U.S. Chamber of Commerce link

Energy Blog

Sean Hackbarth Electrical meterPhotographer: Kenneth Freeman/Flickr. Licensed under a Creative Commons Attribution-ShareAlike 2.0 Generic license.

Here are a few energy-related items you might have missed this week.

1. Take a look at your electrical bill. You are probably paying more, as CNSNews.com reports:

For the first time ever, the average price for a kilowatthour (KWH) of electricity in the United States has broken through the 14-cent mark, climbing to a record 14.3 cents in June, according to data released last week by the Bureau of Labor Statistics.

Before this June, the highest the average price for a KWH had ever gone was 13.7 cents, the level it hit in June, July, August and September of last year.

The 14.3-cents average price for a KWH recorded this June is about 4.4 percent higher than that previous record.

The story also notes, “In each of the first six months of this year, the average price for a KWH hour of electricity has hit a record for that month. In June, it hit the all-time record.”

EPA’s proposed carbon regulations will raise electricity prices even higher by reducing energy diversity.

2. Speaking of EPA’s proposed carbon regulations, thousands of union workers protested against them in Pittsburgh [subscription required]:

The United Mine Workers of America and other unions who organized the rally argue that the EPA rule to lower carbon emissions by 30% by 2030 based on 2005 levels would boost electricity prices and cost more than 65,000 jobs mostly across Appalachia, while doing little to address climate change globally.

“It’s going to be devastating if it goes through in its current form,” Cecil Roberts, president of the UMWA, said in an interview before the protest.

Unions opposing the proposed rule argue that U.S. workers will pay the price for lowering emissions domestically while other countries–most notably China, where coal usage has grown rapidly–will continue to burn coal and emit carbon dioxide.

3. Continuing on the theme of EPA’s proposed carbon rules, regulators in charge of power grid reliability told a House committee that EPA has had few discussions with them:

The role of FERC [Federal Energy Regulatory Commission] in the inter-agency consultation process at EPA remains unclear. FERC Chairman Cheryl LaFleur wrote in her written responses to the subcommittee’s questions that she met with EPA officials to discuss the draft Clean Power Plan proposal, but none of the other FERC Commissioners said they were involved in the process. Further, there was no formal partnership between EPA and FERC in coming up with EPA’s power grid reliability assessment for the proposed rule.

[T]he EPA left FERC out of its formal process to evaluate reliability problems despite FERC’s obvious expertise in electric reliability. Furthermore, EPA’s own reliability assessment should be treated as “more speculative than informative” for the reasons outlined in Chairman LaFleur’s written responses.

4. North Dakota's oil boom has resulted in a boom in air travel:

In Minot, N.D., a two-hour-plus drive from Williston, airport-passenger traffic has more than tripled in three years. Four airlines—Delta, United, Frontier and Allegiant—serve that small airport with up to 15 flights a day. Last year, Dickinson, N.D., saw its airport-passenger traffic skyrocket 76%. And here in Williston, Delta has four flights a day to Minneapolis, while United has four flights a day to Denver and will add a daily flight to Houston on Aug. 19. Planes are leaving with, on average, 85% of seats filled, the airport says.

5. On a lighter note, Mother Nature gave the cold shoulder to former Vice President Al Gore’s global warming group:

The Climate Reality Project brought its “I’m Too Hot” trucks and offers of free ice cream to this week’s Environmental Protection Agency hearings on power-plant emissions, but the climate wasn’t cooperating.

The plan was to tout the EPA’s emissions proposal as a solution for hot weather brought on by global warming, but when the hearings began at 9 a.m. Wednesday in Denver, the temperature was a chilly 58 degrees. Plus, it was raining.

The other cities hosting the hearings Wednesday were also hit by cooler-than-usual temperatures. The high in Atlanta was forecast at 82 degrees, while it was a pleasant 70 degrees in Washington, D.C., when the hearings began at 9 a.m.

Weather has complicated Gore’s events so often that it has been dubbed the “Gore Effect.”

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

Sean Hackbarth  Andrew Harrer/Bloomberg.EPA Administrator Gina McCarthy. Photographer: Andrew Harrer/Bloomberg.

