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Coal Gen and EPA Power Struggle: Consumers to Foot The Electric Bills?
By EconMatters
Utility giant American Electric Power (AEP) sent shock wave last week by suggesting consumers could see their electricity bills jump an estimated 40-60% in the next few years. AEP is one of the country's largest investor-owned utilities, serving parts of 11 states with more than 5 million customers.
As part of the company’s plan to comply with EPA's new regulations, AEP said it would cost $6-8 billion in capital investments over the next decade to retire and retrofit its coal fired power plants to meet regulations that start taking effect in 2014. And that’s when the utility rate increases are expected to begin to appear.
As noted in my other article, a study by the Brattle Group concludes that new EPA new emission regulations could push up to 50,000 MW to 67,000 MW, or 20% installed coal plant capacity into early retirement, and additional $100-180 billion investment may be needed to upgrade existing coal plants to comply with the EPA's potential mandates.
Chicago Tribune also reported that generators have announced they plan to retire another 21,000 megawatts in the near future, and some industry consultant studies estimate 60,000 megawatts of power will be taken offline by 2017.
So it seems the estimated impact of EPA’s new Air Toxics Standards for Utilities would be an early retirement of around 20% of coal plant capacity in the next five years or so. Those soon-to-be-retired coal plants are most likely older and smaller coal plants not far from being totally decommissioned in the first place.
Steven F. Hayward, a resident scholar at the American Enterprise Institute, also commented that
“…the average age of the [U.S.] coal fleet is 42 years….it is more likely to be the smaller plants that will be shut down for the simple reason that the fixed capital costs of additional pollution abatement will be too high, while the costs will not be excessively high for the larger plants.”
As for the numbers from AEP, Hayward writes,
“…although new gas-fired power has become very cost competitive on average, the replacement cost of small coal units with small gas units (or renewables such as wind and solar that require gas-backup) is likely to be higher than average in many cases. Hence, the kind of numbers we’re seeing out of Illinois.”
Admittedly, whenever there’s a new legislation affecting the industry landscape, negative impact on the cost structure is inevitable and could eventually be passed through to consumers. However, the ability to pass on the incremental cost as well as the dollar amount are still subject to market supply and demand fundamentals.
Since power plants in the U.S. are used at only about half their potential full output, the estimated coal capacity retirement, which are expected to be compensated by an increase in gas power generation, most likely will not cause significant supply demand imbalance.
Furthermore, electricity costs historically has been highly correlated to natural gas (See Graph Below). Even in the state of Texas which ranked number one based on total amount of coal-generated electricity in 2005, the correlation was as high as 90% from Feb. 2007 to Feb. 2008. The correlation could increase even further now that natural gas is taking the power gen market share from coal with the help of new environmental regulations and cheap Henry Hub price.
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| Chart Source: Hess Corp. presentation, 2011 |
Currently, the outlook for natural gas price does not signal a surge in electricity cost any time soon as the production boom from shale gas has pressured Henry Hub price to around $4 per mmbtu in the last two years or so. The situation is not expected to change significantly in the medium term.
And here is the electricity supply and demand projection by the Energy Dept. in its Annual Energy Outlook 2011 released in April 2011:
“In the Reference case, electricity demand growth rebounds but remains relatively slow, as growing demand for electricity services is offset by efficiency gains from new appliance standards and investments in energy-efficient equipment.”
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| Chart Source: EIA |
“More recently, the economic recession in 2008 and 2009 caused a significant drop in electricity demand. As a result, the lower demand projected for the near term in the AEO2011 Reference case again results in excess generating capacity.”
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| Chart Source: EIA |
Moreover, while there could be added costs passed through to electricity consumers; the existing slack in the power capacity, a less than robust demand outlook, and expected new capacity addition, have made it hard to see how the residential electricity costs could go up as much as “40-60% in the next few years” as AEP suggested.
According to Source Watch, AEP is the top producers of coal-fired electricity in the U.S. in 2005. So it is easy to understand why American Electric Power is busy clashing with the EPA, after its peer Exelon Corp., (EXC) took the high road.
