The Environmental Protection Agency’s Clean Power Plant initiative could reduce emissions by a substantial 240 million metric tons if it’s not overturned by the courts. This constitutes a big piece of the package.
The Berkeley researchers then looked for additional reductions in GHGs. They identified 121 million metric tons fewer of GHG emissions by restricting methane emissions (which are greater than previously thought), 67 million from changes in refrigerator chemicals, and 29 million from efficiency measures. That still does not get us even close to attaining the 2 billion metric tons of GHG reductions targeted by our government. Even a more coal-restrictive stance by the EPA might “only” reduce GHGs by an estimated 407 million tons. That still leaves a big gap.
Electricity production in the U.S. accounts for roughly 30 percent of the nation’s annual greenhouse gas emission “budget”, about 2.1 billion tons. Existing and enhanced EPA restrictions would reduce that number to about 1.5 billion tons.
Imagine the discussion in the White House. “We have to adhere to the Paris standards for emissions but we are way short of cuts. As ‘Feds’, we can really influence two sectors, transportation and energy. It’s an election year. No way we tell Americas to give up SUVs and drive tiny cars. Too Jimmy Carterish. But electric companies could “decarbonize” more if somebody gave them a push. Besides, who understands their electric bill?”
Assuming the new data are correct, electric power generators may see increasing pressures for emissions reductions. The industry is just too big a piece of the nation’s carbon footprint. To us, the implications are an accelerated capital replacement cycle, more efforts at carbon capture and sequestration, and higher electricity prices.
These pressures are likely to occur as sales growth in much of the electric utility industry has been flattish in recent years. An added push for more renewables, due to a perceived shortfall in efforts to reduce greenhouse gas emissions, could “crowd out” existing fossil fueled generation. This is already happening in Texas where a temporary abundance of wind power displaces fossil and nuclear in the electric grid. Their solution? Build more transmission and move power from West Texas to cities like Dallas further east. In California, solar power can displace considerable fossil resources until demand peaks every evening.
It’s not that electric companies can’t adjust to this. But the systems were never built to compete on a price basis. They were strictly a cost plus operation and fully regulated to boot. Now they are forced to compete in wholesale power markets against sellers with zero fuel costs. They can’t.
Years ago California pioneered a technique (helped by Enron) to bankrupt utilities in short order. Restrain retail prices while effectively forcing utilities to purchase power in unregulated wholesale markets. We doubt we’ll see a return to the “bad old days” but it does point to the need for addressing how to reconfigure the grid, its changing operations and the challenges of running this hybrid system of fossil and renewables. The compensation schemes for all base load and intermediate forms of generation, especially fossil and nuclear, will ultimately have to be addressed. Most power generation assets are base load resources in a world that increasingly values “cycling”.
Regulated utilities at least still have relatively “captive” customers to absorb higher costs of environmental compliance and the lost revenues from renewable displacement. But wholesale power producers get no revenue guarantees apart from contractual arrangements. For them, environmental improvement can produce an economic cost as well as benefit.
Read more at Just How Hard Is It to Cut Greenhouse Gases?
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