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US Chamber of Commerce Blog

Sean Hackbarth Light bulbsPhoto credit: Scott Eells/Bloomberg.

The changes to electricity production and transmission required by EPA's carbon regulations will amount to billions in additional costs for electricity producers and higher prices for consumers.

An analysis of EPA's carbon regulations by the Southwest Power Pool (SPP), a regional grid operator covering parts of 14 states, found that the regulations will mean $2.9 billion yearly in additional capital and electricity production costs. What's more, nearly 14 additional gigawatts of affordable, dependable coal-fired electricity generation will be retired.

Since it gets most of its electricity from coal, it's no surprise that SPP has big problems with EPA's carbon regulations, but New York's power grid operator, which gets a sliver of its electricity from coal, is also worried, a recent Wall Street Journal editorial notes [subscription required]:

To take one example, the northeast blackout of 2003 cost about $13 billion, and the New York Independent Systems Operator now reports that the EPA's reductions "cannot be sustained while maintaining reliable electric service to New York City." It calls the plan "inherently unreasonable" that "no amount of flexibility can fix." This is not Texas talking.

Along with the additional costs, EPA's plan runs into permitting obstacles, Warner Baxter, Chairman and CEO of power provider Ameren, writes in The Wall Street Journal [subscription required]:

For example, if a new gas-fired power plant must be built to meet the EPA's 2020 interim target, all permitting and development would need to be completed by 2017. But that is impossible because state compliance plans might not even be submitted to the EPA until 2017 or 2018, and the agency has said it may take up to a year to approve them.

New pipelines and power lines will also have to be built to fuel new power plants and transport the electricity generated:

Beyond that, opening new natural-gas plants, as well as operating existing plants at higher levels, will require new pipeline infrastructure, and building natural-gas pipelines often takes five years or longer. More transmission lines will likely be needed to connect the new capacity to the grid. These projects can take 5-15 years.

Baxter concludes that meeting EPA's 2020 interim carbon emission targets "are simply not achievable."

This adds to the mounting opinion of power grid experts that EPA's carbon regulations will mean "all pain for no gain."

UPDATE: Rufus (@Rufus_GB) reminds me on Twitter that none of us should be surprised by EPA's actions. Then-Senator Barack Obama in 2008 told us electricity prices would "necessarily skyrocket."

Heath Knakmuhs

When consumers pay their electricity bills each month, they probably don't give it much thought.  While many probably expect to see higher bills when the heat or air conditioning have to run, they may not realize how much variance there is between states in the cost of electricity.

Each year, the Institute for 21st Century Energy analyzes electricity prices around the nation and creates a map showing the wide variances.  We rely upon information from the Energy Information Administration from the prior calendar year.  While retail electricity prices typically do not vary significantly from year to year, trends are noticeable when prior years are compared.  In 2014, which is the most recent year with full price data, every single state, except for Michigan, saw its electric rates increase.  So, if you thought that your electric bills were a bit higher last year, you were right. Unfortunately, with the federal government on a march to impose costly new regulations on the power sector, this trend is likely to continue for many years to come. 

Besides bringing greater understanding to consumers, our map helps demonstrate how certain policies drive prices.  Let's dig a little deeper.

Not surprisingly, Hawaii again owns the dubious title of having the most expensive electric rates in the country.  Alaska comes in behind the Aloha State at second highest. Given their unique geographic circumstances and complete isolation from the diverse sources of electricity that exist across the balance of the country, that's understandable and doesn't tell us much from a policy perspective.

However, the lesson begins with the next two states on the list, Connecticut and New York, which both impose more than 16 cent-per-kilowatt-hour electric prices upon their residents.  For comparison sake, these prices are more than double the rates enjoyed by the seven least expensive states.  The balance of New England, along with New Jersey and California, round out the nine most expensive states in the lower forty-eight.

What do these states share in common? 

For one, each of these states has turned its back on one of our most reliable and affordable sources of electricity:  coal.  While the nation on average obtains 37% of its electricity from coal, the biggest coal user among this group is Massachusetts, at a mere 8.8% of electricity production

Second, every one of these states either is, or has recently been part of, a carbon cap-and-trade scheme such as the Regional Greenhouse Gas Initiative (RGGI) or California AB32.  Despite what proponents of these policies might say, these initiatives clearly drive electricity prices higher. 

On the other side of the coin, the ten lowest-priced states enjoy low rates predominately due to their use of coal to generate electricity.  Seven of the lowest-priced states (West Virginia, Wyoming, Arkansas, Oklahoma, Kentucky, Iowa, and Utah) rely on coal more than any other resource, using it for between 40% and 95% of their electric power.  Two of the remaining lowest-priced states (Washington and Idaho) are gifted with plentiful hydroelectric resources which result from unique geographic circumstances in those states. 

While many states are speaking out against the EPA's plan to impose its own version of cap-and-trade across the country, the few states vocally supportive of the EPA's efforts would appear to fall into the "misery loves company" camp.  We can certainly understand why these high-price states may see a benefit to driving prices up for everyone else. Nevertheless, for the sake of consumers and economic growth, both the federal government and states should pay close attention to what has happened to electricity prices in states that have chosen more stringent regulations.  And at the very least, consumers should realize that they will be the ones paying for those choices. 

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Sean Hackbarth Hydraulic fracturing site located atop the Marcellus shale rock formation in Pennsylvania.A hydraulic fracturing site located atop the Marcellus shale rock formation in Pennsylvania. Photographer: Ty Wright/Bloomberg.

When hydraulic fracturing opponents can't stand on legitimate science, they resort to absurdity [emphasis mine]:

Not only is fracking destroying the environment -- it's sexist, too. At least that's the idea that ecologist/social-justice hero Sandra Steingraber presented to more than 100 students at the University of Pittsburgh on Monday during a lecture titled "Fracking Is a Feminist Issue: Women Confronting Fossil Fuels and Petrochemicals in an Age of Climate Uncertainty."

"This is a feminist issue because [the chemicals used and released in the fracking process] are largely reproductive toxins," Steingraber said, according to an article in the Pitt News, the school's official student newspaper.

"Are we using women and their infants as nonconsenting subjects in an uncontrolled human experiment?" she asked.

Serious science says, "No."

Steingraber based her claim on a paper by veterinarians Michelle Bamberger and Robert Oswald. The paper was declared to be "an advocacy piece that does not involve deep...analysis of the data gathered to support its case" by Dr. Ian Rae, co-chair of the Chemicals Technical Options Committee for the United Nations Environment Programme. So you can toss that aside.

Researchers who have done thoughtful work on this topic have concluded the exact opposite of what Steingraber and her ilk preach: Hydraulic fracturing is safe.

Two cabinet members, who understand the science, back these conclusions. "To my knowledge," Energy Secretary Ernest Moniz (and MIT physics professor) said, "I still have not seen any evidence of fracking per se contaminating groundwater." Interior Secretary Jewell, a former petroleum engineer, has also said hydraulic fracturing "can be done safely and responsibly."

More importantly, hydraulic fracturing's benefits don't discriminate. All Americans have gained from the able to produce more energy safely:

Hydraulic fracturing has delivered "an increase in welfare for natural gas consumers and producers of $48 billion per year." By 2025, shale energy will support 3.9 million jobs. American energy security has improved because of the shale boom.

To say hydraulic fracturing involves any sort of identity politics is absurd. It's a valuable technology that is improving the lives of all Americans.