November 2013

Dustin TrippRegulatory Update

Over the past several years, your Cooperative has been informing you of pending legislation and new environmental regulations that if enacted would impact the cost of generating electricity.  The most recent development occurred in September with a new proposed regulation by the U.S. EPA.

On September 20, 2013, the U.S. Environmental Protection Agency (EPA) announced proposed carbon pollution standards for coal and natural gas power plants built in the future.  In addition, the EPA announced that it is in the process of engaging with states, stakeholders, and the public to establish carbon pollution standards for currently operating power plants.

The proposed standard would require any new coal-fired generating facility to implement a technology known as carbon capture and storage (CCS).  This technology would require capturing the carbon formed during the generation process, compress it into a liquid form, and transport it via pipeline to a site suitable for injecting it underground permanently without leakage.

Given this new proposed standard, one would think that CCS technology is commercially proven and available for deployment in new coal-fired generation facilities on a cost-effective basis.  Unfortunately, that is not the case.  There are a few commercial size generation plants that are under construction and scheduled to become operational in the next few years that will attempt to utilize CCS technology.  However, numerous studies reveal that the cost of the CCS technology will be prohibitive.  Cost estimates vary widely depending upon the type of power plant, the stage of carbon capture, the type of transport system and storage type.  Given these variable, studies have revealed that the implementation of CCS technology would increase the cost of energy from a coal-fired power plant in the range of 60 to 85%.  In addition, the additional equipment required to perform CCS would decrease the plants efficiency by as much as 20 to 40%. 

Like any other new technology, the cost of CCS could come down with several years of continued research, development and implementation.  However, electric utilities are unlikely to make a decision to invest in a new plant with this new technology given the increased costs and reduction in efficiencies, especially given the current market price of alternative fuels such as natural gas.  This leaves the need for a significant amount of public sector investment to make CCS technology a cost-effective reality.  The EPA did not follow the historical standard that requires a technology to be cost-effective which will certainly lead to a court challenge that may take years to complete.

This proposed standard currently applies to future coal and natural gas generation facilities.  However, the U.S. EPA is also scheduled to release proposed carbon pollution standards for existing coal and natural gas generation facilities in June 2014 which could impact over 65% of our nation’s current energy supply and increase the cost of generating electricity.

Given the proposed standards by the EPA, it certainly appears they are trying to remove coal as a fuel source for generating electricity.  This will lead to an over reliance on natural gas as a fuel source and at some time in the near future, potentially higher electricity prices due to higher natural gas prices.  If you are concerned about these proposed standards as they are currently written, you can visit and send an email message to the EPA and urge them to pursue fair, affordable and achievable technological solutions.

See you next month and as always, "We'll keep the lights on for you."