Exelon is expected to benefit from this new air legislative change due to its large fleet of nuclear power plants that have low emissions and are cheap to run. Below is Exelon’s statement in March 2011 regarding proposed EPA rules as reported by MarketWatch:
"Based on our detailed review of the Air Toxics Rule and our preliminary analysis of the Section 316(b) rule, rumors of a 'train wreck' caused by new EPA regulations are simply false…. That is not to say that there is not room for additional dialogue, but these discussions need to be guided by sound science, not rhetoric….. EPA has done a good job listening to the industry and moving the ball forward."
It looks like the battle line is drawn in the power gen sector, and coal got thrown under the bus. As to what the final damage to consumers' wallet will be, I guess only time will tell.
Further Reading - The Power Race: Natural Gas vs. Coal
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Obviously, Texas has no earthly use except to be wall-to-wall nuke-YOO-laur plants.
But I digress with an obvious troll-comment!
However, chart in article looks funny here. Such things are based upon the population density, since you really can't regulate Americans. If you somehow bribed them into putting up windmills and solar panels, that's a different projection.
XOE and co suggest that the new currency be based upon either Power or even anti-Power (Carbon offsets) It's not "nothing" as many complain about, it's Power!
and if all thise little appliances with the little lights that never really turned of were smarter and went into deep sleep mode or actually turned off you would cut your energy use by massive amounts. your cable modem because it in fact running even while off uses much more than your frig. Regardless of hatred of regulation energy efficiency has to become a national policy. by the way the cable modems sold in europe go into deep sleepp mode so the tech for these easy savings to drasticly cut american energy usage are already there, at no real cost.
Mercury is our end, or at least the slow version. For Rome, it was lead. Every single politician speaking on coal over the last dozen years has inserted the word "clean" before coal. It has all been a lie. Of course companies such as this one will spend to pay the slut congress (via the slither lobbyists) to delay and or look the other way because the incentives are wrong. Companies should be provided tax incentives (these of course have to outweigh the cost of doing nothing and paying the sluts) to use truly clean coal over the first ten years. That would put firms such as the viper American Power at a disadvantage for 10 years - hardly an option now is it. This simple fix goes over the head of 99% of the idiots out there and therefore, it will never happen.
Meanwhile, the joke at American Power amongst the execs is to always make sure you live in the southwest if you cant' live in the Carib... Kids, you have simply got to join the bad guys - Goldman, Haliburton, the frackers, the list goes on...
I like how AEP instantly argues against change by telling the public how expensive it will be to them personally. This is a typical lobbiest's garbage argument released to the public and carried.
It's the industry telling the EPA to go fuck themselves. It's a threat. The government KNOWS that they can't allow 20% generating capability to go away because of regulation and no money to pay for it. They'll get a waiver that will go on forever.
Whining and pining for 'mornings in America' when they didn't have to give a damn about consequences of their actions.
Welfare queens, the electric utilities.
Energy priced to reflect its real value will bring the waste- based economy to its knees. Good riddance. If we cannot think of anything better to do with energy is to waste it then we don't deserve any.
You have a point. Your hand vagina is powerless!
That is about the 6th comment you have added without adding any value to this discussion... Go practice at Yahoo!
Gee, people in states which are polluting the air with toxic fumes (not CO2, but genuine poisons) are finally going to start paying their share instead of "externalizing their costs" by getting away with spewing poison instead of cleaning up after themselves.
Sheesh. If ratepayers in the rust belt start paying 40-60% more, then their rates will approach rates already paid by people living in New England.
Make 'em clean up their smokestacks, whatever the cost.
The whole mercury poisoning argument is of great interest to me.
Which is worse....
1. Having a single point of contamination (coal fired plants)
2. Millions of people tossing Hg laden CFLs into thousands of landfills with a wide distribution of contamination.
Which is easier to clean up? Which one will be cleaned up? All of the cost savings of CFLs will be lost on the cleanup of landfills and human costs.
I predict California will be the new leader in Hg contamination, not the rust belt.
Why don't you do a simple google search to get the answer? This has been studied, at observed rates of CFL recycling mercury is significantly reduced.
In fact IIRC if you simply throw the CFL in the garbage you still reduce the amount of mercury....
I have CFLs I put in 2004 that are still working fine and have more than paid for themselves between electricity and bulb replacement.
