Wednesday, February 13, 2013
Richard J. Campbell
Specialist in Energy Policy
The electric power industry is in the process of transformation. The electricity infrastructure of the United States is aging, and uncertainty exists around how to modernize the grid, and what technologies and fuels will be used to produce electricity in the future. Congress will likely be faced with policy issues regarding how the modernization of this vital industry will unfold.
For most of the 20th century, coal has been the dominant fuel used to produce electricity. In 2011, coal was the fuel used for almost 42% of power generation in the United States. However, coal use for power generation seems to be on the decline. In April 2012, for the first time in history, the amount of electricity generated from natural gas equaled that of coal (according to Energy Information Administration statistics) with each fuel claiming about 32% of the market. The future of coal as a fuel for power generation seems to be in question. Two major reasons are generally seen as being responsible: the expectation of a dramatic rise in natural gas supplies, and the impact of environmental regulations on an aging base of coal-fired power plants. The electric utility industry values diversity in fuel choice options since reliance on one fuel or technology can leave electricity producers vulnerable to price and supply volatility. However, an “inverse relationship” is developing for coal vs. natural gas as a power generation choice based on market economics alone, and policies which allow one fuel source to dominate may come at the detriment of the other.
Upgrading the nation’s transmission system to accommodate current and future uses, and ensuring the reliable functioning and the security of the grid, has been a major concern for the federal government. Federal law has already tasked the Federal Energy Regulatory Commission with responsibility for enforcing reliability standards for the bulk electric system, including cybersecurity, but protection from natural hazards continues as a key issue. The recent damage sustained to the electrical grid by Hurricane Sandy in New York and New Jersey and difficulty in restoring electricity service underscore the age and fragility of the power system, and how electricity service might benefit from hardening and modernization of various power systems. Growing concerns over greenhouse gas (GHG) emissions, other environmental costs associated with burning fossil fuels, and existing or anticipated state and federal policies addressing these issues are leading some utilities and energy providers to deploy more renewable energy technologies to meet power demands, and potentially increasing the need for new transmission lines to incorporate clean energy sources.
New environmental regulations under development would impose new requirements on coal-fired power plants. Some of these rules would be implemented at the federal level, while others would be implemented at the state level. The Environmental Protection Agency (EPA) also issued standards for greenhouse gas emissions which would require all new power plants to restrict carbon dioxide emissions. EPA has yet to propose rules for GHG emissions from existing power plants, as is required by court order. Much attention has focused on the resulting finalization of these regulations, and their potential to contribute to power plant retirements, with some in the electric power industry expressing concern that reliability could be impacted.
Date of Report: January 30, 2013
Number of Pages: 14
Order Number: R42923
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Posted by Penny Hill Press, Inc. at Wednesday, February 13, 2013