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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.”
 |
| 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.”
 |
| 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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Americans seem to equate material excess and waste (ie a bigger house/car/boat than you really need) with a high standard of living. Europeans seem to prefer more vacation and family time, as well as guaranteed health care that won't bankrupt them. Oh yeah, and their kids mostly don't have to go to some god-forsaken desert to die fighting for oil.
"Oh yeah, and their kids mostly don't have to go to some god-forsaken desert to die fighting for oil. "
So, have things greened-up a bunch in Libya? It looked like a desert in the news footage to me.
And the houses they have are well built. Not the crappy stick houses we have here. Ugh, we might have more sq. ft., but the buildings are crappy energy hogs. I wish we had the EU standards for buildings, food and cosmetics. We would all be healthier. Our health costs would go down, no doubt about it.
You can immigrate you know. Talk is cheap.
And sharing Scottish bathwater is naturally contraceptive.
http://jd-antiqueswestcom.blogspot.com/2009/04/never-been-kissed-scottis...
Easy to come up with anecdotes....having lived in Europe, if you are solidly middle class (equiv household income of ~$80,000 or so), the QOL is much better than the US...
You obviously have not sampled the tap water in some of the western Chicago suburbs, e.g. Batavia.
Actually, figures just show how bad a contaminate coal is for energy. If one can believe a lobby group.
We live in an age where if we fire all the teachers everything will be ok.
"fire all the teachers"
Are they cleaner than coal?
"Are they cleaner than coal?"
Probably, but you have to render them into bio-diesel.
+1
Actually, figures just show how bad a contaminate coal is for energy. If one can believe a lobby group.
We live in an age where if we fire all the teachers everything will be ok.
If you care about education watch "Waiting For Superman" & "The Cartel." I don't know a decent human who doesn't want to pay teachers MORE. Educate yourself on the topic...
All the teachers are being fired while all the administrators keep their $300,000 jobs and all the classrooms get new 50 inch LED TV's and the students get an iPad to teach them how to read. Quick, raise taxes and destroy small businesses and jobs to save the school budgets.
Yep.... the admin side of Health care and education are the classic examples of the parasite slowing destroying the host.... A redux of Wall Street, a 1-2% vig on GDP is the price of business, 10% is legalized looting
Go to your local school and look at the faculty list - esp. high schools. There is a long list of people who are doing other tasks, not teaching. Then go to find out how many work at the school district offices, logistics, and other jobs. These are all people with jobs for life and huge benefits packages. In my state, one of the poorest I might add, the teachers do not contribute even one dime to retirement health care plan - yet they have full health care for life. This is where my property taxes are going - and it is a pyramid scheme - the math doesn't work long term, I cannot earn enough money to pay the property taxes that would be required to make it work.
Electricity and natural gas are significant input costs in manufacturing. But we can always blame greedy corporations for our demse.....
thanks for the story, but The country wont make it to 2014........
same happening in UK and Europe ...consumers don't stand a chance when there's not a free market, choice and most importantly competition
instead all Western utility markets (electricity, gas, water and telecoms) look remarkably similar: the fascist model of bloated inept Dinosaur Utilities created by Govt regulations and Regulators (the protection racket) which strangle small (better) competition
The utility markets are one big rotten carve-up and as always the consumers are being milked (extortion is another good word for it)... this sad sham of a market system will only end when the extorters greatest tool, democratic Govt, is taken away...
..do your bit, simply stop paying your taxes and funding the greatest institution of corruption on the face of the planet (as the parasites designed it to be, Doh!)
"..do your bit, simply stop paying your taxes and funding the greatest institution of corruption on the face of the planet "
Can you get internet service from inside a federal prison? I want to still be able to read and post on ZeroHedge! Once I get that issue taken care of, I'm all-in with ya'.
Silverman - wait for the online petition, 'Zero Govt' or 'Zero Tax' or 'Anarchy Anonymous' to start up ...until then as some have done simply opt out of paying tax by reorganising your economic affairs (live off capital as i do, join unemployment etc). There are (always) options in life and it's certainly satisfying to think you're not funding the buggest criminal organisation in history any longer ;)
I am sympathetic, but it is hard to have a pareto efficient market in what may be natural monopolies.
