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Backers of New Carbon Rule See Many Benefits

Despite warnings from doomsayers, Eastern states found that reducing emissions had positive effects for both the environment and the economy

Posted on Jun 19 2014 by Scott Gibson

New carbon pollution limits for existing power plants announced by the Environmental Protection Agency have lobbyists warning of economic disaster, but a five-year-old alliance of nine Eastern states has already shown it could provide a major environmental and economic boost.

That's the gist of a post by Dale Bryk at Switchboard, a website for the Natural Resources Defense Council (NRDC). She compares public reaction to the new EPA rules with that of the Regional Greenhouse Gas Initiative (RGGI).

Bryk, deputy director of programs at the NRDC, said the EPA's June announcement was followed by howls of protest from critics, including a full-page ad in USA Today suggesting that new regulations could close a quarter of the nation's power plants.

But, she writes, the RGGI experience suggests they're wrong.

"NRDC’s own analysis shows power plant standards done right can deliver huge economic benefits, as states shift more of their energy dollars to clean resources like energy efficiency, wind and solar power, putting hundreds of thousands of building contractors, plumbers and electricians to work helping our homes and businesses reduce their energy bills with better lighting, high efficiency heating and cooling systems, advanced windows and insulation," Bryk wrote.

Market-based regulatory structure

The regional initiative brought together Republican and Democratic governors from nine states: Maryland, New York, Maine, Vermont, Rhode Island, Delaware, New Hampshire, Connecticut and Massachusetts.

RGGI set limits on carbon emissions in the region and required power plants with a capacity of at least 25 megawatts to buy pollution permits for the amount of carbon they vented into the atmosphere. Proceeds from the sale of permits are used by individual states to fund energy efficiency and renewable energy programs.

At the time, Bryk writes, "polluter lobbyists came up from Washington and told us it would be the end of western civilization as we know it. They literally said that."

But the effect has been just the opposite: carbon pollution in the region has declined by nearly 30%, and the area also has seen electricity rates drop by an average of 8%, economic development benefits of $2.4 billion, and cleaner air. "And the entire RGGI region as a whole is well on its way to meeting the new federal standards," she says.

California, she adds, has a similar program and is seeing similar benefits.

Since 2009, she says, carbon emissions in RGGI states have dropped 2.7 times faster than in the rest of the country, while RGGI economies have increased 2.5 times faster.

"Interestingly, the companies that actually own the power plants in question are rolling up their sleeves to figure out how to reduce pollution in the smartest and most efficient way possible," Bryk says. "Even major electric utility companies like American Electric Power and Southern Company — not traditionally at the forefront of clean energy investment — say they want to shape the new standards, not prevent EPA from moving forward."

Government sees many benefits, too

The EPA said the clean power plan will cut carbon pollution from power plants by 30% from 2005 levels by 2030, and reduce soot and smog-producing pollution by more than 25%. That's the equivalent of taking two thirds of all the cars and trucks in the country off the road.

Among the positive effects of the plan, the EPA says, is the avoidance of as many as 6,600 premature deaths and up to 150,000 asthma attacks in children, as well as billions in economic benefits. Electric rates should go down by 8% in 2030.

According to The New York Times, the EPA pegged the direct cost of the program at between $7.3 billion and $8.8 billion, but said it would lead to benefits of as much as $93 billion.

Critics said the new rules would lead to higher costs for electricity. Senate Republican Leader Mitch McConnell of Kentucky said it was a "dagger in the heart of the American middle class," according to Fox News, and the Republican Party Chairman Reince Priebus cited U.S. Chamber of Commerce estimates that the regulations would kill 224,000 jobs.

States have until 2016 to work out the specifics of how they will meet the targets. Opponents in Congress say they'll try to block it.


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Image Credits:

  1. Warren Gretz / National Renewable Energy Laboratory
1.
Thu, 06/19/2014 - 08:43

Electricity rates have not dropped at all!!
by Sonny Chatum

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What a disgrace. Electricity rates in Maryland have not dropped at all .....ever!!!! People just throw around bs numbers and other people just pick up on them as if they are real. If electricity rates have dropped by 8% on average among the rggi states, then there must have been one hell of a drop in other statest (NOT) to achieve that 8%, because it has not happened in Maryland. In 2006, I was paying about 8 cents and now I am paying 14 cents........period..................What a disgrace.


2.
Thu, 06/19/2014 - 10:00

Electricity rates.
by Joshua van Tol

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Retail rates and wholesale rates are not always directly tied. Costs for distribution are likely dominant for residential electricity rates.


3.
Thu, 06/19/2014 - 16:07

A bit o' history for Sonny
by Dana Dorsett

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In 2005 (before the RGGI) the state average residential retail delivered price of electricity:

Massachusetts was 13.44 cents/kwh
Maryland the price was 8.46 cents.

