The
high price of cleaner air
Climate change legislation is one reason rates
are on the rise
by
Jim McCarty
While debate continues
on whether or not the world is getting warmer, one fact has emerged
from the dialogue: Any attempt to lower the temperature will raise
the price consumers pay for electricity.
In fact, it’s
already taking place. Electric utilities across the country have made
dramatic decreases in the greenhouse gas emissions coming from power
plants. But this progress has come at great cost. And past costs are
just the tip of the iceberg compared to what could be coming.
Each year,
the Environmental Protection Agency looks at emissions that could
affect health. Between 1970 and 2006, the six principal air pollutants
the agency measures dropped by 54 percent. While this was happening,
energy consumption increased 49 percent, the U.S. population increased
46 percent, vehicle miles traveled increased 177 percent and gross
domestic product increased 203 percent.
Associated Electric
Cooperative, which supplies wholesale power to electric co-ops in Missouri,
Iowa and Oklahoma, mirrors the national trend.
At Associated’s power plants, the sulfur dioxide emissions rate
dropped 90 percent since 1994 while nitrogen oxide (NOx) emissions rate
was cut 77 percent. Additional NOx reductions will come by 2009 when
equipment being added to the Thomas Hill plant is completed.
Those are
impressive numbers. But so is the price tag.
• In the past
13 years, Associated alone has invested $650 million to reduce emissions
at its coal-based power plants.
• In 2006, the
cost to operate emissions equipment at the Thomas Hill and New Madrid
plants totaled more than $12 million.
• Those costs
will increase to $16 million when Associated begins meeting the new
federal regulations starting in 2009.
• Operating
costs in 2006 to remove NOx totaled about $10 million.
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| A construction worker is dwarfed by the metal framework of the emissions control equipment being added to the Thomas Hill Energy Center. When completed, the equipment will add to the tremendous progress being made to clean up the air by utilities across the country — but these improvements have a huge price tag. |
• Associated
will spend $468 million on additional environmental improvements.
This includes $330 million to meet new standards passed by Congress.
• Depending
on future political and regulatory decisions, especially regarding
carbon control, these costs could be even higher.
“Make no mistake,
there is substantial cost to be paid to reduce carbon emissions
and that needs to be laid out on the political table,” says Glenn
English, CEO of the National Rural Electric Cooperative
Association. English and his staff have been tasked by the electric
cooperatives they represent with making sure Congress considers the
member at the end of the line during climate debate.
In their dialogue
with members of Congress, English and his staff agree that carbon
emissions must be reduced. But they draw a line in the sand when talk
turns to raising rates to force consumers to use less energy.
“Co-ops
find themselves facing some who believe America’s energy
is too cheap, and that the way to fight global warming
is to encourage conservation and efficiency through much higher energy
prices,” English says. “Dollars
derived from rate increases must result in significant
gains worthy of the pain millions of our members will feel.”
Closer
to home, the costs to add selective catalytic reduction equipment
to the Thomas Hill plant will rival the original cost to build
the plant. The $330 million price tag for that equipment is nearly
three times the price of a similar system installed at New Madrid seven
years ago. Driving that cost increase is global demand
for steel and other materials due to massive construction
projects in China and India.
Associated had to
go to France to get the 6,000 tons of steel for the project. They also
had to wait in line for the skilled workers, especially welders, to
build it. All of these factors are driving up the costs to generate
the electricity you use.
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Emissions controls to be installed at the Thomas Hill Power Plant will cost nearly as much as construction of the plant itself. |
What’s interesting
to note is that in these days when demand for electricity is growing,
none of these measures will add a single kilowatt-hour to the system.
Instead, they cut efficiency and add to the price of energy coming
out of the plant.
And these costs are
ultimately passed on to consumers.
Electric cooperatives
generate just 5 percent of the electricity used in the United States.
So why are they so concerned about the cost of
environmental compliance?
It’s because
electric cooperatives depend more on coal for generation than the rest
of the industry. Co-op generation equals about 80 percent coal, while
investor-owned and municipal systems are about 50 percent coal.
So why
not switch from coal to another fuel source? Coal is by far the lowest-priced
fuel for generating electricity. The delivered
cost to generate 1 megawatt hour from coal
(fuel price plus transportation) is $13.
The next cheapest source, natural gas,
is roughly three times higher, at $47.
When energy costs
go up, they hit the poorest Americans the hardest. Those living at
the poverty level spend about 33 percent of their incomes on energy.
Cooperatives tend to serve areas with income levels 16 percent lower
than the national average.
Because they live
and work in the areas they serve, electric cooperative employees and
directors are especially sensitive to anything that will increase the
price of electricity to the cooperative’s members.
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| The rail cars full of coal arriving at the New Madrid Power Plant each day provide Missouri electric cooperative members affordable, reliable power. But utilizing America's abundant coal resource will become increasingly more expensive due to environmental regulations. |
It’s
a double-edged sword: Electric cooperatives want to do their part
to protect the environment. But they want to do it in a way that does
not cripple the economy.
As Congress debates
stricter measures designed to curb greenhouse gases, NRECA
is urging lawmakers to be honest with
consumers about the true costs of these
measures. They aren’t the only voice speaking out.
In its July 6 edition,
The New York Times ran an editorial citing what they call “an unpleasant
and inescapable truth.”
“Any serious
effort to fight warming will require everyone to pay more for energy,” the
Times opined.
How much more is
still to be determined in the halls of Congress.
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