From Unreasonable Assumptions to an Outright Mistake, New U.S. Chamber Analysis Details Important Flaws with EPA Power Plant Regulations

Press Release
January 19, 2016

WASHINGTON, D.C. — A new analysis by the U.S. Chamber’s Institute for 21st Century Energy identifies key shortcomings that expose the subjectivity and fundamental unfairness of the Environmental Protection Agency’s (EPA) so-called “Clean Power Plan.”

What’s in a Target?” examines how the EPA relied on faulty assumptions and mistakes as the basis for the complex regulatory formulas used to set requirements on states under the Clean Power Plan (CPP).

“EPA’s power plant regulations are flawed at their very core,” said Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy. “Our analysis reveals how the EPA relied on tactics buried deep in the rule’s complex regulatory formulas to make the rule at least 28 percent more stringent, which will increase compliance costs on states, utilities, and consumers by billions of dollars.”

For instance, the rule’s stringency relies heavily on the EPA’s decision to use 2012 as the basis for its assumptions on deployment of wind energy, demonstrating the Agency’s deceptiveness. In 2012, the pending expiration of the production tax credit (PTC) triggered a massive spike in new wind installations. Despite the fact that no government forecast expects the unusual, record-smashing circumstances of 2012 to come close to being repeated, the CPP assumes that it will in fact reoccur every year for seven straight years.

Had the EPA based its regulatory requirements on the second-highest wind capacity deployment year instead of 2012, it would make the overall Clean Power Plan emissions reductions 93 million tons—or 22 percent—less stringent.

“EPA’s treatment of wind power illustrates how a single faulty assumption can increase compliance costs by billions of dollars,” said Dan Byers, senior director of policy at the U.S. Chamber’s Institute for 21st Century Energy. “The regulatory basis of the CPP has almost nothing to do with the operation of coal and natural gas plants, and it is disingenuous for EPA to suggest otherwise. This report quantifies the role of highly questionable renewable energy generation assumptions as a central driver of the rule’s stringency.”

The report also details a mistake by the EPA in its estimate of potential future geothermal energy generation, in which Department of Energy data is incorrectly exaggerated by a factor of four. It also discusses unsupported assumptions of capacity factors for renewable energy generation.

Collectively, substituting the EPA’s assumptions with more realistic data in these three areas would reduce the stringency of the regulation’s performance standards for coal and natural gas by 117 million tons of CO2—equivalent to 28 percent of the total amount required to be reduced. At a cost of $30 per ton carbon, these faulty assumptions would cost $3.5 billion in compliance costs. 

The report also discusses how the EPA’s decision in the final rule to move away from a state-tailored model of renewable projections to a regional model disadvantages states with limited onshore wind resources, implicitly calling on them to shut down in-state coal and gas generation and replace it with imported wind generation from other states, often hundreds of miles away.

The complete report is available here: Underlying spreadsheets based on the EPA’s technical support documents are available upon request.