We’re into Day 2 of EPA’s public hearings on its proposed carbon regulations that are taking place across the country over the next few days—unless you live in one of the states most reliant on coal for electricity.

Yesterday, I noted three potent arguments for why the proposed regulations are bad policy. Here are four more based on President and CEO of the U.S. Chamber’s Institute for 21st Century Energy Karen Harbert’s testimony.

1. The proposal is a significant threat to American jobs and the economy.

The proposed regulation will cost billions of dollars resulting in significant jobs losses:

EPA itself estimates that its rule will increase electricity prices between 6 and 7 percent nationally in 2020, and up to 12 percent in some locations.  This is on top of the 13 percent increase already forecast by EIA over that time period. EPA estimates annual compliance costs between $5.4 and $7.4 billion in 2020, rising up to $8.8 billion in 2030. 

It is important to note that these are power sector compliance costs only, and do not capture the subsequent spillover impacts of higher electricity rates on overall economic activity.  Even if these costs were accurate, these increases will place an immense burden on U.S. businesses, and could eliminate the critical competitive advantage that affordable and reliable electricity provides to the American economy.

The United Mine Workers Association has estimated that this rule will result in 187,000 direct and indirect job losses in the utility, rail, and coal industries in 2020, and income losses from these sectors of $208 billion between 2015 and 2035.  

An IHS study found that less energy diversity that will result from EPA's regulations will mean higher and more volatile electricity costs, lost jobs, and reduced family incomes.

2. EPA’s proposal lacks flexibility.

EPA Administrator Gina McCarthy claims that EPA’s proposal is built on “flexibility.” She used that word eight times in her June speech announcing the regulations. Harbert explains that the actual proposal says otherwise:

[B]y incorporating reduction measures beyond affected sources, EPA was able to tighten individual state targets substantially. If the emissions reductions called for from one individual building block are not met, they must be made up for through even greater reductions in another building block.  Because individual building block targets were set at aggressive levels, there is little to no “wiggle room” between options.  As a result, and unless EPA incorporates true flexibility into the rule, we expect states will face major compliance challenges. 

3. There are transparency, process, and timeline problems.

EPA’s proposed carbon regulations run over 1,600 pages and establish carbon emissions targets for each state. However, the agency hasn’t offered the data or a rationale that justifies the different targets:

In order for states and stakeholders to fully evaluate the impacts of EPA’s proposal, EPA must better explain and disclose underlying assumptions and data that serve as the foundation for its binding emissions targets on states. EPA has to date failed to address these issues, provided little to no information regarding what authority it is relying upon to institute such an “outside the fence” [beyond a power plant] expansive regulatory regime, nor how it intends to proceed if it does not approve of individual state implementation plans.

In addition, more time is needed to examine this proposal that will force a redesign of America’s power system. Harbert advises that EPA should include an interactive component to public meetings “so impacted stakeholders can ask EPA direct questions and get answers regarding the proposed rule.”

4. It won’t result in meaningful carbon emission reductions.

Even if you ignore the harm it will have on electricity prices, jobs, household incomes, and the economy, the proposed regulations will have a negligible global impact [emphasis hers]:

The EPA estimates that in 2030, its proposed rule would reduce CO2 emissions 555 million metric tons below current projections which represents only 1.3 percent reduction of projected global emissions in 2030. Because non-U.S. CO2 emissions are projected to grow by 41 percent between 2010 and 2030, EPA’s proposed rule will offset the equivalent of 13.5 days of Chinese emissions in 2030, based on U.S. Department of Energy projections.

Senior administration officials have publicly emphasized that absent similar actions by other major economies, U.S. regulations to reduce carbon emissions will not succeed.  In fact would simply result in moving emissions to other countries that have not implemented similar restrictions.

Let’s review. EPA's proposed carbon regulations:

Threaten American jobs and the economy. Aren't flexible. Lack transparency and are being rushed. Will have negligible effects on global carbon emissions.

In short, EPA’s proposed carbon regulations will be all pain with little gain.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

Sean Hackbarth EPA Headquarters in Washington, DC.EPA Headquarters in Washington, DC.Photographer: Coolcaesar/Wikimedia Commons. Licensed under Creative Commons Attribution-Share Alike 3.0. license.

