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Exelon CEO Supports EPA Clean Air Act Enforcement
While Congress is seeking to strip the Environmental Protection Agency (EPA) of some of its regulatory powers, the head of Exelon Corp.Wednesday expressed his support for the agency’s continued enforcement of the Clean Air Act (CAA), saying that it was more cost-effective for the energy industry and removed uncertainty.
The EPA scored a small victory Thursday when the Senate defeated (41-56) a proposal offered by Tea Party-favored Sen. Rand Paul (R-KY) to nullify a rule on cross-state emissions.
Speaking to the Bipartisan Policy Center in Washington, DC, Exelon CEO John W. Rowe said “Congress should not stop the EPA from enforcing the Clean Air Act. Postponing these rules will delay the creation of new jobs across the country to install pollution controls and build new generation at a time when economic benefits and investment are desperately needed.”
The Chicago-based utility plans to reduce, offset or displace its entire carbon footprint by 2020, and so far it has cut emissions by 6.3 million tons, or 56% of its goal. It is on schedule to retire four inefficient fossil plants by May and increase its existing nuclear generating capacity by about 490 MW, he said.
“No other utility has anything like Exelon 2020. And no other utility is as prepared to meet the environmental challenges of air and carbon pollution as we are,” Rowe said.
He said the company’s 2020 analysis has found that by letting competitive electricity markets work, the electric utility industry can slash harmful air pollutants for as little as one-quarter the cost of other politically popular approaches, such as subsidizing wind, solar, new nuclear and clean coal.
As part of the analysis, Exelon modeled four scenarios for the PJM market (the market in which it operates) for achieving compliance with the CAA based on reliability, affordability and emission-reduction capability. “The sweet spot, which allows the market to work within a frame of environmental regulation, is clearly the best scenario,” he said.
Under this scenario, “no new mandates or subsidies are needed, only…EPA Clean Air Act regulation go into effect,” Rowe said. The oldest, least efficient, biggest polluting coal and oil-fired plants are retired due to the economics of cheaper natural gas and the high costs of installing emission-control devices.
The sweet spot scenario “shows that while compliance with EPA regulations is not without cost, it can be done at prices that are still very reasonable and can be done without sacrificing reliability. The sweet spot’s prices are about $12/MWh higher than where the market is currently trading in today’s dollars. [But] this is far less than the National Research Council’s finding that the societal costs of pollution from NOx [nitrogen oxide], SO2 [sodium oxide] and particulates is $120/MWh — for the dirtiest plants,” Rowe said.
He estimates that carbon dioxide (CO2) is reduced by 40 million tons from business as usual under this scenario.
The second, so-named “king coal” scenario assumes that all coal plants, including the ones that don’t make economic sense, are retrofitted with scrubbers or other technologies to comply with the CAA, and that the costs will be passed through to customers’ rate bases. Keeping this generation online would cost PJM customers $1.5 billion more than in the sweet spot scenario, and it would emit 30 million tons more of carbon dioxide, according to Rowe.
The last two scenarios — “big wind” and “playing favorites” — are even less promising, he said. Big wind advocates the subsidized construction of wind with the hope of either displacing or forcing the retirement of enough existing coal-fired generation to meet the CAA objectives. He estimated that big wind would cost consumers $15 billion annually, a 325% increase over sweet spot.
Playing favorites assumes a mandate of portfolio options commensurate with a 25% clean energy standard. This scenario would cost customers an additional $10 billion, a 285% increase.
“Although each scenario reduces 90 million tons more carbon than the sweet spot, it comes at great cost to the consumer — $125 a ton for big wind and $110 a ton for playing favorites,” Rowe said.
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