The Unseen Carbon Agenda: EPA wants to remove 7% of U.S. power generation

WSJ.COM  REVIEW & OUTLOOK OCTOBER 27, 2010

The Unseen Carbon Agenda

Anyone who cares about the U.S. economy is breathing easier now that cap and tax appears to be on the political garbage barge, but don't be so sure. The White House is still pursuing its carbon agenda through regulation, albeit with almost no public attention, and a new study shows the damage that is already being done.

Yesterday the North American Electric Reliability Corporation, a highly regarded federal energy advisory body, released an exhaustive "special assessment" of this covert program. NERC estimates that the Environmental Protection Agency's pending electric utility regulations will subtract between 46 and 76 gigawatts of generating capacity from the U.S. grid by 2015. To put those numbers in perspective, the worst-case scenario would amount to a reduction of about 7.2% of national power generation, and almost all of it will hit coal-fired plants, the workhorse that supplies a little over half of U.S. electricity.

The EPA's battery of new rules is mostly obscure, ranging from traditional pollutants such as mercury and sulfur to new regulation of coal ash and even water intake structures, which power plants use to cool down equipment. NERC notes that the "pace and aggressiveness" of issuing so many new rules at once is unprecedented. Keep in mind, too, that these are conservative estimates and don't even include the EPA's looming carbon "endangerment" rules.

Supposedly all this is separate from greenhouse gases, but the White House and the EPA are clearly targeting fossil fuels and coal in particular to achieve via rule-making what even the Democratic 111th Congress has rejected as legislation. As much as a fifth of the perfectly functioning coal-fired fleet will be forced into early retirement, to be replaced with a largely more expensive energy mix, especially natural gas.

Some plants can be retrofit with new environmental controls like scrubbers, but this is nearly as costly as building new plants from scratch. And just as you can't replace an engine while heading down the highway at 75 mph, this will still require shut downs in the interim, for at least five years.

In a recent research note, Credit Suisse estimates that compliance will cost as much as $150 billion in capital investment by the end of the decade. All of this will flow through to rising electricity prices, which is the same as a tax increase on businesses and consumers.

NERC also warns of "deteriorating resource adequacy" and of the logistical reality that replacing or upgrading so much capacity so fast may lead to brownouts and shortages. The danger is greatest throughout the Midwest in states like Ohio, Pennsylvania and West Virginia, where the costs will also be concentrated.

The larger point is that instead of debating a carbon program on the merits, the Obama Administration is now trying to impose the same burden step by step on the sly. At this point, the only way voters can stop the EPA is to install a check in one of the other branches of government. Election Day is Tuesday.