DOE Report Rejects the Notion EPA Emissions Standards Will Create Deficit in Power Supply

On Thursday the U.S. Department of Energy (DOE) released a report concerning the effect and impact of recently proposed emission standards set forth by the Environmental Protection Agency (EPA).

The aptly named, Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations report [pdf] assessed the adequacy of U.S. electric generation under air pollution regulation being finalized by the EPA. Specifically the report looked at the feasibility for utilities to meet the Cross-State Air Pollution Rule (CSAPR) and the Mercury and Air Toxics Standards (MATS) under the time frames set under the new regulations. Here's a brief look at the new standards and when they will be implemented:

Proposed in July, CSPAR will require 27 states in the eastern half of the country to reduce power plant emissions that the EPA says are drifting across state lines and creating health risks in neighboring communities. Beginning January 2012, sulfur dioxide (SO2) and nitrogen oxide (NOX) emission reductions will take effect.

Proposed in March, MATS coal and oil-fired power plants will be required to install pollution controls to cut not only mercury emissions but also arsenic, chromium, nickel and acid gases. The first year of compliance for MATS is 2015.

Since announcing the standards the EPA has come under considerable fire from not only power generators and utilities but also the coal industry and trade organizations. 

Weeks after MATS was proposed the Electric Reliability Coordinating Council (ERCC) said the proposed rules could be the most expensive in the EPA’s history joining the clamors of the National Mining Association and the Public Service Company of New Mexico. In May, ICF International Inc. released a study claiming the new regulations and standards could result in the closure of 50 GW of coal fired plants over the next 10 years.

These warnings have been the actions of utilities--several have announced planned closures of coal power plants.  For example, after CSAPR was finalized Duke Ohio said that due to the new regulations it was planning on retiring six coal-fired units that have a combined generating capacity of 862 MW. In August, Southern Company said that EPA rules would cause the company to spend between $13 billion and $20 billion to retire, upgrade, change fuel and install emission controls on its coal fleet over the next eight years.

On top of the economics of the restrictions, the time frame laid out by the EPA is also being attacked as unrealistic. According to Thomas A. Fanning, Southern Company chairman, president and CEO "the three-year compliance time frame of the proposed Utility MACT is much too short; [an] extension of the utility compliance time frame to at least six years, for example, would achieve the same environmental results, ease inflationary pressures, protect reliability and reduce the loss of jobs."

In its report, the DOE argues quite the contrary:  “Our review, combined with several other studies, demonstrate that new EPA rules – which will provide extensive public health protections from an array of harmful pollutants – should not create resource adequacy issues," said David Sandalow, Assistant Secretary for Policy and International Affairs.

The DOE claims to have conducted its research using more stringent parameters than the new EPA rules require. The stress test modeled worst case scenario for the 2015 beginning of MATS. In its "Stringent Test Case," the model retires 29 GW of coal capacity and the analysis finds that "that target reserve margins can be met in all regions, even under these stringent assumptions". Furthermore, the study shows that "no additional new capacity is needed to ensure resource adequacy in the Stringent Test Case."

The 33 page report concludes:

The EPA's first rules will take affect in just under a month.

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