Wednesday, May 18, 2016

Clean Power Plan:  Climate Regs Could Have Modest Impact on Electricity Prices -- EIA

Under one implementation option for the Clean Power Plan, the U.S. Energy Information Administration projects that coal's share of electricity generation would fall from 33 percent to 18 percent in 2040. Without the plan, coal would represent 26 percent of generation in 2040. (Graph Credit: EIA) Click to Enlarge.
Electricity prices in the later years of U.S. EPA's Clean Power Plan might be 3 percent higher than without the rule, according to an early release of part of the U.S. Energy Information Administration's outlook for 2016.

Those figures are significantly lower than analyses cited by opponents of the climate rule that project 11 to 14 percent increases.

"The national average prices are higher as the rule's introduced, and it peaks about 2025, but by 2040 they're back pretty much to the same place," said Paul Holtberg, EIA's program lead on the analysis.

In response to its critics, EPA often insists that while the Clean Power Plan may result in higher electricity prices, electricity bills will be lower under the regulation because of increased energy efficiency and reduced demand.  EIA's case study found electric demand would be 2 percent lower in 2030 with the Clean Power Plan than without it, which is a far less significant decrease in demand than EPA projects, Holtberg said.

But some said the numbers could still bolster EPA's case that the Clean Power Plan won't leave Americans with much higher electricity bills.

"Importantly, this 3 percent increase is limited just to electricity prices; EIA assumes that in the Clean Power Plan, electricity providers purchase CO2 allowances, the revenues of which are rebated to ratepayer bills," Synapse Energy Economics Inc. said in a statement following the outlook's release.  "As a result, the full effect on out-of-pocket spending on electricity by ratepayers is lower than 3 percent, or even zero."

However, experts say the rule's final costs could vary depending on gas prices, future policies and how states implement the regulation.
EIA will publish the full report in July.  The agency cautioned that the analysis incorporates only existing laws and policies and "is not intended to be a most likely prediction of the future."

Clean Power Plan 'exaggerates' current trends
Under the Clean Power Plan, coal power would fall to 18 percent of U.S. electricity generation in 2040, compared with 33 percent last year, according to EIA's outlook.

In contrast, coal would make up 26 percent of power generation in 2040 without EPA's greenhouse gas regulation.

Renewable power and natural gas will grow and coal will decline regardless of the Clean Power Plan.  Renewable tax credits, reduced solar photovoltaic capital costs and low natural gas prices will all contribute to that shift, although it would happen faster under EPA's rule, EIA found.

Read more at Clean Power Plan:  Climate Regs Could Have Modest Impact on Electricity Prices -- EIA

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