Yes, the rust belt is doing so well they should step up and take advantage of all their abundant gas supply. Great point! Deep thoughts...
Yes, consumers will be expected to pay much more dearly for electricity. Utility inflation may even rival that of medical care and higher education, more than 10% per year. Yes, that's awful. People will try to cut back on their usage, turn off the air conditioner, turn off the lights, but that probably will not save the average consumer because the billing methodology is increasing becoming flat rate and fixed fee.
For instance, all consumers, large and small, are more likely to see new line items on their monthly electricity bill, lets say a $10.76 Environmental Recovery Fee and a $5.34 Nuclear Construction Fee. Conservation becomes less effective when 60% of a bill is fixed fee and 40% is usage based. Imagine if gasoline pumps had a $62.53 fixed fee added to whatever you pumped.
$45.23 - Environmental cleanup fee
$17.30 - Sensitive habitat drilling fee
$23.40 - 4.75 gallons premium unleaded
$85.93 - total
The poor, middle class, and conservation minded households are increasingly corralled into paying dearly for that which is considered essential.
AEP has been sitting on past successes, ignoring the wave of clean technology that could improve their aging plants, has billions of tons of fly ash just ripe for another environmental catastrophe. They have been their own worst enemy, relying on buying legislation to keep these plants exempt for decades after they should have been retrofitted.
Now they want consumers to pay through the nose for their bad choices and investments? Fuck them. I sold their stock when I found out about the wast problems they have. It is only a matter of time before they have a giant and expensive problem with this alone.
If I maintained my house the way AEP has maintained it power plants and waste products, my house would be a dump. They have a terrible business plan. Penny wise and pound foolish.
what will replce this ? http://www.intermountainpower.com/About_Us.htm
think of the EPA as that eco centric friend that carries a very large hammer. They are the "enforcers" for the Great One's idea to make people convert to green power or else. To end the thirst for anything with hydrocarbons in it.
The end run of course...bring America to its knees and ask forgiveness from the rest of the world...for...everything.
Yea, well I bet you do not remember when rivers in America used to catch on fire. These companies have to be forced to change and become 21st Century corporations. The EPA is just protecting the 'commons' of our clean air and water. But you dont remember when this was not the case, obviously. Those who do not know history are doomed to repeat it. And as one who fought for clean air and clean water, you all should be thanking me and everyone else who fought and cleaned up America decades ago.
Otherwise you probably would be living in a much different world here. One where water costs a fortune, where the air causes disease, and where birth defects and poor health are common. We cannot invest enough in Green Energy at this point. Because the capitalists have fooled people like you into supporting power and money over everything else. We lost 8 years under Shrub, where he increased the amount of mercury in our air and arsenic in our water with the stroke of a pen.
I hope you love heavy metal poisoning. Soon, because of people like you, there will be no more wild crafted foods. None of our food will be uncontaminated by industry. And then people will get sick, our life span will decline, and our quality of life will be lower all around.
The EPA is simply symptomatic of the change in power in America. We can argue the regulation of dumping waste into rivers was for the common good, (and that was what was catching on fire). But our whole Government has been taken over by the Global Bank Cartel. So now the WHOLE Government acts on their behalf. So now if the EPA tries to act unilaterally to shut down massive coal plant capacity who do you think they are working for? "The People?" Please. The energy traders at Phibro and The Squid? Yes.
The analogy is the Federal deficit. "We can't cut that now, but we should long term." How the fuck does that apply to our Country's finances and not our crotical power supply?
Don't be a dupe!
I was wondering when someone would reference
Tragedy of the commonsIt needs to be studied by all who care to comment on this article.
Hey, isn't TotC commie-speak??
You will have (literally) lots of elderly people dying ---freezing during the winter and dehydrating summertime---if utility bills go any higher. Maybe this is the "Death Panel" everyone talked about ...just in a different form.
Here from WSJ:
"From the beginning of the recession to April 2011, real personal income has grown just .9% compared to 9.4% for the same period in previous post 1960 recessions."
http://online.wsj.com/article/SB1000142405270230333990457640627220631217...
From Steven Moor's "Bummer of a recovery."
