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Good News: EPA Standards Could Lower Electricity Bills

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  • Sep 17, 2014
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By Mandy Warner

Source: Brendan Wood

Source: Brendan Wood

Millions of Americans are watching their bills more closely as middle-class incomes continue to stagnate in the nation’s uneven economic recovery.

So it’s frustrating to hear opponents of climate action once again use the threat of higher electricity rates as a scare tactic to try to stop the U.S. Environmental Protection Agency’s Clean Power Plan. We know it has many people concerned.

The good news is we have more evidence than ever before to prove our opponents wrong.

We pay the same rates for power now as in 1994

Electric rates in the United States have remained steady over the last 20 years, even as consumption of renewable energy increased 40 percent, statistics from the U.S. Energy Information Administration show. Over the same time, we reduced coal plant emissions of sulfur dioxide and nitrogen oxides by more than 75 percent.

The power sector has a long history of implementing clean air standards while delivering reliable power and doing so at lower-than-anticipated costs. Not surprisingly, EPA’s modeling shows that the average monthly electric bill will be $8 lower in 2030 with the Clean Power Plan than without it.

So why, then, would fossil fuel interest groups claim that electric bills are going to drastically increase whenever we talk about clean energy and reducing pollution from power plants?

It comes down to this: The proposed Clean Power Plan will place the first-ever national limits on carbon pollution emitted by power plants in the United States – a proposed rule that will shift the market toward clean energy and away from the dirtiest power producers and their shareholders.

Opponents of EPA’s plan point to utility bills – when it’s really about defeating clean air policies.

States would need to ramp up carbon-reducing measures such as energy efficiency and installation of renewable energy sources so the power sector as a whole can cut emissions by 30 percent in 2030, from 2005 levels.

Of course, nobody really opposes clean air. This is why opponents of EPA’s plan point to utility bills – when it’s really about defeating clean air policies.

Energy efficiency can save us billions

In California, the state’s efficiency standards have saved Californians $74 billion and avoided the construction of more than 30 power plants.

Now, remember that as our coal fleet continues to age it must be replaced, anyway. The industry is already facing competitive pressure from low- and zero-carbon resources – with or without new policies.

New coal-fired power plants are one of the costliest generation options even without considering the significant pollution they generate. If built in the next five years, they would cost about 19 percent more than onshore wind, 44 percent more than combined cycle natural gas, and significantly more than energy efficiency measures.

The energy sector is entering a new era, even if some players have yet to get onboard.

Clean power is already lowering bills

The cost of renewable energy has been dropping dramatically and wind is now competitive with coal in some places. The top 10 wind-producing states have average residential electricity prices that are lower than the national average.

The Clean Power Plan may just spell out what many in the industry already knew: Fossil fuels are not as cheap as they may seem. So why do opponents think they can fool consumers into thinking they’re better off with pollution?

Beats me. Today, more than ever before, we can show that clean energy is a good deal for you and me.

This post originally appeared on the EDF Voices Blog.

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John Miller's picture
John Miller on Sep 17, 2014

It can also be frustrating when some Federal Agencies grossly underestimate the costs of new regulations such as the recent EPA power generation reduced carbon standards.  Re. a recent TEC Post on this subject: Table 4a.  Yes, (non-hydro) Renewable power net generation has increased substantially over the past 20 years (+177 TWh/yr.) and Residential average cost per KWh (1994-2011, 2005 dollar basis, and adjusted for GDP) has remained relatively constant.  But, unfortunately on an actual dollar basis Residential (or Middle Class) power costs have clearly been increasing over the past 10 years (1993-2013).

Nuclear and Natural Gas net power generation have also increased, and even more substantially than Renewables over the past 20 years.  Nuclear increased by a +179 TWh/yr. over the past 20 years (due to capacity factor improvements and despite shutting down several units) and Natural Gas by a huge +699 KWh/yr. (or 4-times non-hydro Renewables 1993-2013).  The primary reason for the U.S. having lower power market prices has little to do with Renewables, which have directionally increased costs; including tax credits and other subsidies.  The primary reason for reduced (constant dollar) power costs is due to substantial increases in Natural Gas and Nuclear power generation capacity factors and thermal efficiencies (lower Btu/KW; for example refer to the 3rd graph of a past TEC Post), and lower cost natural gas.  These lower/zero carbon power generation technologies are major factors towards reduced U.S. carbon emissions over the past 10 years and why the U.S. has some of the lowest power costs in the World today.  This, of course, could change in the future if regulatory or special interests’ constraints  inhibit a more cost effective and ‘balanced’ approach (Re. Table 3a) to reducing U.S. Power Sector carbon emissions.

There is little question future power costs are going up.  The objective question is: “How much?”

Joris van Dorp's picture
Joris van Dorp on Sep 18, 2014

Hi John,

For what it’s worth, I agree with pretty much everything you write on this website, but your final sentence triggers me to comment.

There is little question future power costs are going up.  The objective question is: “How much?””