(See pp 104 & 113, PDF pagination) http://www.eia.gov/electricity/state/archive/062905.pdf

In 2007, the year both MA & MD signed the Memorandum of Understanding for the RGGI the residential retail average:

MA was 16.23 cents/kwh ..
MD was 11.89 cents/kwh

(See pp 128 & 134) http://www.eia.gov/electricity/state/archive/062907.pdf

In 2012 (the most recently released full-year numbers) the average retail price in MA

MA was runnnin13.79 cent/kwh, (a reduction of more than 15% below the 2007 signing year number)

MD average retail pricing was 11.28 cents, (a reduction of about 5%)

http://www.eia.gov/electricity/state/massachusetts/
http://www.eia.gov/electricity/state/maryland/index.cfm

The complete statistics for 2013 have not been published, but the Q1 2013 price in MA was 14.77 cents (still 10% below the 2007 price), and in MD it was 12.56 cents, 6% higher than 2007.

As natural gas prices have more than doubled the recent residential retail pricing in MA has risen to about 17.33 cents/kwh, edging out the 2007 numbers (but about dead-even, in inflation-adjusted dollars), while in Maryland the prices are running 13.57 cents/kwh, or 16% higher than 2007 (nominal, not inflation adjusted.)

http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a

It all depends which years you want to average the pricing over, but you can't just cherry-pick the cheapest or most expensive year of a decade and compare it to last week's pricing. Pricing is volatile, though regulated. To be sure the 5 year average in MA has been well below the average price the year the RGGI was signed, even if the Q1 2014 price is slightly higher in nominal dollars.

But signing onto the RGGI has not dramatically moved the price in either direction. Some of the carbon reductions attributed to the RGGI would have taken place anyway (there's always a bit of political theater going on), but that's not to say it had NO effect. It sure hasn't broken the bank though.

There's plenty of theater in the EPA standards too. Pegging it to 2005 emissions levels ( the peak year for US power plants) means credit is being taken for the substantial reductions already achieved. And when you look at the 2005-2014 reduction ramp rate for the whole US, to ONLY hit the target levels going forward would require that we slow down how quickly we are cutting- overshoot of those targets is all but assured(!). But there is still some rationale for putting on the show- it gives a semblance of a plan, a plan with which to apply diplomatic pressure on other high-carb countries (China & India) to submit plans too.

The recently elected Indian PM, Narendra Modi has been talking up renewables and making promises during the campaign, but less well understood aspect of Indian coal-fired expansion is that they are already tapped out: The do not have sufficient cooling water to run their existing coal fleet at capacity, and the corrupt Indian coal companies that lobbied to created that coal-fired generation market can't even supply the necessary fuel, which has put India in the position of having to spend hard-currency reserves on expensive imports from Indonesia & Australia. Add it up, and India's coal-fired emissions don' have much room to move up no matter what they do. So, Modi will (rightly) promote more expansion of renewables, and will likely sign up for emissions caps, and take credit for it (more political theater.)

Similarly, soot & sulfur emissions from power generation in China have hit crisis levels, making cutbacks in regional/local coal fired power a life & death situation. Wind and PV in China are rapidly hitting lifecycle cost parity with coal fired power anyway, (a fact that made China the worlds largest installer of both last year), so they too will likely be willing to sign up, pretending it is a magnanimous sacrifice, a gift to the world, while the US claims victory for having "forced them to the table" with the EPA plan.

It's not ALL just that cynical, but the heavy political spin on this stuff is worth about a gigawatt of wind power in any of the national capitals. :-)

The good news is that it's not going to be a sacrifice for any of these countries to pull it together, as long as competition with the incumbent power generators isn't derailed by corruption or protectionist regulatory policies of local grid operators. This can be a real issue in the US, where lobbyists have considerable (often behind-the-scenes influence) at the state legislature & agency level, and that's where the EPA directive to "make a plan" may actually have some influence. For those states & regions that already have plans, the effect of the EPA directive is nil- most of those WILL overshoot the EPA targets. In India they are on an anti-corruption bent, having just thrown the bums out- we'll see if that means they can really undo some of the coal-plant deals currently under construction that have only negative economic merit. Undoing some of their domestic content rules on solar could make solar the cheapest way forward for stabilizing their grid & providing power to the far flung villages without the infrastructure costs of grid expansion.

Note, Modi did indeed preside over large solar expansion in the state of Gujarat during his tenure there. Jigar Shah, founder of the large vertically integrated US solar company, SunEdison was also born in Gujarat (though he was raised in the US), and has a personal interest in seeing solar succeed in India, as well as the rest of the world, and has been publicly outspoken in India on how they can get there. (Shah sold out his shares of SunEdison last year, but is still investing in solar here & elsewhere.) SunEdison-India has a lot of financial, technical & business backing, but are clearly not the only players.

http://www.bloomberg.com/news/2014-03-12/modi-signals-solar-revolution-f...

Either way, the EPA directive can only help the international situation, and will likely be cost-neutral to cost-negative for most US states (even without calculating the health benefits.)


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