Waxman-Markey bill

I attended an excellent briefing  today on “Creating a low-carbon future” by Michael Howard of the Electric Power Research Institute (EPRI).  The event  was hosted by the U. S. Energy Association and its executive director, Barry Worthington.   EPRI has done a lot of work on how the electricity sector could meet the greenhouse gas emissions target in the Waxman-Markey energy-rationing bill.  That target is economy-wide emissions 83% below 2005 levels by 2050.

Howard said that EPRI wanted to identify a strategy by which the electric sector could be de-carbonized affordably.  Here’s the background and how EPRI would do it:

The decisions made today and in the next few years will shape electric generation in 2050, so we have to make the right decisions starting now.  Electricity generation accounts for about one-third of the 2005 U. S. total of six billion metric tons of carbon dioxide emissions.  Electric rates in constant dollars have been remarkably flat for the past forty years.

EPRI has identified two paths to meeting the 83% reduction target.  The first is by deploying a full portfolio of energy sources.  A full portfolio would most notably include expanded nuclear power and widespread carbon capture and storage for coal and natural gas.  The second is by deploying a limited portfolio of sources that would exclude nuclear and carbon capture and storage.

What is most apparent in EPRI’s modeling is that the limited portfolio approach would end the use of coal completely by 2030.  Renewables would go up, but the biggest increases would be in the use of natural gas.  The result is that electricity would become very expensive, with rates tripling by 2050 in constant dollars.  In addition, we would be forced to use much less electricity in order to meet the emissions reduction targets.

The full portfolio scenario projects that most of the cuts would be made by building new nuclear power plants and new coal plants that capture and store 90% of the carbon dioxide emissions produced.  Natural gas use would go down considerably.  EPRI projects that electric rates would not quite double by 2050 were the full portfolio approach pursued.  Enforced reductions in use would only be about half as severe under the full portfolio compared to the limited portfolio.

The full portfolio scenario sounds very nice, but it’s fantasy.  It has almost nothing to do with the real world.  What EPRI (understandably) does not include in their models are the increasing political, regulatory, and legal obstacles to building new power plants.  Even if carbon capture and storage technology becomes commercially viable by 2020 (which is highly unlikely), it will take decades to permit and build more than a handful of coal plants that capture the carbon dioxide, the pipelines to transport it, and the underground pockets to store it.   Permitting delays will put pipeline siting and construction years behind schedule.  Lawsuits will be filed claiming that pressurized CO2 is too dangerous to be allowed.   Similarly, a few new nuclear power plants may be built in the next twenty years, but building a lot of new plants will take decades to overcome the permitting obstructions.

These obstacles do not apply only to coal and nuclear plants.  Proposed wind and solar energy projects are being blocked and delayed all around the country.  Bobby Kennedy, jnr., is leading the campaign to block a big wind farm off Cape Cod, where his family own valuable, scenic vacation property.  At the same time, Kennedy has lashed out at local environmental pressure groups at the other end of the country that are trying to block a big solar energy development in the Mojave Desert that he has invested in.  Even if both projects eventually get built, they are being delayed for years.  This is a problem that the environmental pressure groups have helped to create and don’t want to admit exists.  It means that the limited portfolio approach modeled by EPRI is fantasy, too.

One of the problems with relying on EPRI’s or any of the economic models to predict the costs of reducing greenhouse gas emissions is that they assume that political decisions will be made in a rational, orderly way that will allow economic decisions to be made in an efficient way.  The Waxman-Markey energy rationing bill (H. R. 2454) is just the latest disproof of this assumption.  The bill creates a cap-and-trade program to reduce emissions and then adds several hundred other programs to pay off individual special interests.  Nearly all these programs get in the way of the efficient working of cap-and-trade.  They will raise the costs of making mandatory reductions beyond what any model can predict.