The U.S. Is On India's Horrid Energy Path

For those who don't remember what a large-scale blackout is like, take a look at what happened earlier this week in India, where 670 million people lost power.

The images were haunting. Miles of stalled cars, snarled because traffic lights were dark. Electric trains that didn't run. Miners trapped underground.

India's blackout was caused by a host of electrical issues ranging from bad energy policy to an overburdened electrical grid. A shortage of rain for hydroelectric dams this year and a shortage of coal for factories does not help the over strapped grid and are the most likely causes for the blackout.

America is fortunate that blackouts of this scale are not occurring here, usually. But we have had some, notably the blackout in the Northeast and Midwest, as well as Ontario, on August 14, 2003. An overburdened electrical grid could not keep up with electrical demand.

While not an everyday or every year occurrence, so far, Americans in some regions have cause to worry. The supply of electricity is growing more slowly than is peak demand. Rising incomes are driving increased use of air conditioning, and new houses are designed for efficient air conditioning rather than with windows that open and screened porches to provide breezes.

As for supply, the proliferation of regulations to protect the environment-sometimes with an excess of zeal-is causing utilities to shut down old plants and is erecting barriers to building new ones.

Energy Department data show that peak power consumption has climbed from 678,400 megawatts in 2000 to 767,900 megawatts in 2010. Generating capacity stood at 1,039,000 MW in 2010, compared to 811,700 MW in 2000 (data for 2011 will be released later this year). While overall supply is outpacing demand, there are some areas where the opposite is true. For example, in Texas the power capacity margin (the amount of reserves available in case of an emergency) is projected to be 13 percent in 2012 compared to 26 percent in 2002.

This summer Texas has barely enough electricity to meet demand. Unexpected drops in output and spikes in demand could lead to rolling blackouts.

This tension is expected to persist for years, largely due to both the state's population growth and the reluctance of power companies to invest in new plants because low wholesale electricity prices have been squeezing profit margins.

California produces only 70 percent of its power, with the remainder imported from other states. California and Colorado have passed laws requiring that by the year 2020, one-third of their electricity be produced from renewables-solar, wind, or biomass-by 2020. The states do not yet have the technology to do this.

The Indian experience should be a wake-up call for the United States. It's time, or past-time, to make investment in power generation a priority.

North America has about 13.5 trillion barrels of oil equivalent in the form of oil, coal, and natural gas, compared with 2.6 trillion for the Middle East. The Middle East is known as the world's oil spigot, but it has 1.6 trillion barrels of oil, compared with 4.5 trillion in North America.

It's unfortunate on many levels that the Obama administration is discouraging the development of America's oil, natural gas, and coal resources. Our electricity grid is less reliable, and America has fewer jobs.

America produces 40 percent of its electricity from coal. Eight states, including Kentucky, Indiana, Ohio, Missouri, and West Virginia, use coal to generate more than 80 percent of their electricity. But over 100 coal-fired generating plants have closed since January 2010, mostly due to Environmental Protection Agency regulations.

EPA's Mercury and Air Toxic Standards for Power Plants rule, issued last December, will make electricity generation more complex and expensive, especially in the eastern half of the United States. It will lead to the closure of many coal- and oil-fired power plants that would be too expensive to bring into compliance. Ultimately, power users will bear these costs.

Whether the uncertain benefits to be realized are worth the high costs is unclear.

EPA's Utility Maximum Achievable Control Technology rule means that plants and boilers have to use the most stringent methods possible to get emissions out of the air, even if these methods cost billions and the benefits are worth far less-as is the case with the new utility rule. That is why many plants will have to close.

EPA estimates its mercury rules alone would cost the electric power industry $10 billion a year in 2016, which would in turn cause a 3.1 percent increase in retail electricity prices. Industry groups have estimated the costs at $40 billion to $120 billion for full compliance.

The benefits, calculated by EPA at $33 billion to $81 billion each year, starting from 2016, supposedly come from improvements in Americans' health, mostly from decreases in asthma. But the most rapid growth in the prevalence of asthma occurred between 1980 and 1996, when the air became cleaner due to increased use of unleaded gasoline, and asthma prevalence has continued to increase. The Centers for Disease Control does not link asthma prevalence to dirty air. In reality, these projected benefits are guesses, with other factors, such as obesity and lack of exercise, in play.

In March, EPA proposed a Carbon Pollution Standard for New Power Plants. In its cost-benefit analysis, it projects no costs on the coal industry, because it assumes that no new coal-fired power plants will be built in the future. No new coal-fired plants, so no costs on those plants. In contrast, EPA projects that generation capacity provided by non-hydropower renewables will more than double-even though this power is more costly and less reliable than coal.

Instead of using our coal, we are exporting it to China, which uses it to lower manufacturing costs. We have enough coal to use it ourselves and to ship it to China.

The federal government stands in the way of more oil exploration too. Alaska, for example, wants to drill for oil in a small part of the Arctic National Wildlife Refuge, but federal law prevents that. California would likely see more exploration if the state could find a faster way to approve permits.

Areas of North Dakota where the oil boom is taking place are privately-owned, as are areas in Pennsylvania. If Wyoming, Utah and Alaska had more private property, they would be able to put into place a streamlined development approval process.

Deterioration of the electricity grid is not just an occasional inconvenience-it systematically undermines the economic foundation of America.

Power plants can take decades from initial conception through permitting and planning and construction to electricity generation. The ill-advised decision by EPA to make these plants unprofitable with no reasonable expectation of immediate replacement capacity in the pipeline is a reckless approach to energy policy.

A federal government correctly concerned with the interests of the public would take steps to ensure that blackouts in America were rare. Instead, our government is leading us on a passage to India.