The Cost of Clean Power

By Frank A Caro and Adrian LeCesne of Polsinelli

By Frank A Caro and Adrian LeCesne of Polsinelli

Missouri derives approximately 82 percent of its electric power from coal, but a new Environmental Protection Agency rule could require the state to shut down more than 21 percent of this generation, significantly impacting costs and reliability.

On June 2, 2014, the EPA announced its proposed Carbon Pollution Emission Guidelines for Existing Stationary Sources, dubbed the Clean Power Plan (CPP), which calls for a 30 percent reduction in carbon dioxide emissions from 2005 levels by 2030, along with interim goals to be achieved by 2020. The scope of regulation, timeline for reductions, and hefty price tag has many utilities and industrial power consumers in Missouri worried.

Frank A. Caro, fcaro@polsinelli.com

Frank A. Caro, fcaro@polsinelli.com

Many large power consumers and public utilities oppose the EPA’s proposed changes because of the increased investments in equipment, facilities, and retrofits that these system-wide changes will require, which some estimate could increase consumer rates by as much as 15 percent and will require review and approval from the Missouri Public Service Commission. They protest that the cost increases are too high and the risks to system reliability too great.

Some challenge the EPA’s legal authority to regulate aspects of the grid “outside of the fence” of generating facilities themselves and believe the legislature must address this oversight.

Currently, Missouri industrial and commercial electricity consumers enjoy some of the cheapest power in the country, approximately 18 percent below the national average.

Missouri Industrial Energy Consumers, which represents the majority of the state’s industrial energy users, believes the CPP is an “overly burdensome and excessively expensive” way to achieve the same results that Ameren Missouri’s existing electric resource plan would achieve by 2034.

Adrian LeCesne, alecesne@polsinelli.com

Adrian LeCesne, alecesne@polsinelli.com

Ameren’s proposed plan includes the 30 percent reduction in CO2 emissions in addition to expanding renewable generation by adding 400 megawatts (MW) of wind power, 45 MW of solar, 28 MW of hydroelectric and 5 MW of landfill gas renewable power generation. Ameren states its plan achieves the EPA’s goals for energy generation, but in a longer time frame. The company also claims its plan would save its customers an estimated $4 billion.

Calls have gone out for EPA to allow for additional hearings on whether the interim goals are realistic, listen to evaluations from independent experts on what energy efficiency goals are plausible and enforceable, and perhaps even allow utilities a few more years to replace the capacity lost as a result of this top-down policy adventure.

Missouri utilities, industries, and consumers anxiously await EPA’s response.

Building blocks
Because emission reductions can come from improvements across the entire electrical grid, the EPA has suggested a diverse mixture of emission reduction methods or “building blocks,” which include:

  • improving power plant efficiency by 6 percent,
  • improving the dispatch of existing coal and natural gas generation so that natural gas combined cycle plants run at 70 percent capacity,
  • installing additional zero-emission generation sources, and
  • increasing energy efficiency programs to reduce demand by 1.5 percent per year.

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