A circus atmosphere surrounds the locations of EPA's two days of public hearings on its proposed carbon regulations. For example, campaign-style rallies are being held in Atlanta—where the hearings were moved due to power outage, and Ben & Jerry’s is dishing out free ice cream in Washington, DC.

Let me remind you that of the locations where EPA is holding public hearings, none will take place in any of the ten states most reliant on coal for electricity. For EPA Administrator Gina McCarthy, this is what she considers to be part of her agency's “unprecedented outreach.”

There may be a carefree atmosphere outside, but it’s serious inside the hearings where over the next two days 1,600 people will testify on EPA’s costly regulations that will reshape America’s power system. One of those was Mary Martin, energy, clean air, and natural resources policy counsel for the U.S. Chamber. She delivered three potent arguments against the proposed regulations.

1. EPA failed to study how the proposed regulations will affect small businesses.

EPA has taken a “very myopic view” and avoided how the proposed regulations will affect small businesses, Martin explained:

As EPA itself admits, electricity prices — which are one of the largest concerns of small businesses — will go up as a result of this proposal. In fact, energy costs are one of the top three business expenses for 35% of small businesses.

Yet, EPA hasn’t convened a Small Business Advocacy Review as it’s obligated to do under the Regulatory Flexibility Act. The review would look at how electricity price increases as well as possible compliance burdens imposed by state and regional plans would affect small businesses.

2. EPA is rushing the proposed regulations.

Because of the vast scope and complexity of the proposed regulations, more time is needed to analyze them, Martin argued:

Based solely upon the magnitude and breadth of this proposed regulation, the comment period should be extended by at least 60 days to give the various stakeholders more time to understand and analyze the potential impacts of the proposal. Additionally, there should be more time in the process for the states to understand the complexities of an extremely technical rule that goes beyond traditional environmental regulation and delves into the world of energy generation and distribution.

3. There are major problems with EPA’s cost-benefit analysis.

While the proposed regulations are about reducing greenhouse gas emissions, much of the benefits come from reductions in other emissions, Martin stated:

The EPA continues to justify a regulation with benefits that are derived not from the pollutant that the EPA cites as the justification for promulgating the regulation (carbon dioxide), but from pollutants incidentally reduced by the primary regulatory requirements (ozone and particulate matter). For example, under the state compliance approach, the EPA estimates that “the climate benefits in 2020 are expected to be approximately $18 billion ...“ while the “[h]ealth co-benefits are estimated to be $17 to $40 billion.”

She also noted that the carbon benefits are based in part on a “social cost of carbon” estimate that lacks transparency and hasn’t gone through the rulemaking process.

This isn’t the only instance of EPA puffing up the potential benefits from its proposed carbon regulations. EPA Administrator Gina McCarthy has stated that by 2030, the proposed regulations will deliver $30 billion in climate benefits. What she didn’t say, and what was noted by scholars from the Brookings Institution, is that most of those benefits will be global benefits. “Only 7 to 23 percent of these benefits would be domestic benefits,” write Ted Gayer and Kip Viscusi.

There are problems on the cost side of the equation as well. Martin points out that EPA hasn’t analyzed the proposed regulations’ effects on jobs:

Finally, the EPA persists in its failure to consider in any significant way the employment impacts of Clean Air Act regulations like this one. The Agency did not use a whole-economy modeling approach here, which would have captured a much more accurate picture of the likely job losses from this proposal. The EPA also continues to avoid undertaking an employment analysis under Section 321(a) of the Clean Air Act, which requires the continuous review of potential job losses and shifts in employment due to the implementation of the Act.

Let’s sum this up:

EPA hasn’t examined possible effects of its proposed carbon regulations on small businesses, as it’s obligated by federal law, Despite its scope and complexity, EPA is rushing them through the process; EPA’s cost-benefit analysis is questionable at best.

That’s all that could fit into five minutes, but this only scratches the surface on why this proposed regulation is bad policy. There’s more to come.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

Sean Hackbarth Power outage.Photographer: fun3MD/Flickr. Licensed under a Creative Commons Attribution 2.0 Generic license.

