EPRI: POWER INDUSTRY COULD SAVE BILLIONS IF EPA LOOSENS COMPLIANCE TIMELINES

Tamar Hallerman
GHG Monitor
06/01/12

The electric power generation industry could save $100 billion in compliance expenditures for a host of upcoming federal environmental regulations if the Environmental Protection Agency allows for more flexibility for its upcoming rulemakings, a new Electric Power Research Institute study says. New economic modeling from the group, which is funded by the utility industry, concludes that companies could pay $175 billion instead of $275 billion over the next 25 years to comply with EPA regulations affecting sulfur dioxide, nitrogen oxide, air toxics, cooling water intake structures and coal combustion residuals if EPA pursues a more flexible timeline that allows for two extra years of phased-in compliance. EPRI said those flexibilities would allow for more time for utilities to install pollution-control technologies, as well as for technological innovation to occur that could “dramatically” reduce costs for industry.

Two Compliance Pathways

The study is EPRI’s first using its newly-developed U.S. Regional Economy, Greenhouse Gas and Energy (US-REGEN) model of the country’s economy, which through different data points related to regional power production and demand, as well as average cost figures for expenses like retrofits, can assess the cumulative impacts of policies and regulations on the economy, according to EPRI.

In this study, EPRI evaluated two potential pathways for compliance—a ‘current course’ and an ‘alternative flexible course.’ The former assumes that EPA continues with its current compliance schedules for all its upcoming rules. EPRI predicts that approach will limit policy and technological flexibilities and will likely lead to cost escalations due to the high demand for retrofit equipment and labor. EPRI estimates that approach will cost industry approximately $275 billion through 2035, lead to roughly 61 GW of coal unit retirements and 54 GW of units that could either retire or switch to natural gas depending on market factors.

On the flexible path, which EPRI said would allow for two extra years of phase-in, the regulations would cost $175 million over 25 years but cut down retirements to 25 GW and leave 4 GW for market forces to decide. The rest of the 288 GW of coal capacity would be retrofit. That plan, according to EPRI, would allow for the same overall compliance rates but allow for less cost escalations because retrofits are more spaced out. It also would allow for more advanced pollution control technologies such as selective catalytic reduction (SCR) systems and sorbent activation processes to become more commercially available, according to EPRI. “With phased compliance, more time can facilitate testing and application of new and existing lower-cost technologies with significant savings, and with little change in overall emission reductions,” the report says.

Hank Courtright, EPRI’s senior vice president of Global Strategy and External Relations, said in a conference call with reporters this week that EPRI did a near unit-by-unit analysis of approximately 1,000 of the country’s coal units to understand the impact of the regulations on their operating futures. “We did this really to evaluate the potential for innovations for pollution control technologies in this economic framework,” he said. Courtright added that EPRI does not plan on making specific policy recommendations to agencies like EPA or the Federal Energy Regulatory Commission. “Our role has been to simply provide the information to them,” he said.