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Coal Regulations Could Hike Energy Costs as Much as 80 Percent

WASHINGTON – Environmental regulations imposed on newly constructed coal-fired power plants could hike the wholesale cost of electricity in some areas by as much as 80 percent, according to a high-ranking Obama administration energy official.

Dr. S. Julio Friedmann, the deputy assistant secretary for clean coal in the Department of Energy, told a House subcommittee last week that those costs are expected to decline once technology advances. But even then the price of electricity will remain higher than current costs.

The precise wholesale hike will vary from plant to plant, depending on factors like the type of coal used and technology implemented.

“Typically we express these costs as a range, so for the first generation technology…we’re looking at something on the order of $70 to $90 a ton,” Friedmann told the House Energy and Commerce Subcommittee on Oversight and Investigations. “In that context that looks something like a 70 to 80 percent increase on the wholesale price of electricity.”

Under second generation technologies currently under development, which aren’t expected to be available until 2022 at the earliest, Friedmann said there exists “a strong expectation that that number will be roughly half – we’ll be looking at something like a 40 or $50 a ton cost.”

The retail price increase will “vary by market,” Friedmann said.

“One of the points that I would like to make though, it is, in fact, a substantial percentage increase in the cost of electricity but in part that is because the current price of coal is so low that it represents a large percentage increase,” he said.

According to the Department of Energy, the cost of a ton of coal as of Feb. 7 ranged from $62.18 for coal from Central Appalachia to $36 from the Uinta Basin in Eastern Utah.

The steep increase is the result of new rules implemented by the Environmental Protection Agency requiring any new power plant coming on line to use carbon capture and sequestration technologies intended to reduce the amount of greenhouse gases dispatched into the atmosphere. Climatologists maintain man-made greenhouse gases are a primary contributor to global climate change.

A number of lawmakers and utility officials assert installing the carbon capture technology in newly constructed power plants can’t be accomplished in a fiscally sustainable manner, meaning power companies will turn to alternative fuel sources like natural gas.

Rep. Tim Murphy (R-Pa.), the subcommittee chairman, said increased electrical costs will make it “even more difficult for families and U.S. manufacturers to compete.”

“The costs to produce electricity have to come down by a large amount to make any successfully demonstrated CCS systems commercially viable in the open market,” Murphy said, adding that “if coal power plants cost too much, nobody will build them.”

The National Energy Technology Laboratory furthermore determined that carbon capture technologies are not ready for implementation on commercial coal-based power plants because they have not been demonstrated at appropriate scale, require about 33 percent of a plant’s steam and power to operate and are cost prohibitive.

Coal presently accounts for about 40 percent of the nation’s electricity production. Friedmann said it is expected to continue as one of the two most important generation sources through 2040 despite the newly imposed EPA standards.

“Because it is abundant, the clean and efficient use of coal is a key part of President Obama’s all-of-the-above energy strategy,” Friedmann said. “A major challenge to coal, however, is that it is a major source of carbon dioxide emissions. Therefore, it is critical that we promote currently available technologies and develop more economic and broadly available technologies to reduce those emissions from coal-fired power plants.”

In order to meet that need, Friedmann said, the administration strongly supports the development of clean coal technologies, including carbon capture and storage, as a “critical component to an energy-rich, environmentally sound energy economy.”

The Department of Energy, beginning in 2005, has received funding totaling about $7.6 billion to develop carbon capture technologies in an effort to make the systems structurally and economically viable. Eight demonstration projects have been initiated to advance the initiative.

Rep. Henry Waxman (D-Calif.), the subcommittee’s ranking member, said the federal government’s investment in carbon capture technologies “will help industry produce cleaner power, help provide a market for coal as the world moves to cut carbon pollution, and help avoid a catastrophic degree of climate change.”

Waxman asserted that the “costs of virtually all new technologies decrease over time with experience, continued innovation, and economies of scale.”

“Investing in CCS makes sense because our nation – and the world – must reduce our carbon emissions,” Waxman said. “My Republican colleagues accuse the president of waging a ‘War on Coal.’ In fact, the president is trying to create a future for coal. His administration has invested billions of dollars –more than any other administration – to develop clean coal technologies.

It is the policies pursued by Republicans on this committee – not the president’s policies – that are the real threat to coal.”

But Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, argued that the nation has witnessed “an onslaught of EPA rules and proposals” during the five-year course of the Obama administration “that have significantly affected or threaten to affect the nation’s ability to provide a diverse and abundant supply of electricity.”

Upton questioned whether the Department of Energy is actually playing a leading role in the development of the nation’s energy policy or “taking a backseat to EPA.”

“We should be mindful of and think about whether, in fact, DOE is truly up to the task, given existing authorities, for guiding policy and providing the research to support a secure energy future,” Upton said.