EPA Clean Power Plan Costs

The EPA is proposing the Clean Power Plan (CPP) to reduce greenhouse gas emissions by 30% by 2030 from their amount in 2005.  This is part of the program to reduce total US emissions by 30% by 2030 from their amount in 2005.  We are apparently about half the way there.  Since emissions from the power sector are 32% of total emissions, the power sector is a crucial part of the overall plan.  The emission reductions vary for each state, depending on how clean their current energy sources are.

An analysis by Energy Ventures Analysis (EVA) gives the projected increase from 2012 to 2020 per household at $680 per year, a 35% increase, in current (nominal) dollars.  In projected real dollars, the EVA report gave the rise as less than half of that as $293, a 15% increase.

On December 5, 2014, Stephen Moore, Chief Economist of The Heritage Foundation, wrote an editorial for the Orange County Register showing the cost of the new proposed Clean Power Plan (CPP) of the EPA, but only indicating the $680 per year increase, not the $293 cost in real dollars, which is only 43% of the cost in current dollars.

Stephen Moore also said that was the effect of the CPP alone, but the EVA analysis included the effect of all EPA regulations, including those that lead to cleaning smog causing nitrous oxides and acid rain causing sulfur dioxides from the exhaust gases, all of which we greatly appreciate.  The EVA analysis also adds the cost of residential natural gas to the cost of electrical power.  The EVA analysis also does not fold in all the cost savings from efficiency increases that are part of the Clean Power Plan.

His editorial did not delve further into the assumptions of the EVA analysis, which assumed a 135% increase in natural gas prices in current dollars, or 100% in real dollars.  Here is an actual EIA graph of the projected price of natural gas.

Natural gas price projections








It is not clear how much of the cost increase is due to the projected rise in natural gas alone.  Natural gas prices are very hard to predict, since there is a debate about the extent of cheap shale gas from plays.  Also, a large Liquid Natural Gas export trade in the future could drive up prices to compete with much higher international prices.  The EVA report seems to be closer to the “Reference Case” in the graph, and should be extended to cover the full range of prices shown in the EIA projections, including the much lower “Low natural gas price case”.  So it is not at all clear from the EVA how much cost rise is due to the currently protested and debated CPP rule on coal power itself, and how much to the assumed increase in the cost of natural gas.

I do agree that Stephen Moore is rightly concerned about the high cost increases, especially to poor families.  Programs are needed on a Federal or State level to give cost reductions to poor families, as already exist in California.

For the case of California in the EVA report, the combined gas plus electrical residential cost increase would be increased $249 in current dollars by 2020 over 2012, a 17% increase, but they don’t give the increase in real dollars.  For the residential electricity bill alone, an EVA table gives an increase of 11% in current dollars, or -5% in real dollars.  That may largely be because we do not have coal power plants directly in the state.

About Dennis SILVERMAN

I am a retired Professor of Physics and Astronomy at U C Irvine. For a decade I have been active in learning about energy and the environment, and in lecturing and attending classes at the Osher Lifelong Learning Institute (OLLI) at UC Irvine.
This entry was posted in California Power Mixes, Climate Change, Coal, Electric Power, Energy Efficiency, Fossil Fuel Energy, Greenhouse Gas Emissions, Natural Gas, Renewable Energy, Solar Energy, Wind Energy. Bookmark the permalink.

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