This is not a story from The Onion.

EPA is moving its Atlanta public hearings on proposed carbon regulations next week because of a power outage.

An email from an EPA staffer explained the situation [emphasis hers]:

Please be aware that as the result of a large scale power outage at the Sam Nunn Atlanta Federal Center, EPA will hold the July 29 and 30, 2014, Atlanta Clean Power Plan public hearings at the Omni Hotel. While repairs are underway at the Federal Center, there is no guarantee the facility will be fully operational in time for the hearings. This led to the agency’s decision to change locations.

 The hearing dates and times have not changed.

According to local news reports, an internal power outage has kept the building closed all week.

Ironically, the carbon regulations that will be discussed at the hearing will make the electrical grid less reliable and more vulnerable to price spikes.

“This significant power outage is either cruel irony or a glimpse of a coming cruel reality if the Obama Administration and the EPA are successful in their quest to end the use of affordable, reliable coal,” said Laura Sheehan, senior vice president for communications at the American Coalition for Clean Coal Electricity.

Let me also remind you that EPA hasn’t scheduled any hearings on the proposed carbon regulations any of the ten states most reliant on coal for electricity, such as Wyoming, West Virginia, or Missouri--where the lights are presumably still on.

Sean Hackbarth Electrical linesPhotographer: Kevin Dooley/Flickr. Licensed under a Creative Commons Attribution 2.0 Generic license.

Both my grandmother and my financial adviser told me, “Don’t put all your eggs in one basket.” This aphorism helps me manage life’s inherent risk and uncertainty. Unfortunately, Washington policymakers aren’t heeding this advice when it comes to energy policy.

EPA’s proposed carbon regulations would make coal an energy “loser” and drive it out of America’s fuel mix. This would make electricity production more reliant on natural gas for baseload power and more reliant on wind and solar for intermittent power.

What would a reduction in power supply diversity mean for electricity costs and our economy? The U.S. Chamber’s Institute for 21st Century Energy, the Edison Electric Institute, and the Nuclear Energy Institute asked research firm IHS to study this question. After looking at data from 2010-2012, the report found that, compared to a less diverse case with no meaningful contributions from coal and nuclear, our current mix of energy sources has lowered electricity generating costs by $93 billion per year while also reducing price volatility. With less diversity wholesale electricity prices would have been 75% higher and retail prices would have been 25% higher.

Since many industries buy electricity on the wholesale market, higher prices would mean fewer resources available to invest and hire workers. IHS estimates that the economic pain from less energy diversity would be over one million jobs lost and annual household disposable income reduced by around $2,100.

“The federal push to eliminate coal and favor some technologies over others could turn a major strength of our nation—a diverse supply of electricity resources—into a big vulnerability,” said Karen Harbert, president and CEO of the Energy Institute

IHS explains why energy diversity is best for electricity consumers:

Engineering and economic analyses consistently show that an integration of different fuels and technologies produces the least-cost power production mix. Power production costs change because the input fuel costs—including for natural gas, oil, coal, and uranium—change over time. The inherent uncertainty around the future prices of these fuels translates into uncertainty regarding the cost to produce electricity, known as production cost risk. A diversified portfolio is the most cost-effective tool available to manage the inherent production cost risk involved in transforming primary energy fuels into electricity. In addition, a diverse power generation technology mix is essential to cost-effectively integrate intermittent renewable power resources into the power supply mix.

We’ve lived so long with a diverse energy portfolio that we take it for granted. This past winter during the polar vortex, many Americans benefited from our diverse energy mix as Heath Knakmuhs, senior director of policy at the U.S. Chamber’s Energy Institute explains:

The colder temperatures in some parts of the country stretched natural gas demand, and utilities turned to coal to provide power. While increasing natural gas production is a very good thing for our economy and our security, it should not be at the expense of other sources.

If EPA’s greenhouse gas policies were already in effect, many Americans would have been shivering, sitting in the dark, or both. Energy policies that drive abundant fuels like coal out of the market will result in higher electricity costs, jobs lost, and families hurt.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.