I would be interested in how that could be done, because I agree that bloated government agencies (which essentially characterize the management of utility companies, public and private, in most of the developed western world) are not the most useful method for efficient and cost effective power generation and distribution.
Top, right now you cannot have an efficient market with a 3D pyramid. The great slaughter will happen first and then a 4D governance model will be built. It will not be perfect but it may give a decent Republic say 300 years vs. 200 years before the model inverts to 3D, then 2D and then BOOM, global violence and evolving, once again...
TopCalling - there is no such thing as a "natural monopoly" even in utilities.. it is an entirely un-natural market state we have become so accustomed to because the State has grown and protected so many of these bloated dinosaurs over decades we no longer question, it's just a part of the wallpaper
But we should question. We should question why our petrol is delivered by the same monoliths decade after decade with no new entrants. We should question the same in telecoms, electricity, water, gas, software, agriculture.
Capitalism works like a forest, where Young Trees/Turks thrust, some fail but some succeed to become the new establishment and enjoy their time in the sun. Then they become old, tired and even diseased and run out of money fighting off a constant stream of new entrants who eventually out-smart/wit the old guard and take their place
The other sign of a healthy free market is not huge fat organisations like utilities and oil (as we have) but lots of small organisations thrusting and competing (which we don't have). These huge dinosaurs are another sign of corruption and an un-natural (dis)order in the markets, the usual sign of corrupt bloated market monopolies
In market after market (see also banking, automobiles, healthcare, pensions, insurance etc) we see huge 'Robber Baron' type corporations instead of lots of small and medium sized competitors fighting it out which is a direct result of the most corrupt organisation in the world, democratic Govt, suffocating the natural churn and vibrancy of the free market
Never get used to monopolies, 'Big' and a stagnant churn of faces in a market
If 1/4 of the money wasted on preserving the power utility monopoly was spend on R&D for localized power generation [think small home power generation package - geothermal heat pump for HVAC & hot water, combined with solar / wind / hydro or what have you based on location] we would be much better off. Since TPTB have exported manufacturing as fast as they could from the USA, we should not need large power generation any more - let's make homes self-sufficient. However, this also breaks up the plan to herd us into the ghettos know as major metro areas.
What did JP Morgan say when he saw Telsa's experimental wireless power transmission facility that he had funded in N.J.?
How am I going to put a meter on that?
"AEP is one of the country's largest investor-owned utilities"
Maybe you missed this part... this is a privately owned utility that is threatening consumers with higher prices, not a government agency. Even with the alleged inefficienies, at least government utils are run for the public, not for shareholder profit.
" the issue of coal.." at 0:26
It's not hard to figure out.. they have it in for coal.
He wanted to bleed and hobble the nation with a trillion dollar synthetic cap and trade market, but he'll settle for just hobbling it through regulation.
http://www.youtube.com/watch?v=HlTxGHn4sH4
Agreed, Cap'n Trade is a fucking scam.... a simple Carbon tax would suffice offset by a reduction in payroll taxes....
FLAK:
I don't like you. I think that you are a pompous a-hole; however you do make a point about alternatives to coal and the real alternative is not wind. The real alternative is space based solar. For less than it cost to prop up a failed strategy of empire over a decade, the United States could become a legitimate supplier of the worlds energy needs via space based solar energy. All we need to do first is knock out a few Chinese satellites/ declare dominion over a band of space and wa-la! Of course the watermelons will find some way to marginalize the concept 'cause what they REALLY want is control of our energy supplies for the purpose of denial, not any of the lies about green/sustainable. What they want is power in the sense of THEY have it/YOU don't
I am not here to be liked....
Space based solar is a pipe dream, look at the EROEI for starters.
No argument about the Empire having pissed away it's remaining capital
Space based solar is less a "pipe dream" than sustainable deficit spending.
Just because we are not presently invested in the idea does not equal pipe dream. I'm too lazy too provide you with links, so do your own work. Not only is space based solar viable, it has attracted capital and is funded in part by the state of California (I get it, but even after CA implodes, some of the salvageable parts will take root under a new structure).
Space based solar would be achievable far more readily than was a lunar landing in 1965?
Think on a longer timeline.
R U on drugs? A space based system with energy beamed down to us at the good graces of the PTB ... that sounds really liberating. 1 missile from anywhere on earth and the lights go out?
