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‘War on Coal’ is Not the Real Reason Your Utility Rates Will Go Up

| Monday March 24th, 2014 | 0 Comments

7681112366_6e465d4d17_zWith new EPA regulations for coal-fired power plants looming ahead, the coal and utilities industries have issued sharp warnings about the impact of another “war on coal.” The argument goes that the cost of installing pollution-scrubbing equipment, and/or shutting down outdated coal-fired power plants, is passed directly along to the consumer in the form of higher rates. The U.S. economy also feels the impact, so the argument goes, in terms of higher business costs, lost employment opportunities and a competitive advantage for coal-using companies overseas.

However, given the past record of accuracy for those warnings, it looks like a bad case of déjà vu all over again. According to a history of similar warnings about coal regulation compiled by the Center for American Progress (CAP), those predictions fail to account for the positive impact of innovation, as well as the economic counterbalance of improved public health.

Meanwhile, within the broader issue of U.S. infrastructure, CAP draws out an important point: In the coming years, the main driver of utility rates will not be the power plants or the fuel they use, it will be the urgent need to overhaul the nation’s aging, badly outdated electricity distribution and transmission grid.

A history of the ‘war on coal’

The CAP article, by Daniel J. Weiss Miranda Peterson, is well worth a read in full (here’s that link again), but for those of you on-the-go, here is brief summary of the failed predictions they uncover through more than 40 years of the EPA’s war on coal:

  • 1970s: The war on coal set predicted that 1970 Clean Air Act regulations would spark “huge” utility rate hikes. By 1982, the Congressional Budget Office concluded that the impact was low.
  • 1972: Similarly, a West Virginia environmental official testified that the Clean Air Act would result in costly compliance errors over a 25-year period, a prediction also later debunked by the Budget Office.
  • 1977: Utilities and related industries predicted an “economic disaster” from new pollution scrubber regulations. By 1981, the National Commission on Air Quality determined that was wrong, and the bipartisan group had the figures to prove it. The estimated cost of installing new equipment was $16.6 billion in 1978, while the economic benefits of improved air quality ranged from $4.6 billion to $51.2 billion per year.
  • 1989: In response to the acid rain bill, the lobbying group Edison Electric Institute (EEI) issued a detailed report predicting a dramatic rise in electricity rates over a 20-year period. CAP’s own analysis of actual utility rates in 2009 — 20 years later — showed that the prediction was “flat-out wrong.”

Innovation and the war on coal

Weiss and Peterson argue that the “war on coal” complaints go off-track because they fail to account for the ingenuity of the U.S. research and engineering sector:

The EEI study proved false because it ignored the innovation and savings that occur once managers and engineers have binding reduction targets with firm deadlines. In other words, EEI’s study could not predict nor account for future innovation. In reality, numerous studies found that regulation can stimulate creative invention. The EPA found that the Clean Air Act19 prompted the deployment of new technologies to reduce sulfur dioxide and nitrogen oxide emissions, which are ingredients in acid rain and smog.

That’s not even counting more recent innovations, namely the emergence of utility-scale wind power and low-cost solar power, and the rise of the distributed electricity generation model — along with the development of new energy storage technology.

As for the competitive advantage, as public awareness grows around the issue of global warming and other forms of fossil fuel pollution, the business sector has become more attracted to clean energy as an effective branding tool.

It’s also worth noting the Chicago example, which illustrates that utility costs are only one factor in a strong local and regional economy, and the benefit of public health improvements may far outweigh the cost of paying a premium for clean, renewable energy over coal.

Image credit: Flickr/Yidjp_2b

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