The Dirty Secret of Obama’s Carbon Plan

The Dirty Secret of Obama’s Carbon Plan

Taking one-third of U.S. coal-fired power plants off the grid by 2020 simply isn’t workable. Here’s why.

By Warner Baxter in the Wall Street Journal

Americans don’t give much thought to whether their electricity will be there when they need it. You flip a switch, the lights go on. Your phone charges up. The medical equipment in the emergency room does its job. Yet electric reliability, long a bedrock of this country’s prosperity and high standard of living, does not come as easily as its steady presence might suggest.

The Environmental Protection Agency’s Clean Power Plan, a proposed regulation limiting carbon emissions from existing coal-fired plants, threatens to jeopardize the reliability that Americans and businesses have come to depend upon. The EPA proposal calls for states to cut emissions by 30% from 2005 levels by 2030. It also imposes aggressive interim targets starting in 2020 that will test states’ ability to meet these standards without disrupting service. For example, 39 states must achieve more than 50% of their final target by 2020.

Reliable power requires decades of careful planning. The appropriate amount and type of round-the-clock generation capacity, transmission and distribution lines must be finely balanced in advance to ensure the lights go on when a switch is flipped anywhere in the U.S. The EPA plan will significantly impair that planning process.

The EPA’s proposal is causing concern among those who provide electricity for a living. The Federal Energy Regulatory Commission held an event in St. Louis on March 31, the last in a series of conferences on the implications of the plan. The North American Electric Reliability Corp., a nonprofit oversight group, has said the EPA plan could constitute “a significant reliability challenge, given the constrained time period for implementation.”

These concerns are driven in large part by the planned retirement, mostly thanks to the EPA’s carbon plan, of about one-third of America’s coal-fired power plants by 2020. This represents enough generating capacity to supply the residential electricity of about 57 million Americans. That’s a lot of power being taken off the grid in a very short period.

It takes years to site, permit and construct replacement power plants, and EPA’s compliance timeline does not account for this reality. For example, if a new gas-fired power plant must be built to meet the EPA’s 2020 interim target, all permitting and development would need to be completed by 2017. But that is impossible because state compliance plans might not even be submitted to the EPA until 2017 or 2018, and the agency has said it may take up to a year to approve them.

Beyond that, opening new natural-gas plants, as well as operating existing plants at higher levels, will require new pipeline infrastructure, and building natural-gas pipelines often takes five years or longer. More transmission lines will likely be needed to connect the new capacity to the grid. These projects can take 5-15 years. The point is that the 2020 interim targets are simply not achievable.

Like many utilities, my company, Ameren, has spent years developing a plan that achieves substantial carbon reductions without straining the grid or needlessly raising rates. With millions of people in Missouri and Illinois relying on us for safe, reliable and reasonably priced energy, we have to find responsible, practical ways to transition to a cleaner and more diverse portfolio. Our 20-year plan involves adopting a mix of coal, nuclear, natural gas and renewables, while improving energy efficiency, and reaches the EPA goal only five years later than the current plan—and at a staggering cost savings of $4 billion for our Missouri customers, according to company estimates.

A few solutions would significantly reduce the reliability and cost risks of the EPA’s proposed plan. A critical first step is that the EPA must replace its aggressive interim targets with a process that allows states to set their own paths toward the final goals. Each state should be allowed to tailor its compliance plan to local circumstances, balancing unique factors such as cost, fuel diversity and environmental benefits. In exchange for this flexibility, enhanced interim reporting requirements would help the EPA monitor the progress while providing a more accurate idea of the work under way—and challenges involved—in achieving the targets.

Beyond that, two safeguards should be added to the plan. First, it should include a mechanism to deal with reliability issues before a state’s plan is implemented. Such a mechanism would require the Federal Energy Regulatory Commission to examine the effects of state-submitted plans on regional reliability. If issues are identified, the state should be allowed to resubmit a revised plan and potentially adjust its targets to maintain reliability.

Second, the EPA should incorporate a reliability safety valve that would operate throughout the compliance period if unforeseen events—such as tornadoes destroying a wind farm or extreme cold weather—require coal plants to operate at unanticipated levels. Owners of these coal plants need assurance that they will never be penalized for keeping the lights on.

Neither fallback measure is a substitute for addressing the EPA’s interim targets. While the EPA’s desire to reduce carbon emissions is understandable, doing so should not jeopardize reliability or unnecessarily threaten the affordability of the national electricity supply. There are better ways to achieve much the same end, and the agency should pursue a more reasonable course on carbon policy.

Mr. Baxter is chairman, president and CEO of St. Louis-based Ameren Corp.