved will result in a Federal Implementation Plan (FIP). Wyoming has one of the more onerous targets, from 50 million tons of CO2 in 2012 to 32 million tons, or about 43%.

The plan is to be carried out in three stages, or “blocks”. Block one is to focus on making existing coal fired plants cleaner. Block two involves shutting down existing coal fired generation in favor of gas fired generation. Block three calls for more renewable sources such as wind and solar power.

Note the wasteful approach: first we spend money to make coal plants cleaner. Then we shut down the freshly cleaner plants in favor of natural gas. Then we replace some of those gas plants with wind turbines and solar power plants. All before their designed lifetimes end.

This will not be cheap. American Coalition for Clean Coal Electricity (ACCCE), citing a study by NERA Economic Consulting, estimates the average cost of compliance to run $41 billion to $73 billion a year after 2030. Compare that with the previously most expensive rule for power plants, the Mercury and Air Toxics Standards rule, costing $10 billion per year. Cost of compliance from 2017 to 2030 will be $366 billion to $479 billion. And where do utilities usually get the money to pay for things? From the rate payers. From you.

This is not the only estimate out there. One study estimates $2.2 trillion in “stranded assets” alone if utilities go ahead with existing plans. A stranded asset is one made useless by regulation, such as a coal fire plant which works just fin except it does not meet requirements imposed after it was designed and built, and for which upgrades would be too expensive. Stranded assets are shut down.

That is strictly the cost of compliance. Add another $560 billion consumers will shell out to cut energy consumption.

Then there's the cost of power generation. James M. Taylor of the Heartland Institute, citing the US Energy Information Administration, estimates the levelized cost of generating a megawatt hour of electricity between 2016 to 2046 will be:

Source

Cost

Natural gas

$79.3

Coal

$100.4

Nuclear

$119

Onshore wind

$149.3

Offshore wind

$191.1

Solar thermal

$256.6

Solar photo-voltaic

$396.1

Oh, and the EPA thinks the CPP will reduce our electric bills by $7 a month by 2030 due to increased efficiency. Increased efficiency? Or decreased availability due to decreased reliability? If you want to reduce the cost of electricity bills, keep fuel costs low.

Then there are the knock-on effects: higher electricity costs (despite the EPA's estimate), higher natural gas costs (possibly as much as 29%), and higher costs of other goods and services that use energy, which is all of them.

All of this will affect the poor the most. Households earning less than $50,000 a year pay a fifth of their income on energy. 67% of black households earn less than $50,000, 62% of Hispanic households earn less than $50,000. And in Montana, the Crow see it even more starkly. They want coal development to pay for jobs and community.

And meanwhile, the population will continue to grow.

So what do we get for our trillions of dollars? Stay tuned. This is the first of a series on the Clean Power Plan.

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Monday, 20 November 2017

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