Another day, another false study of the costs and benefits of the EPA Clean Power Plan.
Energy Ventures Analysis (EVA) has provided its now familiar “analysis” of “actual costs likely to result” from implementation of the carbon reductions. Like other flawed analyses, it uses highly limited choices for compliance to claim that the costs will be higher than any other study has suggested.
How do they make the costs so high?
For starters, they ignore the benefits. EVA and the National Mining Association (NMA) claim that the “EPA does not even bother to measure how the rules will improve the climate.” NMA/EVA also omit completely the health co-benefits of the CPP. Well, as even NMA/EVA admits the CPP will “accelerate the momentum of carbon emissions in the U.S. by mandating a 32 percent reduction in emissions from the power sector below 2005 levels… in 2030.” (page 3). In fact, the EPA estimates the Clean Power Plan will cut carbon by millions of tons per year, and generate climate benefits worth billions of dollars, reaching $20 billion in 2030. Further, the EPA estimates health benefits from the reduced air pollution will range from $12-34 billion in 2030.
But are compliance costs really so high?
No. This is where the wheels really come off. NMA/EVA admits it only evaluated “one of the six approved state alternatives” for complying with the CPP: “This study focused on a state mass-based limitation including new unit complement with no inter-state trading. Should states elect to pursue a rate-based limitation and/or participate in inter-state trading programs, the lowest cost resource compliance plan would likely be different.” (Emphasis added) (See NEMA report, Appendix II)
Interstate trading is the more common means of nearly all commerce that requires major capital equipment. The regional power pools, MISO, SPP, NYISO, ISO-NE and PJM all participate in, or have reported, that use of regional trading for carbon reduction is more economical. These regional power grid operators and interstate utility companies exist because of the economic benefits from drawing on a fleet of generators to provide power, share reserves and maintain reliability. Ignoring the lower cost option is a sure way to raise the cost.
Are there lower cost energy replacements, too?
Yes, though we don’t see them in the NMA/EVA “analysis”. NMA/EVA’s study is done in a black box; it contains little to no information re: the assumptions they used for the cost of renewables, natural gas, etc… No mention whatsoever of energy efficiency. In a prior round with EVA providing biased analysis of the CPP, we found through close scrutiny that EVA developed a table of upper limits of how much renewables are allowed. The report hints that EVA employed an internally developed state-by-state forecast of renewable capacity. (See more in this EVA report for coal producer Peabody Energy.)
There, EVA explain that the renewable energy additions were limited by its view of “state renewable resource quality and potential” and “historical/forecast future renewable generation growth trends”. In that work, EVA limited wind or solar allowed in state-by-state modeling: Alabama, Mississippi, and Louisiana are shown with no solar in the future, South Carolina is limited to adding 1 MW between 2020 and 2030. Arizona, 40 – 50 MW of solar per year. In very successful windy states, Kansas is limited to 25 MW, Oklahoma 600 MW, and Nebraska 62 MW total new wind between 2020 and 2030.
Does this make sense?
No. This flies in the face of recent trends and plans for future development. For example, Texas had over 8,000 MW and SPP had over 3,175 MW of wind under construction or under development with a power purchase agreement at the end of 2014, according to AWEA. AWEA also reports 95.8 GW of wind projects were in transmission queues around the U.S. at the end of 2014, including 23.9 GW in ERCOT and 14.3 GW in SPP.
In that work, EVA defies credibility with projections of zero new wind added from 2016 onward in these regions where wind performs better and cheaper than anywhere in the U.S. In 2013, average wind power prices in the interior region of the country were $22/MWh with the production tax credit, according to the definitive energy lab study. Even without the PTC, projects in this part of the country would be cost-competitive with new natural gas combined cycle plants.
For the solar numbers, predictions are tough, because solar is growing so quickly. The CEO of Southern Company, which serves among other states, Alabama and Mississippi, said in recent interview that his company is investing $800 million in 2015 in renewables, and between $1.3 billion and $2 billion in subsequent years, with the majority to be in solar. (“Utilities plan a surge of solar, wind in Southeast” Energywire, Nov. 19, 2015.)
This latest EVA study offers flaws and misinformation. An honest reader should be able to spot the flaws.