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Renewable Energy: Policy Matters

By Roger S. Conrad on Aug. 12, 2014

On June 2, 2014, the Environmental Protection Agency (EPA) proposed what would be the most aggressively pro-renewable energy regulations in US history: a plan to cut carbon dioxide (CO2) emissions from operating power plants 30 percent from 2005 levels by 2030.

In its current form, the EPA’s plan–colloquially known as Rule 111(d)–would place the onus on local regulators and electric utilities to determine the best way of achieving their mandated goal. These targets, depicted in the graph below, vary from state to state and reflect the extent to which utilities and regulators have moved to limit CO2 emissions since 2005.

(Enlarge Graph.)

Although politicians and power companies have griped about the plan, the proposed baseline year of 2005 represents a major victory for the industry; environmental advocates had pushed for 2012 as the start date, a move that would have required steeper cuts in CO2 emissions.

Nevertheless, the EPA estimates the total cost of compliance at almost $9 billion, while opponents have advanced cost projections at several times that amount.

Winners and Losers from EPA’s Rule 111(d)

If approved in their current form, the new rules would reduce coal’s share of the US generation mix to about 30 percent from 37 percent. Of course, organizations representing the coal industry have projected much deeper cuts in coal-fired generation.

In contrast, the nuclear power industry would benefit from the EPA’s proposal; these plants don’t emit CO2, a huge advantage for Southern Company’s (NYSE: SO) two under-construction reactors in Vogtle, Georgia, and the pair that SCANA Corp (NYSE: SCG) is building in South Carolina.

Both projects appear to be on schedule and under budget, while Tom Fanning, CEO of Southern Company, suggested that the utility could announce the construction of another nuclear power plant later this year.

Nevertheless, nuclear power remains highly controversial. 

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