The U.S. Environmental Protection Agency’s effort to regulate CO2 emissions will add billions of dollars to the cost of electricity each year in Texas.
In addition, the Clean Power Plan represents an unprecedented intrusion into Texas’ and other states’ regulation of the electricity market in the United States.
Despite what some claim, the premise behind the CPP, that man-made CO2 emissions are somehow destroying the world, is still subject to debate. But even granting the possibility of human impact on the climate, the EPA’s efforts represent a negative impact on the economy for the very long term.
What the CPP boils down to is replacing coal with natural gas or renewable sources and reducing electricity use through energy efficiency programs.
The impact of this will be devastating to the U.S. and Texas economies.
Shifting from coal to renewables would be very costly for a simple reason: Coal is cheap and renewable energy is expensive. Renewable energy subsidies in Texas have exceeded $11 billion since 2006.
Using natural gas to replace coal looks a bit more reasonable. Certainly the natural gas industry wants us to believe it is, claiming $16 billion of increased revenues for the industry in a region including Texas.
But building new generation plants to replace existing plants is costly, and experts suggest that natural gas prices will surge because of the increased demand under the CPP — negating gains expected from today’s lower prices.
Reducing electricity consumption is also a losing proposition. The 10-year cost of Texas energy efficiency programs to consumers though 2015 will be about $1.38 billion.
And it’s getting more expensive the bigger it gets. Today’s program costs 25 cents per KWh of energy saved, compared to the 17 cents per KWh it cost in 2006. Both of these compare poorly to the 10 to 11 cents that electricity costs today.
This will get worse under the CPP, which would require Texas to increase its energy efficiency programs eight-fold by 2029. The EPA projects that this will cost Texans more than $20 billion.
It is easy for Texans to criticize the Obama administration and Washington bureaucrats for the heavy costs we will bear under the CPP. And while the criticisms are justifiable, we also must be willing to share some of the blame.
The truth is, Texas’ creation of renewable energy and energy efficiency mandates in 1999 helped pave the way for the CPP. So did the creation in the same year of a mandate that 50 percent of all new generation be powered by natural gas.
That means to combat the CPP, Texas will have to do more than just say no. The Texas Legislature must clean up its own house by eliminating Texas’ mandates for natural gas, renewable energy and energy efficiency.
These measures would greatly increase the efficiency of the Texas market and reduce CO2 emissions much more cost effectively than the EPA’s plan.
We won’t reach the EPA’s goals. Recent history has shown the only way to achieve those levels of reduction is to have a recession, which is what will happen if states subject themselves to the CPP.
Texas can avoid this fate and lead the nation to greater energy efficiency by rejecting the CPP and relying on its world-class electricity market to power our future.
Bill Peacock is vice president of research for the Texas Public Policy Foundaton and director of its Center for Economic Freedom. www.texaspolicy.com