The Southwest Power Pool released a study today examining the impacts of complying with EPA’s Clean Power Plan. Unfortunately, the study’s results are not realistic as the study arbitrarily limited the region’s options for complying with the Clean Power Plan. If the region had been allowed to fully utilize its abundant and low-cost resources of wind, natural gas, and energy efficiency, the cost of achieving the Clean Power Plan would have been far lower.
Below are some of the flaws in the study’s methodology.
- SPP’s assumption for the cost of new wind generation is about 40 percent higher than current wind costs in SPP. This faulty assumption alone inflates the cost of compliance by nearly $1 billion annually. Those costs would be even lower if SPP accounted for how wind energy costs continue to fall drastically, dropping by more than 50 percent over the last five years, and therefore will likely be even lower during the 2020-2030 timeframe of the Clean Power Plan. So while SPP was correct to find that wind energy would be one of the most cost-effective options for compliance, the study would have found even greater use of wind energy and even lower cost of compliance if it had used more accurate wind cost assumptions.
- SPP arbitrarily limited most of the main options for achieving the Clean Power Plan’s pollution reductions, which makes compliance appear far more difficult and costly than it is in reality. SPP’s study essentially examines what would happen if the region tried to comply with one arm tied behind its back. If the region had been allowed to fully utilize its abundant and low-cost resources of wind, natural gas, and energy efficiency, the cost of achieving the Clean Power Plan would have been far lower.
- The study assumed almost no new gas generation was built and did not offer energy efficiency as a compliance option, making it far more difficult and costly to comply with the Clean Power Plan.
- The report’s claim that 13.9 GW of coal is “at risk” of retirement is not an accurate reflection of the study’s results. SPP’s study actually found that only 2.2 GW of coal plants are likely to retire due to the Clean Power Plan, in that they are expected to fall below the 30 percent capacity factor threshold that SPP assumes will actually cause retirement. Capacity factor is the amount of energy a power plant produces per year relative to the maximum it could have produced if it ran at maximum output for the full year. SPP gets to the extremely unrealistic 13.9 GW number by considering coal plants “at risk” for retirement if they fall below an 80 percent capacity factor. An 80 percent capacity factor is an extremely high and unrealistic threshold for considering a plant at risk of retirement; in fact, the national average coal plant capacity factor is currently 60 percent. Almost all of SPP’s “at risk” coal plants would actually just be operating at average capacity factors. Most coal plants could not run at an 80 percent capacity factor today even if they wanted to, due to outages, periods of low electricity demand, etc.