I don’t believe power costs need necessarily go up. In constant US dollars, the wholesale cost of electricity need never be higher than 4 or 5 ct/kWh at any time in the future if the nuclear option is chosen. Nuclear plants can be costly depending on the quality of the local regulatory regime but they can provide energy for up to 80 or even 100 years, which means a large part of the electricity they produce is produced after the investment has been amortised. A nuclear powered economy will therefore – in the long-term – experience average power costs of less than 5 ct/kWh indefinitely.

The above may seem like a quible, but in my consultations with clients and peers I am often confronted with this argument of ‘future power costs are going up’. The argument is often advanced as justification for moving forward on costly renewable energy projects. After all: since ‘future power costs are going up’, why should we pause to consider the expense of renewable energy projects?

My reaction whenever people state that ‘future power costs are going up’ is always the same. I argue that future power costs will not go up, unless the political and technological choices we make today cause them to go up. Putting a point to it, I then argue that the rise of power costs is a threat to the planet as well as to the economy, because while the cost of power can rise due to our political and technological choices, the cost of coal will not go up for many decades, possibly centuries. Hence, a rising cost of power will increase the pressure to maintain or increase the use of coal for achieving competitive advantage, which fast-tracks climate destruction.

It is low power costs which are needed to render coal obsolete. High power costs may seem to incentivise the implementation of expensive RE, but it will incentivise and lock-in the use of fossil fuels far more, IMO.

 

Hops Gegangen's picture
Hops Gegangen on Sep 18, 2014

 

From watching my electric bill over the years, the price of power goes up anyway.

But I’ve installed LED lights in the most-used locations in the house, more efficient appliances, and a more efficient HVAC system, so my total bill has actually gone down.

I think every homeowner who has not done the same will do so eventually, simply because things wear out and will be replaced by more efficient equipment.

So, if adding more renewables to the mix increases the price per KWh a little, we may not even notice.

.

 

Joris van Dorp's picture
Joris van Dorp on Sep 18, 2014

So, if adding more renewables to the mix increases the price per KWh a little, we may not even notice.”

Consumers will not just be paying for the per kWh cost increase of their own household electricity usage, but also – indirectly – for the cost increase experienced by the commercial, industrial and transport sector.

All energy costs of a nation are ultimately payed for by households, since commerce and industry must pass-on all their costs to the households by raising their prices and/or by paying lower salaries or lower prices for the goods and services they consume in the course of doing business.

The sometimes heard populist green claim that “industry and commerce should pay their fair share” of the cost of going green is obvious nonsense, since all costs for all energy usage in a country are ultimately paid by the households themselves, directly or indirectly.

 

Engineer- Poet's picture
Engineer- Poet on Sep 18, 2014

The figures I’m seeing for the cost of electricity from Cape Wind start at 19¢/kWh and go up from there.  If “renewables” (and not mere increased thermal efficiency, which has firm limits) are the source of the carbon reductions, how can it help but to drive costs up?

I know EDF is virulently opposed to nuclear power, so I’m sure I’ll raise hackles when I mention that I recently saw a calculation of 6¢/kWh for the cost of electricity from Watts Bar Unit 2.  But if that’s really what it costs, how can you argue with it?

Nathan Wilson's picture
Nathan Wilson on Sep 19, 2014

Great point about the low fleet averaged cost of electricity from nuclear power.  With only 1-2% of the nuclear fleet needing replacement per year on average, the power cost will be held-down by cheap power from already-paid-for plants (1.2 ¢/kWh according to the EIA).

This assumes that each generation of people replace their fare share of nuclear plants (about 20% of fleet).  In the US, our generation has not replaced any, choosing instead to burocratically harrass the owners of the plants built by our fathers, while growing our fleet of fossile fuel fired power plants.  Perhaps our children will think us irresponsible, but at least we aren’t following the German lead, and squandering our parent’s nuclear nuclear investments via early decomissionings.

I would also point out that ¢/kWh electricity is the main ingredient in sustainable carbon-free synfuel for transportation, assuming such a fuel must have a cost in the $4/gge range (one gallon-of-gasoline-equivalent equals an energy content of 34 kWh).

Joris van Dorp's picture
Joris van Dorp on Sep 19, 2014

Nathan, I think you wrapped-up the whole climate/energy nexus very nicely (as usual).

There is no climate problem, there is no energy problem and there is no liquid fuels problem *except* if the nuclear option is successfully supressed.

That is why suppression of the nuclear option is such a catastrophic, tragic and despicable injustice. It is also why education of the public in order to improve public acceptance of nuclear power to reasonable levels is of such critical importance to us all, and most importantly to future generations (AKA our children).

Nice.

 

 

Robert Bernal's picture
Robert Bernal on Sep 22, 2014

Opponents of climate action? Seriously? I might sound like an opponent when I say “we should not have to pay higher prices for electricity”. But you guys sound like the opponent when you say that we have to conserve within the fossil fuels box.

It’s all newspeak to me (nuclear is the scientific solution out of the box)!

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