Decentralised local generation is the way of the future IMO ... mine will be that is for sure.
You can already combine solar, wind, heatpumps and generators to provide continuous independent energy for yourself at a lower running cost than using the 'grid' The options are expanding all the time and the capital costs coming down.
A space based government on the other hand .... now there is an idea I will support.
The onus is on you to provide the evidence that it is scalable and feasible...
Flakmeister - you simply cannot resist another tax (theft) on society can you? How are the other 100 taxes doing to 'right the wrongs'? Idealogy applied to justification of the State robbing people of their income, what a great system!
Since you are a dyed-in-the-wool anarchist, I am not going to waste my breath... Somalia beckons you, no income taxes or what have you. Unfettered freedom to do whatever you please...
Flakmeister - i'm not an "anarchist" in the least. Anarchy involves breaking the rules or laws, my breaches are entriely speeding fines.
The Biggest Rule Breakers throughout history have always been the Biggest Rule Makers ...yes you've guessed it, the anarchists are the Govt themselves. Your own US Govt is curently in breach of the Laws on War and are waging murder and mayhem in no less than 3 countries, none of which under international Law you are allowed to do unless your national borders are threatened by those said countries. Has Iraq, Afghanistan or Libya ever threatened your borders?
Your Govt is also bankrupt, lying/cooking its books and a whole host of other criminal offences. Me I'm having a cup of tea blogging. Who is the real anarchist at this very moment buddy?
And you didn't answer my question. Why do you think your idealism should transform into a tax (robbery) of other peoples income? Has any tax worked ever? Do taxes on cigarettes and alcahol stop anything or are they just, as i maintain, State robbery?
If you are going to cling to the idea that all taxes are state robbery then any discussion is pointless.
There are good and bad taxes: good taxes discourage certain behaviors, bad taxes enable the system to be exploited.
Go bark up another tree, I have other matters to attend to tonight.
Flakmeister, it is not me clinging to the idea all State taxes are theft because they very patently are. Extortion in a word. It is you clinging to the idea you can do any good by using taxation. Duties on cigarettes and alcahol do no good whatsoever, they do not change consumption patterns at all, these State duties do however rob peoples pockets for no apgood reason.
You were extolling the virtues of a Carbon tax. Putting aside the usual Govt hired crones (climate scientists) what possible good is increasing the cost of goods as a methology of preventing something?
Why tax when surely your purpose is to educate through reasoned debate?
Please explain yourself regards there are "good taxes"? Give an example
The first tax in England was on windows/glass. It was a tax to fund the Kings murderous crusade/warmongering in Arabia. This State tax fueled murder and mayhem, a war no Englishmen had any beef with any Arabian (ie. no just cause)
There has never been a "good tax" in human history, they have all been plain simple theft and extortion
Since we differ on everything and there is a lack of common ground to build upon, I feel that entering any debate with you is a pointless endevour.
Perhaps you should become aware of things like the Tragedy of the Commons and intrinsic process of privatizing gains and socializing losses. Imagine I make for my self $10,000,000 while destroying a public asset, e.g. river, and be free of any liability, now imagine that you rely on said river for your water.
Government agencies are run for their benefit. They have grown like a metasticising cancer and threaten, no, are destroying the wealth of the nation.
There was no mention in this flawed article of inflation. Oops, did I say something that we do not talk about? Sorry, but inflation is eating me alive. Real inflation not that crap from govinmint statistic-lies.
Flawed article.
We are doomed, get used to it and get prepared.
Nice analysis. I suggest that the damage is going to be quite severe to the US consumer's wallet and energy prices are going to shoot up regardless of who is in the White House.
The US might be in the final phases of its transition to a post-industrial era but coal should be huge overseas....somebody's still got to fire up those factories for the time-being. Coal is a good play if you can pick the right investment vehicle.
Whoever junked this post should consider explaining why.
Pretty please? And since this post (mine) likely won't fall into sequence (annoying, but I won't bitch), I refer to the first comment in this thread. Submitted by Vic Vinegar.
Whoever junked it would be very kind in offering up a reason for having done so. Honesty is going to become a form of currency insofar as going forward is concerned. The forensic analysis post collapse will conclude that disinformation was at the heart of what caused the 'great...'.
