Originally posted by PennFuture
A couple weeks ago, before the Clean Power Plan (CPP) was released, I went out on a limb and made the bold prediction that polluters and their allies will seek to inflate the cost estimates required to meet the goals of the Environmental Protection Agency's (EPA) plan.
The EPA predicts that this plan will result in electricity bills that are 7 percent lower by 2030, or about $7 less each month for the average American family. As we've mentioned before, opponents always predict that environmental regulation will cause higher electricity bills, but Punxsutawney Phil has a better track record for predictions. In spite of their consistent naysaying, here we are after decades of environmental improvement with electricity that costs less in real dollars than when the EPA was founded.
Since the EPA numbers are not favorable to their cause, polluters often substitute their own studies or those of sympathetic think tanks that simply ignore relevant data. We saw one such claim from an organization that brags on its website that the New York Times called them "the primary American organization pushing climate change skepticism." It's no surprise they are predicting electric bills will rise but not every organization makes their bias so clear, and some of the flawed arguments they use are intentionally subtle. With that in mind, I thought I'd review some examples.
Demand-Side Energy Efficiency
When the EPA set the targets for the CPP, it didn't include demand-side energy efficiency (EE) as one of its building blocks but it made it clear that states can use increased efficiency as part of their compliance program. In Pennsylvania, we have years of data from our Act 129 energy efficiency program that demonstrates increasing efficiency pays for itself. Independent studies commissioned by the Public Utility Commission have also found that Act 129 only gets a fraction of the cost effective efficiency that is available.
Polluters who don't want to face these facts may simply ignore EE altogether. This can be hard to spot but you may notice folks making claims about the costs of the individual building blocks EPA considered and not the plan as a whole. So, instead of having the extra savings from EE offset other higher cost measures, it is ignored.
Another way they ignore EE is to talk about impacts in cents per kilowatt-hour (kWh). On average, most of us spend but a few minutes a year looking at our electricity bills. In that time, we might glance at the rate we are paying (about 14 cents per kWh) but few of us pay much attention. The only number most of us care about is probably printed in bold, and maybe with a box around it, along with words like "Pay This Amount." If we improve energy efficiency, that number drops. It's possible for that number to go down, even if the rate we pay goes up.
Polluters who feel threatened by increases in clean renewable energy often claim it's too expensive and resort to similar shenanigans. One method is to focus on capital costs. According to the EPA analysis, the capital cost of building utility scale solar is slightly higher than the cost of building equivalent natural gas capacity. They admit that there are a number of factors that are not considered, making this a conservative estimate, but even if it's true, does this matter to consumers?
If someone builds a new grocery store across the street from an existing store, the capital costs of the construction will eventually be paid by shoppers but that doesn't mean that prices are going to rise. In fact, with competition just across the street, they probably can't raise prices. Maybe the new store will be more efficient and have lower utility bills, or maybe the store just won't make as much profit, but higher capital costs don't always translate to higher prices.
With renewable energy, the situation is similar. If you build a utility-scale solar plant or wind farm, you make money by selling power to the grid. Since the grid buys the cheapest power first, raising prices isn't an option. Fortunately with solar and wind, once you build your plant, you don't have the fuel costs that the fossil fuel operators do. Renewable operators typically bid power into the grid at a much cheaper price than the fossil fuel operators. This influx of low cost power actually drives down the market, lowering wholesale costs across the board.
Also, not all solar and other renewable energy is utility scale solar. As the price to install solar is falling, more and more people are choosing to put solar panels on their rooftops. As was the case with EE, the EPA didn't consider any of this small-scale solar when setting Pennsylvania's target but it is generating real emission reductions that we can use for compliance. This behind-the-meter generation often never makes it out on the grid but it still provides benefits. The benefits come in the form of reducing peak demand, reduced line losses, and even health and environmental benefits.
Another technique you often see is opponents focusing on the subsidies paid to promote renewable energy while completely ignoring the far higher subsidies that have been paid, and continue to be paid, to promote fossil fuel use and keep prices artificially low. A common refrain here is the claim that most fossil fuel subsidies are in the form of tax breaks, and these folks seem to believe that a tax break on fuel isn't a subsidy even though it makes fuel cheaper than other alternatives. If that argument fails, polluters then try to claim their opponents want higher taxes. Again, untrue, but they seem to think repeating it often enough will make it so.
Pennsylvania Specific Results
The costs for implementing the CPP in Pennsylvania depends, in large part, on the plan that the Pennsylvania Department of Environmental Protection (DEP) develops. As we've mentioned before, multi-state trading is probably the cheapest solution but there are other alternatives. Many of them, such as recent construction of renewable resources, increases in energy efficiency, and uprates in nuclear capacity, have already happened and will have no additional cost. Other factors, like the rapidly decreasing cost of solar and advances in battery technology, will further reduce costs. Since DEP is going to prioritize the most cost effective measures to get us the rest of the way, it shouldn't surprise anyone if the plan ends up costing much less than the EPA has predicted.
Rob Altenburg is director of the PennFuture Energy Center and is based in Harrisburg. He tweets @RobAltenburg.