I am not big on entitlements, but I do have a "soft spot" for people over 65.
+1
http://pjm.com/markets-and-operations/rpm/~/media/markets-ops/rpm/rpm-auction-info/2014-2015-rpm-bra-results-report-addendum.ashx
Capcity prices for 14/15 are around where they are this year and last year. PJM basically concludes that the EPA regulations forced about 7000MW of coal to not clear the auction. Luckily, the gap was mostly fulled by demand resources (price takers) so in the end, the prices are still "reasonable". AEP got pushed out by the EPA with the help their own consumers (acting as demand resources). Of course they're pissed. It's nice to see the tabled turn.
Coal sucks.
Well, coal provides 60% of our base load power in the U.S. So it doesn't suck in that respect. But thanks for the deep thought...
I actually price and sell electricity and in the regions AEP generates power. What you're missing in the analysis of prices are the capacity auction results from PJM. The 2014/2015 planning year saw a large increase in price for capacity in PJM west and a fall in PJM east. There are a lot of theories as to why this happened. AEP has a point if generators in PJM west withheld power from the auction because they plan on shutting it down. They may be right on the residential side if the generators are capable of passing through the costs via their utilities. The cost recovery model in the power space should be killed off. AEP hates retail and wholesale competition, but it's entirely unnecessary to burden utility ratepayers with the costs of plant development. These are not natural monopolies as someone suggested above, these are forced monopolies by broken governmental system of regulation and control of the power markets.
The other interesting part that you should add is the dark and spark spreads in the traded markets. You'll find that in most of the northeast and Midwest that coal plants are simply not competitive on the bid stack to natural gas plants. Coal is actually setting the margin a lot of times this year and last. That alone will drive development of more natural gas plants or conversion of existing coal plants into combined cycle.
AEP just hates the fact they're boxed in a region of the country that's experiencing major demand destruction with aging coal plants while being way behind the curve on competition.
Wind is better than you think.... it has to be a very large distributed network to take into account the wind variability. It does need to be supplemented though.
The future of solar, IMHO, is not photovoltaic but CSP. No exciting and rare elements are required. Just to capital (and infrastructure) to put it where it works best.
Nukes were to be a bridge to solar, but we fucked that up. C'est la vie.
As for getting off grid, better to stick with PV. Do a compution of the bio-diesel yield for something manageable and the output of a diesel generator. If you have bio-diesel, you will find that its value and utility is much greater as a mobile liquid fuel than as a "stationary" input to a generator. 10 gallons of diesel in a tractor has the greatest value, i.e. food production productivity...
Get a real job. Please...
You are the one that strikes me as an indigent asshole...get a life, better yet, get an idea...
There's no easy way out.
Coal-fired power pollutes, and kills coal miners. Nuclear is much cleaner, unless you get a Fukushima. Fuel cells are clean, but expensive, and not yet perfected. Solar is clean, but has high initial capital costs, and uses some rare elements, and I haven't heard of solar panels that can produce 230V three-phase power yet. Wind is generally undependable, and far from needs locations. Geothermal is only available in certain locations (so far).
Natural-gas fired power plants seem reasonable; you can get natural gas from decaying organics, certain chemical paths and oil fields. Just watch out where and how you frac!
Probably a mix of methods is the best approach; wind where it works, solar for low power apps like households, nuclear in remote locations far from populations, and natural gas most other locations. I now have one set of solar panels that puts up 45W max to recharge lead-acid batteries, with an inverter to put up 300W max 110V one-phase AC. I also have a 1200W generator, which unfortunately runs on premium unleaded gasoline - for emergencies only, obviously, and not long ones either - so far only five gallons storage commissioned.
What have you other ZH-ers done to "get off the grid"? Anyone know a source for CHEAP diesel generators, low power? You can make "bio-diesel" from various organic oils, and it's SUPPOSED to be better to burn (better internal lubrication) than crude-sourced diesel oil, but I'm not knowledgeable about that. We've gotta look for ways to get "off the grid", though - preferably BEFORE the grid gets away from us.
