By Tom Borelli
2/8/2012
President Obama’s glaring ignorance of the economic consequences of his energy policy will doom a central theme in his State of the Union speech: his “Blueprint for an America Built to Last” plan to boost manufacturing jobs.
Obama revealed in his speech that his command-and-control energy policy will now emphasize the use of natural gas to compliment his renewable energy push to generate electricity. Notably absent from Obama’s “all of the above” energy strategy is coal, which currently provides about 45 percent of our nation’s electricity.
In classic Obama heavy-handed style, the President is using the regulatory power of the EPA to manipulate the free market to favor natural gas and renewable energy by regulating coal-fired electricity out of existence.
Obama’s blunder is ignoring the transition cost of eliminating about half of the country’s cheap and dependable source of electricity. Higher energy costs resulting from the shift from coal to Obama’s choice of electricity generation will drain the disposable income of consumers and, most important, be a huge barrier to the creation of new manufacturing jobs.
The EPA’s war against coal is already making electricity prices skyrocket. The compliance costs associated with the agency’s Cross State Air Pollution and Utility MACT rules are forcing coal-fired utilities to close and electricity prices to rise across the country.
Ohio-based utility First Energy, for example, recently announced it was going close six coal-fired power plants due to the costs associated with EPA regulations. The reduction in the supply of power is expected to almost double electricity prices.
An UBS stock analyst estimated the rates for power would rise to $200 per megawatt per day from $126. An analyst from a different firm predicted rates could go as high as $500.
American Electric Power (AEP), another Ohio-based utility with a heavy reliance on coal, was given permission from the Public Utility Commission of Ohio (PUC) to recover the costs of complying with the EPA’s rules, including transitioning its facilities from coal to natural gas. The plan also allows AEP to recover investments is solar power.
The price tag of the new compliance plan is estimated to be $6 to $8 billion. While the deal is good for AEP, the same can’t be said of the hardworking families and businesses that will be forced to pay for Obama’s energy policy.
With coal-fired utilities already on the regulatory ropes, the EPA is setting them up for a knockout punch. According to news reports, the agency is close to releasing a new regulation targeting greenhouse gas emissions for the utility sector.
The new regulation for power plants is rumored to include a technology standard that would force coal-fired utilities to use carbon capture and sequestration (CCS).
This technology employs a technique for power plants to capture carbon dioxide and bury the gas underground. Since CCS is extremely expensive and the technology has yet to be commercialized, such a rule would essentially end new construction of coal power plants.
It’s also possible the new rule would also apply to power plants that are modified or upgraded.
Congressmen serving on the Energy and Commerce Committee recently wrote to the White House Office of Management and Budget (OMB) urging the acting director to block EPA’s pending greenhouse gas rule.
The letter emphasized the impact of the regulation on manufacturing, saying, “Further increasing electricity costs by requiring commercially unproven technologies, or forcing a transition away from coal, will send thousands more U.S. jobs overseas at a time when the nation can least afford it.”
Existing and pending EPA rules are forcing utilities to follow Obama’s central planning energy plan without regard to the negative economic consequences for the country. Facing the mounting regulatory costs for coal use, utilities will be forced to use natural gas as an energy source.
The added costs will pose significant hardships for hardworking Americans and a barrier to companies contemplating building manufacturing facilities in the U.S.
A new report from the American Coalition for Clean Coal Electricity found that the energy costs for most American households have just about doubled since 2001 taking 20 percent of their after tax income. Lower income Americans are hit harder and EPA’s new rules will add to this burden.
President Obama’s war against coal will undermine his manufacturing jobs agenda and harm those who can least afford to pay for his ill-conceived energy policy.
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To read another article by Tom Borelli, click here.
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