Policy & RESEARCH

Capitol Ideas

CSG Knowledge Center

Research Services

MLC Policy Resolutions

Stateline Midwest

States Perform

policy

New EPA emissions rules causing some of region's older power
plants to shut down

by Ilene Grossman ~ April 2012 ~ Stateline Midwest »
New rules by the U.S. Environmental Protection Agency that limit emissions from power plants have already had one effect: Some of the Midwest’s older coal-fired facilities are shutting down.
 
Two plants in the city of Chicago are being shuttered, one by the end of this year, as are generating units in Indiana and Ohio. What remains to be seen is the impact of these closures.
The EPA says the tougher regulations will improve health and reduce costs — fewer premature deaths, a reduction in hospital stays for asthma and other respiratory diseases, and better outcomes for children because they are not exposed to harmful levels of mercury.
But will these plant closures impact electricity reliability and consumer costs?
All of the plants being closed are older, and some operated only during periods of peak demand. Still, as Melissa McHenry, a spokeswoman for Ohio-based American Electric Power, notes, “Every plant that we are closing was operating during last summer’s heat wave.”
“The industry and the reliability coordinators don’t yet have a really good handle on how much generation will be retired,” McHenry says.

“The EPA’s estimate of shutdowns for just one of the new rules was 4,500 megawatts for all of the U.S. We [AEP] are shuttering more than that, and we are just one company.”
Utilities in almost every state in the coal- dependent Midwest will have to adhere to the new rules. Most likely to close are plants that run on coal and that are costly to retrofit because of their age.
The first of the new regulations is the Cross-State Air Pollution Rule, which requires reductions in emissions from a state’s power plants that lead to ozone and particulate pollution in another state. The rule was set to take effect in January but has been delayed by a court challenge. Utilities are given two years to comply.
The EPA announced standards for the second new rule in December. The rule requires power plants to meet specific numeric emissions standards for mercury and other toxic metals by 2014.
According to the EPA, the cross-state rule will yield up to $280 billion in annual health and environmental benefits, and the mercury rule up to $90 billion.
An industry-supported report on the impact of these rules and other proposed EPA regulations estimates that compliance will cost the industry $21 billion a year. That could cause the price of electricity to double in some regions of the country, the study concluded.
“These have been dubbed the EPA train wreck,” says Ned Leonard, a vice president for the American Coalition for Clean Coal Electricity. Even so, he adds, “We are not so much looking for relief from the standards, as relief from the timeline.”
McHenry says that since 2004, her company has invested $7 billion in retrofitting plants to meet environmental standards. But whether the cost makes sense depends on the age, size and location of a plant.
“There can be physical constraints,” Leonard adds. “In older plants in the middle of a city, there may not be space to add the equipment to meet the new standards.”
In addition to closing plants and upgrading others, utilities are using more natural gas and renewables.
But McHenry adds that “you can’t put in one of these plants overnight,” citing the large capital investment and a long permitting and building process.

 

Ilene Grossman serves as staff liaison to the Midwestern Legislative Conference Energy Committee. The committee’s co-chairs are Iowa Rep. Chuck Soderberg and Nebraska Sen. Deb Fischer.