If you don't have the guts to put your real thoughts out there for others to fairly evaluate then you are a coward/tyrant/progressive/neocon.
Shithead.
A world for us demands transparency. Transparency begins in you and grows outward. Honesty will become viral.
Think spike/base pattern.
With absolute fiction/porno style dishonesty so prevalent, I call a bubble. Those who survive the collapse of this bubble will TREASURE HONESTY.
So get honest.
So much to say regarding this but will just say I appreciate you, ISEEIT...I agree with what you wrote.
http://www.youtube.com/watch?v=M4ImlBc_jSc
The 2035 Demand chart is bullshit. And I will tell you why.
I had consumed about 1600 kWh just feeding a failed 8 seer system running 24/7 trying to cool the house in one month last summer, a cherry on a pile of VERY stiff BILLING. Several hundred dollars if memory serves.
Several thousands of dollars and a week later I am running a 16 Seer system and dropped the summer kWh use to about 350 if that in one month this year. Maybe 35 dollars total electric bill. In addition reinforced the situation by disposing of obselete light bulbs, old appliances etc. Replaced it all on a big strong electric web.
A secret. That thin peice of shit aluminum mains that feed your house can be connected to your Meter via Stranded Copper Cabling about almost two inches thick. That will slow the heat generated by the watts "Pulled" by the house into the meter on the A and B main off the Pole Transformer.
The wattage in heat is what spins your meter really fast if you use crappy thin cheap mains.
Most people will NOT spend the money to bring the house up to snuff. Not for a long time. Most of the house holds in my area still run on 20-30 year old technology that will be forced to start replacing as soon as all those 3.00 lightbulbs DISAPPEAR from the grocery store shelf.
That will happen Jan 1 next year. Your 3.00 banned bulb just became a 50 dollar Ebay orgasm/wetdream of underground profits. Fook the PM's Juice it on the bulbs.
WHY?! Because PEOPLE WILL NOT BE KICKED INTO LOWES or whatever to buy a 10 dollar LED bulb plus a fucking 20 dollar mount for every goddamned room in the crappy house?!
Some of you will dig up my old posts and say fuck me, go solar, geo, wind etc.
No sir, not yet. I pay 35 dollars a month for up to about 20+ years... call it 70 dollars a month or a little more by the time I replace the aging cooling system and electrical yet again between 15 to 20 years from now. God knows how MUCH that will cost.
And it probably will not be priced in USD either, those things will fatten up and die like a bunch of Tribbles engorged on grain. It would be some kind of UNFubar Credits or something at a exchange rate gauranteed to drain the citizen of any solvency what so ever aka : "Tron"
By then SOLAR should be cheap, wind even cheaper and GEO thermal so common, copper is frigging .10 a pound and thievery has essentially stopped.
/rant
Oh by the way I don't expect to be around or even functional in my old drooling diaper/IV narcotics old age to even give a damn 15- 25 years from now. Much less the house.
Excuse me - but what? Who gives a shit about the 2035 chart.
Some of us are just gamblers at heart, and wanna bet against all the intellectuals on this site.
No offense to said intellectuals. It ain't about the price tag, bitchez.
http://www.youtube.com/watch?v=qMxX-QOV9tI
BTW.. That Jesse J song/video is pretty good. Nice message, tune and production.
It’s goes right back to the start of rap before it turned to crap (Blondie, Rapture.. complete with Mars and cars).
I sense a little turn on, tune in, drop out sentiment in that piece.
Living in a garage with a six string and a half stack sounds great, but somebody’s got to buy dinner, pay the rent and preserve the freedom to sing your own songs.
The trick is how to get the best of both worlds without allowing the banksters and their government minions to go all serfdom and police state on everyone.
Agreed. It's not about the price tag.
Especially when you don't have a job, you can't get a loan and you can't afford to buy anything.
Dancing is a good way to pass the time.
Unfortunately unemployment is a very real problem many people are experiencing today.
If you are experiencing it, I would suggest: sports gambling, drug dealing or going back to school to obtain a valued skill (I hear there's a future in the health care field).
Whatever you choose is up to you, your skill set, and your appreciation for our legal system.
In any case, remember that bitching gets you nowhere. Good luck.