When we start hearing that "rolling blackouts to encourage energy conservation" are being "enforced for our own good" we'll know that the current crony capitalism is about to crack for good.
went solar, dont' really care how much they raise electric rates. natgas is very inexpensive, and should the solar panels not pull the load, will install gas lamps, take the horse to town, and listen to Alexanders ragtime band at the outdoor orchestra.
Oops... my reply became a new comment...
Hey, its only a few hillbillies, a small price to pay....
http://blogs.wvgazette.com/coaltattoo/2011/05/10/latest-wvu-study-finds-more-health-problems-among-residents-near-mountaintop-removal-mines/
Lets not even get into the bullshit of the "job killing" aspects of controlling mercury, chew on this for a bit:
http://www.mwcog.org/uploads/committee-documents/Yl5XVldd20110309153605.pdf
Any surprise at the correlation between public health and the 50 worst coal plants in the US?
http://en.wikipedia.org/wiki/List_of_U.S._states_by_life_expectancy
Actually, those WV hills are greener than it seems.
http://www.sciencedaily.com/releases/2010/10/101005121720.htm
Hey dumbass, closing some coal plants won't do anything to stop mountaintop mining. The coal will simply be shipped off to Asia. Booyah!
Strange how your Messiah exempted GE from all the new EPA rules that were slapped on the coal plants. Yes, he really is worried about your health. Now stick your head back up Obama's ass. It will save you from having to breath in that poisonous air.
Your logic is impeccably fucked... I just threw out two examples of how coal is slowly killing us.
One of my most cherished rights is my right not to be poisoned by corporations, and if it takes the EPA to do it, I am ok with that.
I respect your right to life, the healthiest possible. I fart in the general direction of the EPA. Are we such trolls that we can't find an innovative solution to the problem without the gun to the head, money junkie goons like the EPA? Don't answer that, we are trolls and livestock in the nation, nothing more.
So you think that being a thrall to coal interests is an improvement? Money junkie goons?? Follow the real money and don't be naive.
flakmeister is definitely not an obama supporter!
If we are going to have coal fired plants, then can't we ship them all to mexico and let them send back clean, pure electrons?
So the pollution'll all stay in Mexico?
Grand idea.
Why not do it to oh, say, Des Moines?
Oh, never the fuck mind.
Would you really trust that corrupt oligarchy not to nationalize them, and then run them into the ground the way they've screwed up Pemex?
Coal lobby spinning again?
Imagine giving up a few $5 lattes in exchange for an attempt not to fry the planet... Oh my, the sacrifice!
Lattes? Your precious govt sticks a gun to everyone's head to pervert money into huge debt and you claim it's about Lattes?
Land of the fleeced and home of the slave.
Obviously you have difficulty interpreting metaphors...Your avatar is a clue, I'm glad I never had to go to school in Texas....
If your head wasn't stuck so deep up Obama's ass, you might realize that it will be the poor and working class who will be most effected. They don't drink $5 lattes like you limp-wristed knob gobblers
Watch your tongue, the only head up an ass appears to be your self-afflicted state
So let me guess better to slowly poison everyone....
Strangely, the rest of the world does not feel the same need as the West to cut their own throats.
Well, part of the Obama-Biden campaign platform was to "get rid of dirty coal" in favor of consumer-friendly power sources such as I-Melt & Co GEE-Whizbang boiling water nuke reactors, of course, of course.
Didn't Obama promise to skyrocket energy costs to every greenie university student who would listen? They LOVED it. They had been taught for years that See-Oh-Two was public enemy numbah 2, right behind Oh-Bee-El.
Let's see how much those stoo-dints love not being able to find a job and not being able to buy the latest sail foams. The USA will start to look like Europe, with "chidren" living at their parents homes until well into their 30's because they can't find a job. Spain has a 43% yoof unemployment rate, worse than Egypt and Tunisia. At least they have free healthcare.
That is why I have never understood the europeans thinking they have a better standard of living than we do. A friend built a house in the countryside in France and the builders seemed in shock that someone would build a house with two or three bathrooms. I am very unimpressed with the quality of life I see in Europe.
They have more free time and vacation on average, but in Scotland they share bathwater! Totally freaky and disgusting!
All in all I am damn glad I am an American. We have plenty of land and plenty of natural resources. We can still drink the tapwater.