MS Energy Institute Cost Impact Analysis of EPA 111(d) Proposal

  • EPA recently proposed to require that states enact programs to reduce carbon dioxide emissions from existing power plants.
  • Mississippi Energy Institute (MEI) estimates minimum incremental capital costs associated with the proposal at $14.2 billion for Mississippi.  In other words, Mississippi electric ratepayers would spend an extra $14 billion to construct facilities not likely to be built unless compelled by federal mandate.
  • With the regulated period running 2020-2030, plans would necessarily be completed within 3 years, and associated construction would start by 2017 or 2018 in order to begin compliance by 2020.
  • Of the $14.2 billion, over 98% of the costs will go to build electric power generating facilities to meet new generation mix “goals”, and since natural gas generation is high in each case, virtually all of the added costs are due to meeting aggressive renewable energy production targets as existing coal plants are prematurely retired.
  • In this analysis, MEI did not include normal generation or infrastructure costs likely to be incurred with or without the EPA rule.  Within the regulatory period, a certain amount of capital will be required to maintain, update, and expand Mississippi’s electric power infrastructure.  These costs to ratepayers are unknown but expected.  Examples include the Kemper County generation facility, transmission/distribution maintenance and expansion, the installation of pollution control equipment required by other EPA rules, MPSC energy efficiency program costs, the closure of old and inefficient power plants, and the addition of new power plants to meet new power demands with a growing population and economy.
  • EPA proposes Mississippi reach the “goals” in a combination of ways, including; electric power use reductions through energy efficiency programs, the closure of all existing coal power plants, and the addition of renewable generation sources.
  • To comply with the EPA proposal, total capacity in Mississippi will be about 2000 MW higher than the base case due to the requirement of installing large amounts of intermittent generation sources, like wind and solar (3000 MW solar and 800 MW wind to meet renewable target set by EPA).
  • Land requirements for 3000MW of solar capacity = 21,000 acres; 800MW of wind capacity = 48,000 acres.
  • Summary of Analysis:
2012 2030 Base Case (Without Rule) 2030 with EPA Proposal
Generation Mix (Output) 71% Natural Gas,13% Coal,

13% Nuclear,

3% Wood

63% Natural Gas,20% Coal,

15% Nuclear,

2% Wood

68% Natural Gas,13% Nuclear,

8% Solar,

6% Coal,

4% Wood,

3% Wind

Total Capacity (MW) 15,404 16,078 18,127
Total Output (MWh) 54,584,276 65,759,060 59,328,552 (includes 6.6 million MWh in demand reduction as required by EPA rule)
Cost of New Generation NA $1.9 billion $16.1 billion
Emissions (lbs CO2/MWh) 1132 1080 698