If EPA policies cause U.S. electricity grids to fail, then what?

There can be no "oopsie." EPA cannot order natural gas and coal power generators to reopen their plants that their own rules shuttered.

A closed coal-fired power plant in Dayton, Ohio

The EPA ramped up its efforts to control electricity generation when it implemented the Clean Power Plan (CCP) in 2015. Barely two months into his term, President Trump signed an executive order calling on the EPA under then-Administrator Scott Pruitt to pause and review the CCP. The Supreme Court dealt what should have been the final blow with its ruling against such federal agency overreach in “West Virginia v. EPA” in 2022.

With Joe Biden’s election in 2020, the EPA got to work on its next attack on power generation by rewriting and expanding the CCP. The final orders issued on April 25, 2024, were: (i) Greenhouse Gas Standards and Guidelines for Fossil Fuel-Fired Power Plants; (ii) Mercury and Air Toxics Standards (“MATS”); (iii) Steam Electric Power Generating Effluent Guidelines; and (iv) Legacy Coal Combustion Residuals Surface Impoundments and CCR Management Units. These rules are essentially the Clean Power Plan 2.0 on steroids.

These rules are very different from all other EPA rules in history. Instead of establishing environmental standards, the EPA rules are designed to dictate the types of long-term investments in power generation that are legal and those that are illegal. Their words are clear:

[This set of rules] builds on decades of technology advancements and momentum from recent changes in the sector created by the Inflation Reduction Act and the Bipartisan Infrastructure law.

[These rules ] leverage the clean energy incentives and opportunities provided in the Inflation Reduction Act (and)

provides utilities options for meeting these standards as well as the time needed to plan and invest for compliance and continue to support a reliable supply of affordable electricity.

In other words, these rules were specifically designed to force existing coal-fired power plants to cease operations soon and to ensure that no new coal-fired or baseload natural plants will be built. Instead of establishing rules about emissions from power plants, the EPA is now dictating which investments are allowed and which are not allowed.

These EPA rules are already causing a significant number of coal-powered power generation. Some 133,000 megawatts of coal-fired generation capacity is expected to be retired by 2035, about 70% of its remaining capacity, even though the picture is not quite as bad in a 2024 survey compared to a 2023 survey:

Source: Wall Street Journal

What types of electricity generation does the EPA expect to replace this retired generation capacity? EPA doesn’t specify; they only say that the retired generation will be replaced. This assumption allows the EPA to say their models tell them there will be no electricity shortages. EPA can say this because their models have built-in assumptions that adequate power generation will always be available. According to Michelle Bloodworth’s testimony before the EPA, the EPA models assume that adequate electricity generation will always somehow appear to fill in for the generation that EPA rules shutter. EPA calls this a “reliability assurance mechanism.”

A staunch critic of the new EPA rules, FERC Commissioner Mark Christie, mentioned the “reliability assurance mechanism” in some harsh comments about the EPA rules that were recently reprinted by America’s Power, a coal industry coalition:

 “If the EPA’s new power plant rule survives court challenge, it will force the retirements of nearly all remaining coal generation plants and will prevent the construction of vitally needed new combined-cycle baseload gas generation. This loss of vitally needed dispatchable generation resources will be catastrophic.”

“Twice in November I raised with [EPA] my serious concern that their proposed regulations would have a very damaging impact on grid reliability by forcing the premature retirements of vitally needed dispatchable generation units and preventing the construction of sufficient new dispatchable resources.”   

“… it is clear from EPA’s final rule that they [referring to communications between EPA and FERC] had little if any practical weight … as EPA apparently dismissed any serious concerns it heard from FERC staff …”

“The so-called ‘reliability assurance mechanism’ in the final rule … will not materially alleviate the fundamental threats to reliability the rule will cause.”

“The reality is that if the grid has a serious shortfall in power generation resources because necessary resources have retired prematurely, FERC cannot simply order them back onto the grid. Once these needed resources retire, they are gone.”

“The fundamental threat to reliability is the premature retirements of necessary resources.  Waivers of only 90 days [allowed by the Federal Power Act] from the federal regulations causing their retirement will not remotely solve the core problem. Only permanent waivers from such regulations would have any appreciable impact, and only if these waivers are granted before the generation units announce retirement so generators can obtain financing to continue operating.” (bold added)

My Take: The EPA has singlehandedly put the U.S. economy in great peril. Its abuse of power is breathtaking. The fact that the EPA waves its magic wand and declares coal-fired and baseload natural gas power generation illegal is bad enough. However, its assumption that unspecified but EPA-approved power generation will appear to fill the void their rules create is breathtaking.

What if they are wrong? Unapproved power generation, specifically coal and baseload natural gas generation, has already started to close and will close at an accelerated rate as long as their rules are in place. But reality is not that simple. The EPA cannot simply reverse its position in the future and expect new power generation to appear overnight.

EPA’s assumptions that there will always be enough power generation to keep U.S. grids operating are dangerously flawed. There is no “oopsie, never mind what we said; you can reopen the coal plants and start building new natural gas-fired power plants.” The design, permitting, and construction of large generating plants take years. It could take the U.S. years, if not decades, to recover from the EPA’s bad policy decisions regarding the new emissions rules.

Hopefully, some of the lawsuits already filed against the EPA rules will reach the Supreme Court soon, and they will strike down the EPA rules, but that could be a year or more away. Until then, coal and baseload natural gas-fired generation will continue to be closed and unrecoverable, except in Texas, where the Texas Energy Fund is guaranteeing low-interest loans to companies that will build new natural gas generation.

The best hope for the future is that President Trump will be elected in November and take immediate action to delay the EPA rules until the Supreme Court acts. In the meantime, the United States is in a very precarious and dangerous situation.

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