(Updates with New Energy Finance data under ‘Gas Plant’ subheadline. For more on the EPA proposal, see EXT6.)
July 1 (Bloomberg) -- Georgia small-business owner Julian Smith keeps hearing that the Obama administration’s latest climate regulations will drive up local electric bills. He doesn’t believe the prediction, but he isn’t arguing: The fears are doing wonders for his solar-panel installation company.
“My phone is blowing up with new customers,” Smith, owner of SolarSmith LLC of Savannah, said in an interview. “It turns out that if you tell everybody the amount they will spend on electricity will skyrocket, they will believe you.”
In Smith’s home state, as in the rest of the nation, businesses and consumers are struggling to size up competing claims about the Environmental Protection Agency’s plan to cut carbon pollution from power plants, released June 2. The proposed regulations are among the most sweeping and complex in the EPA’s history, promising to revamp the way electricity has been generated and distributed for a century.
To reduce carbon emissions 17 percent nationwide by 2030, the EPA created separate goals for states based on the agency’s determination of what each could do to generate electricity with less carbon pollution and to use it more efficiently.
In practice, the EPA rules, if upheld by the courts, will mean less electricity from plants that burn emission-heavy coal and more from cleaner-burning natural gas, nuclear or renewable energy. It will also, the EPA predicts, curb demand for electricity by promoting efficiency, and actually lead to job gains and lower electric bills -- though some industry leaders vigorously dispute those last two points.
The EPA’s proposed cuts in emission rates vary widely by state. Texas, rich in natural-gas reserves, will alone shoulder a quarter of the total U.S. carbon-emissions reductions, with a 39 percent cut required over 15 years. Coal states including Kentucky, West Virginia and North Dakota, with few gas plants and little history of renewable energy, will face modest reductions.
“If you agree with the need to reduce carbon dioxide emissions, then I think it comes out to be a pretty defensible plan,” Sam Shelton, founder of the Georgia Tech Strategic Energy Institute and a research engineer, said in an interview. “They give a rational defense of everything they’ve come up with.”
For Georgia, the proposed rate reduction of 44 percent by 2030 counts among the larger cuts. Atlanta-based Southern Co., which owns the state’s main utility Georgia Power Co., says the proposal would crimp its operations and hurt consumers.
“The aggressive mandates in the proposal could limit the ability to run the Southern Company system’s generation fleet in the most efficient and cost-effective manner for customers,” the company said in an e-mailed statement. It will mean “forcing Americans to pay higher electricity prices and hurting the diversity of our energy supply.”
Clean-energy advocates, however, say that Georgia could accomplish much of what President Barack Obama’s EPA is demanding with initiatives already underway. Ten aging coal- fired plants are scheduled to be shut, two atomic-power units are due to come on line by the end of 2018 and Georgia Power has begun a solar-energy program at the behest of its state regulator.
Georgia currently gets most of its electricity from coal, followed closely by nuclear and natural gas. The EPA’s plan calls for boosting the share of the last two at the expense of the first.
“This is a modest proposal for Georgia,” said Stephen Smith, executive director of the Southern Alliance for Clean Energy, which has fought for more renewable power and energy efficiency. “They are already on the glide path for some of these coal retirements.”
The state’s Republican governor, Nathan Deal, also has said EPA’s goal is within reach. As a congressman, Deal supported legislation that would have prevented the EPA from issuing rules of this kind under the Clean Air Act. With the proposal out, he took another tack.
“Utilities in Georgia have been very proactive and are probably already taking many of the steps that these new regulations may in fact require,” he said in an e-mail.
Even modest changes can have a dramatic impact on communities, however.
Georgia Power’s Plant Hammond, a 60-year-old, 800-megawatt facility in Coosa, near the Alabama border, isn’t among the 10 coal plants scheduled to be closed. Despite its age, it could provide energy value for years to come, spokesman John Kraft said.
Last year it ran at less than 12 percent of its capacity, which makes it the sort of underutilized plant that could be mothballed in response to the EPA’s rule, according to Ashten Bailey, an environmental lawyer in Atlanta.
The plant is surrounded by pine trees and farmland on a four-lane road dotted with crumbling houses and boarded up shops on one side and a paper mill on the other. The county jobless rate is 7.9 percent and one in five residents lives in poverty.
“That’s one of the few places out here where they pay more than minimum wage,” said Jennifer Storey, 41, the owner of J Salon, a two-chair beauty parlor next to an auctioneering school. “If Washington wants to fix a problem, they need to fix unemployment first,” she said.
The plant and related infrastructure has an $11 million annual payroll and is the biggest property taxpayer in Floyd County, responsible for 10 percent of the tax revenue.
