In terms of the political calculus, GHG regulation faces an uncertain future, at least into 2013. And as a flood of cheap gas erodes the perception of an impending environmental crisis,...
EPA's Winding Road
How we got here and what to expect.
would be enacted at the state level, requiring no federal permits. Lawmakers in the House have introduced two separate bills as an attempt to block the EPA’s ability to regulate CCRs under subtitle C. The EPA decided in April that it would allow a new period of public comment on the analysis it has collected regarding CCR regulation after stakeholders’ criticism that it didn’t properly weigh risks and economic impacts. The EPA has estimated that CCR regulation would cost between $600 million and $1.5 billion annually and wouldn’t result in any additional retirements.
• Cooling Water Intake Rule: The EPA’s proposed rule for cooling water intake establishes an upper limit for impingement—when fish are trapped against an intake screen—and establishes a process to determine best technology available (BTA) for entrainment—when fish are pulled through intake screens. The rule will affect 1,200 operating coal-fired units, 150 oil-fired units and less than half of the existing nuclear fleet’s units, where intake flow is greater than 2 million gallons per minute. The final rule is scheduled to take effect in July 2012 and will require implementation of mitigation technology for impingement within eight years of the rule coming into effect, while the requirements for entrainment will be based on the timing of the permitting authority review and recommendation process. The EPA estimates that this rule will result in 9 GW of retirements of primarily older oil and gas-fired steam units and an annual total compliance cost of $400 million.
Intended and Unintended Consequences
No doubt these new EPA regulations have the potential to significantly improve the quality of our air and water. However, how these goals are achieved and what impact they have on the power generation industry— e.g., generation investments, emission prices, etc.—remains unanswered.
Based on extensive and ongoing research, as well as advanced modeling applications, forecasts suggest the new regulations will have some potential unintended consequences. For instance, the new EPA regulations would require electricity generators to make decisions on the individual unit level. EPA regulators most likely anticipate that these new rules will result in increased investment in scrubbers, instead of other “clean coal” technology such as carbon capture and sequestration. However, with the layering on of multiple regulations, the costs can rapidly add up for coal units and likely result in their retirement rather than retrofitting. In fact, based on our latest research, approximately 8,000 MW of coal-fired generation capacity has been retired in the U.S. in the last five years, and generators have announced they plan to retire another 17,000 MW over the next five years. Announced retirements are due to a combination of low gas prices and uncertain EPA regulations.
Additionally, with no price signal for the development of carbon capture and sequestration, emissions of CO 2 may be reduced to a certain extent. However, they will almost certainly not be reduced as much as they would have under a national CO 2 cap-and-trade scenario with established caps and set emission prices.
Furthermore, with NO x and SO 2 caps, regulators have basically set the level of emissions