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EPA Carbon Plan will cause energy prices to soar

Hydrocarbon Engineering,

According to a study released by Energy Ventures Analysis, Inc., the US Environmental Protection Agency’s (EPA) proposed carbon rule is the latest in a series of regulations alongside rising natural gas prices that will increase the cost of electricity and natural gas by nearly US$ 300 billion in 2020 compared to 2012.

The study found that the typical household’s annual electricity and natural gas bills would increase by US$ 680, or 35%, from 2012 compared to 2020, escalating each year thereafter as EPA regulations grow more stringent. The cost of electricity would increase the most in states that have implemented deregulation of wholesale electric power markets, where the price of electricity will rise to the marginal cost to support new generating capacity.

The study identified a US$ 177 billion increase in electricity costs and a US$ 107 billion increase in natural gas costs in 2020 compared with 2012 when the cumulative effects of EPA regulations and energy market impacts are analysed. The study concludes that US power markets would see a shift in electricity generation from coal to natural gas, causing upward pressure on natural gas demand and prices.

Seth Schwartz, Energy Ventures Analysis, Inc. President, commented: “Our analysis is the first to fully examine the combined economic impacts of the EPA’s long list of proposed and finalised regulations on the electric power industry, including the Mercury and Air Toxics Standards, regional haze regulations and the Clean Power Plan, whose four building blocks are based on flawed assumptions. For example, existing coal fuelled generating facilities are already operating at very efficient levels and , collectively, will not be able to achieve an additional 6% heat rate improvement”.

The industrial sector will be particularly hard hit, with total electricity and natural gas cost for the sector approaching US$ 200 billion in 2020, almost double the cost from 2012. This is of particular concern for energy intensive and international trade exposed industries in the US such as aluminium, steel and chemical manufacturers. These industries rely on low cost and reliable electricity to compete in the global market.

Adapted from a press release by Emma McAleavey

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