Seeing the Forest for the Trees

The U.S. Environmental Protection Agency (EPA) is having a hard time getting its story straight. A year ago, EPA administrator Michael Regan announced that he would be using the full suite of his authorities to give as clear a signal as possible to utilities to close coal plants. He said he’d be rolling out an “integrated and coordinated approach” that creates “regulatory certainty for long-term investments.” In other words, when presented with the cumulative weight of EPA’s regulatory agenda, utilities should close coal plants rather than make investments in them.

Regan’s promised regulatory wave is now breaking on states and utilities. Six rules are poised to hit the industry in rapid succession, each hitting a different pressure point on the nation’s coal fleet. From coal ash to wastewater, ozone and, as of last week, the mercury and air toxics standard (MATS), EPA is following the playbook exactly as the administrator indicated. Yet, despite clearly stating that the point of this suite approach is to present utilities with the full weight of the cumulative impact of the rules, EPA is now pretending each rule exists in a silo and should be viewed and analyzed independently.

By pulling the rules apart, and evaluating their impact independently, EPA is trying to downplay costs and sidestep any criticism over the impact its suite of rulemakings will have on the nation’s increasingly shaky grid reliability or the cost of the nation’s electricity as consumers continue to battle energy-driven inflation.

EPA’s track record on projecting the impact of its rulemakings is abysmal. In 2012, when EPA last promulgated the current MATS standard, it claimed the rule would result in less than 5 GW of coal retirements—the actual result turned out to be nearly 10 times higher.

Trying to Game the Numbers

EPA has already signaled how it plans to game impact analysis of its rules. It wants to point to the Inflation Reduction Act and the incentives for renewable energy additions packed into that legislation as the driver of plant closures and the remaking of the grid, not its rulemakings. But not only does that logic discount the need for the rules in the first place, it’s also already being undercut by the analysis coming from grid operators and utilities charged with managing the entry and exit of new generating capacity.

Just a few weeks ago, PJM, the grid operator for the nation’s largest electricity market, projected it will lose 40 GW of generating capacity by 2030 – 21% of the market’s existing capacity – with only 31 GW of additions in the same period. Of the 40 GW of projected losses, PJM expects 25 GW to be pushed off the grid due to an accumulating regulatory burden, namely EPA rules and state-mandated clean energy targets. PJM believes that just three EPA rulemakings – part of the suite of six the agency is promulgating – could force 10,500 MW of capacity off the grid. PJM is unmistakably warning that EPA’s agenda will lead to resource inadequacy and potential blackouts.

While EPA is now trying to get cute with the total impact of its rules, there’s no denying what its cumulative impact will be. As the National Mining Association’s president and CEO Rich Nolan observed, “EPA is acting on its longstanding threat to make it impossible for utilities to make decisions based on the merits of what keeps the lights on, forcing those utilities to make decisions solely based on the EPA’s agenda, an agenda formed absent consideration of America’s energy reality. As a result, Americans and American businesses will continue to pay increasingly more for electricity that is less and less reliable.”

When EPA Administrator Regan boasted of a coordinated approach to his rulemakings, he made it abundantly clear his aim is to force accelerated closure of the entire coal fleet, the very fleet that provide a foundation of reliability for our grid; now EPA would like us to focus on individual, isolated mandates. Despite this messaging sleight of hand, as the nation’s grid reliability regulators and grid operators only sharpen their warnings of capacity shortfalls and the danger of a disorderly energy transition, there should be absolutely no confusion over where the blame lies when the cumulative impacts take hold and the lights go out.