“It would be a huge blow to the community to lose that plant,” Kevin Payne, the county tax commissioner, said.
Power customers, too, are worried about the EPA’s plan.
“We don’t like it,” said Ned Cochrane, vice president of Mauldin, South Carolina-based Mount Vernon Mills Inc., which operates a mill in Trion, on the Alabama border. The mill, which sells fabric to garment manufacturers in Mexico and Central America, is one of the largest consumers of electricity in northwest Georgia, and needs power prices to stay low in order to be competitive, Cochrane said.
“They put out all these predictions, but nobody really knows what the cost is going to be,” he said in an interview. “It’s going to hurt manufacturing in Georgia, and residential and commercial consumers as well.”
The rules endanger a resurgence of manufacturing in Georgia that has brought the state more than $1 billion in investment and 16,000 jobs, said Roy Bowen, president of the Georgia Association of Manufacturers. The expansion includes a Caterpillar Inc. plant in Athens and expansions at Shaw Industries Group Inc. and Mohawk Industries Inc. textile factories in North Georgia.
It’s all “driven by the advantage that we are seeing come to us in terms of energy prices,” Bowen said.
Cutting down on coal will mean greater reliance on natural gas for power, and gas prices have been volatile. With increased demand for gas by manufacturers, power producers and possibly exporters, any advantage they see now could be squandered if prices spike, Bowen said.
Another plant that regulators should look to shutter, according to Bailey, the environmental lawyer, is the McIntosh coal plant near Savannah. McIntosh, which has 58 full-time employees, didn’t run its coal unit at all in 2012, and ran only a few hours in 2013, she said. It doesn’t have modern pollution controls. Still, the plant provides a crucial power reserve, running during the winter cold spell and already this summer, Kraft said.
“The rumor mill says more of the coal plants are going to close, more than they are already doing,” said Jay Brazell, president of the local chapter of the International Brotherhood of Electrical Workers in Savannah, which represents contract employees at the plant. “I think it’s awful.”
The story there is more nuanced: an adjacent natural-gas plant is one of the state’s biggest power producers; and it could thrive with the climate rules.
“For carbon reduction, there would be additional incentive to run the gas plant over the coal plant,” Georgia Tech’s Shelton said.
According to EPA’s technical documents, Georgia’s coal and natural gas units combined for an adjusted rate of 1,500 pounds of carbon per megawatt hour in 2012, and it must cut that to 834 pounds. Its coal plants could run 6 percent more efficiently, and its gas plants only ran about half the time in 2012, the base year EPA used to calculate reduction mandates.
The EPA determined that the gas plants could run 70 percent of the time. If that happened, coal use in the state would fall by about 34 percent, and natural gas use would jump about the same, the agency forecast.
The cut in the rate per megawatt hour would likely result in an overall reduction of 18 percent in Georgia’s power-sector emissions, because the state could add new natural-gas plants covered by a separate rule, according to EPA data analyzed by Bloomberg New Energy Finance.
The EPA calculated Georgia could make greater use of renewable energy and efficiency-boosting measures, though the combination accounts for less of a change than the boost in natural gas. In part that’s because the EPA grouped Georgia with other Southeast states where the use of renewable energy is less common than those in the Midwest and West.
The biggest reduction in Georgia, however, will come because Southern and its partners are building two new nuclear units, each 1,117 megawatts, at Plant Vogtle, about 26 miles (42 kilometers) southeast of Augusta. The EPA assumed that zero- carbon electricity into the cut required of Georgia. In fact, it alone accounts for more than a third of Georgia’s required reductions.
And then there’s solar, which Southern Chief Executive Officer Tom Fanning has identified as a growth opportunity for his company.
Under pressure from its public service commission, Georgia Power instituted two separate programs to boost solar generation in the state. In July last year, the commission approved a 525- megawatt capacity expansion, at rates that the company says won’t increase power bills for retail users.
The company had to be prodded into its embrace of solar, said Lauren “Bubba” McDonald, a member of the Georgia Public Service Commission who pressed hardest for the solar adoption.
“They should be happy,” McDonald said. “I’ve heard it said the utilities that haven’t made these kinds of moves are going to be in trouble.”
Whether Georgia Power is happy or not, solar installer Smith is. Ever since the EPA rule came out, and Georgia Power told customers their bills could rise, Smith said potential clients have been calling him for price quotes at least twice a day, up from about twice a week.
As he drove off to do a consultation with another homeowner, Smith forecast that tapping the sun for electricity will accomplish one thing that coal cannot.
“Solar will create more jobs than coal ever thought about doing,” he said.