On tennessee



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IMPACTS OF EPA’S CARBON PROPOSAL

ON TENNESSEE
BACKGROUND


  • In 2013, coal provided 41% of Tennessee’s electricity, with nuclear providing 36%, hydroelectric power 15%, natural gas 6%, and other sources providing the remaining 2%.i Tennessee’s average electricity price of 9.22 cents/kWh last year was 9% below the national average.ii




  • Currently, coal is responsible for 8,130 direct and indirect jobs in Tennessee.iii




  • Despite below-average electricity prices, many Tennessee families are struggling with high energy costs. The 1.4 million low-income and middle-income families in Tennessee -- representing 57% of the state’s households -- spend 20% of their after-tax income on energy.iv In addition, 32% of Tennessee households receive Social Security.v Lower income families and Social Security recipients are especially vulnerable to increases in energy costs.vi




  • TVA has announced the retirement or conversion of 15 coal units (totaling 2,299 MW) due to EPA policies. Nationwide, utilities have announced the retirement or conversion of 381 coal units (totaling 60,104 MW) in 36 states due to EPA policies.vii


EPA’S CARBON PROPOSAL


  • In June, EPA proposed its “Clean Power Plan” (CPP) to reduce carbon dioxide (CO2) emissions from existing coal-fired and natural gas-fired power plants in 49 states, including Tennessee, under Section 111(d) of the Clean Air Act. EPA plans to finalize the proposal in June of next year.




  • Under the EPA proposal, Tennessee will be required to reduce the CO2 emissions rate of its electric generating fleet by 39%.viii EPA’s proposal will force Tennessee to change the way the state produces electricity, reduce the amount of electricity used by Tennessee consumers, and significantly increase the price of electricity.



  • EPA assumed the following in setting Tennessee’s emissions rate:




  • The efficiency of existing coal-fired units can be improved by 6%;ix

  • Electricity generation from natural gas can be increased by 50%;x

  • Electricity from coal can be reduced by 10%;xi

  • Electricity from non-hydro renewable energy sources can be increased by 415%;xii and

  • Tennessee consumers can reduce their electricity use by 11%.xiii




  • Officials from 31 states, including Tennessee, have expressed opposition to the approach EPA included in its proposal. Earlier this year, the Tennessee House of Representatives passed H.J.R. 663, supporting CO2 standards based on “inside the fence” measures. EPA’s proposal conflicts with this resolution. Recently, 15 governors wrote the President stating that EPA does not have authority to regulate coal plants under Section 111(d) of the Clean Air Act. And, thirteen states have joined in litigation challenging EPA’s proposal.xiv


SERIOUS ECONOMIC AND RELIABILITY IMPACTS


  • Modeling by NERA Economic Consulting projects that the CPP will cause an average 14% increase in retail electricity prices for Tennessee consumers, with a peak year increase of 18%. Under another scenario (what will happen if Tennessee consumers do not significantly reduce their electricity use), electricity prices in Tennessee could increase by an average of 17%, with a peak year increase of 19%.xv



  • Another independent study conducted for the National Mining Association estimates a peak year wholesale electricity price increase of 19.2% for Tennessee consumers.xvi




  • NERA also projects double digit electricity price increases in 42 other states, as well as nationwide costs averaging $41 billion to $73 billion per year. NERA’s projections include $560 billion that consumers nationwide will have to spend to reduce their electricity use. xvii




  • Grid operators and electric utilities in many parts of the country are expressing serious concerns about the threat of EPA’s proposal to electric reliability. Those concerned include the North American Electric Reliability Corporation whose mission is to “ensure the reliability of the bulk power system in North America.”xviii





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