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EPA's Carbon Dioxide Rule for Existing Power Plants: Economic March 2016 EPA’s Carbon Dioxide Rule for Existing Power Plants: Economic Impact Analysis of Potential State Plan Alternatives for West Virginia EPA’s Carbon Dioxide Rule for Existing Power Plants: Economic Impact Analysis of Potential State Plan Alternatives for West Virginia Jennifer Shand, PhD Director Christine Risch Director of Resource and Energy Economics With Research Assistance From: Kent Sowards, Director of Research and Strategy Alicia Copley Ayo Akinsete Energy Ventures Analysis, Inc. (EVA) Acknowledgements The Center for Business and Economic Research thanks EVA for providing analysis and support. We also thank the West Virginia Public Service Commission and the West Virginia Department of Environmental Protection for their input. Prepared for The West Virginia Department of Environmental Protection The contents of this report reflect the views of the authors, who are responsible for the accuracy of the data presented herein. The views expressed in this report are those of the authors and do not reflect the official policy or position of Marshall University or its governing bodies. The use of trade names, if applicable, does not signify endorsement by the authors. 907 3rd Avenue | Huntington, WV 25701 p 304.528.7201 | f 304.522.0024 | [email protected] Table of Contents Executive Summary ........................................................................................................................................ i 1 – Introduction ............................................................................................................................................ 5 1.1 About the Authors ............................................................................................................................. 6 Center for Business and Economic Research ............................................................................................ 6 Energy Ventures Analysis, Inc. .................................................................................................................. 6 1.2 Purpose of the Study and Limitations ............................................................................................... 6 2 – The Clean Power Plan.............................................................................................................................. 7 2.1 Overview ............................................................................................................................................ 7 2.2 New Source Complement and Leakage .............................................................................................. 9 2.3 Clean Energy Incentive Program ....................................................................................................... 10 2.4 Other Implementation Considerations ............................................................................................. 11 3 – Existing Research ................................................................................................................................... 12 3.1 Changes from Proposed to Final Rule ............................................................................................. 13 3.2 Importance of Other States’ Actions ............................................................................................... 14 3.3 Common Themes ............................................................................................................................. 14 3.4 Energy Market Findings ................................................................................................................... 15 3.5 Economic and Employment Impacts ............................................................................................... 15 3.6 Previous Results Specific to West Virginia....................................................................................... 17 4 – West Virginia Context ........................................................................................................................... 17 4.1 Economic Overview .......................................................................................................................... 17 4.2 Electric Power Generation Industry ................................................................................................ 18 4.3 West Virginia Coal-Fired Power Plants ............................................................................................. 22 4.4 Fuels and Sourcing ........................................................................................................................... 25 4.5 Emissions Goals ................................................................................................................................ 27 5 – Modeling Approach ............................................................................................................................... 29 6 – 111(d) Compliance Scenarios Modeled ................................................................................................ 31 6.1 Other Modeling Assumptions and Considerations .......................................................................... 32 New Source Complement and Leakage .................................................................................................. 32 Energy Efficiency ..................................................................................................................................... 32 7 – Energy Market Analysis ......................................................................................................................... 33 7.1 Approach ......................................................................................................................................... 34 1 | Page 7.2 Energy Market Results ..................................................................................................................... 34 Electricity Generation ............................................................................................................................. 34 Consumption of West Virginia Coal ........................................................................................................ 37 Wholesale Electricity Prices .................................................................................................................... 38 Natural Gas Prices ................................................................................................................................... 38 CO2 Costs ................................................................................................................................................. 39 8 – Statewide Economic Impacts of Potential Plan Alternatives ................................................................ 43 8.1 Approach ......................................................................................................................................... 43 8.2 Economic Impact Results ................................................................................................................. 45 Electricity Industry Impacts ..................................................................................................................... 45 Retail Price Impacts ................................................................................................................................. 45 Impacts from Renewable Energy ............................................................................................................ 46 Total Statewide Impacts.......................................................................................................................... 48 9 – Impact of Hypothetical Plant Closure ................................................................................................... 54 9.1 Approach ......................................................................................................................................... 54 9.2 Results ............................................................................................................................................. 56 9.3 Impacts on State Fossil Fuel Industry .............................................................................................. 61 West Virginia Coal Sales and Severance Tax Revenues .......................................................................... 61 Employment Impacts .............................................................................................................................. 62 9.4 Coal-Fired Power Plant Depreciation ............................................................................................... 62 9.5 Potential tax impacts and considerations ........................................................................................ 63 10 – Discussion ............................................................................................................................................ 64 10.1 Allowance allocation ...................................................................................................................... 65 10.2 Capacity Replacement in Scenarios Without Emissions Trading ................................................... 66 10.3 Environmental considerations with waste coal plants .................................................................. 67 10.4 Potential health impacts ................................................................................................................ 68
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