American Experiment’s Comments on the Environmental Protection Agency’s Carbon Rule

Center of the American Experiment has modeled the impacts of the Biden Administration’s new Environmental Protection Agency (EPA) rules regulating carbon dioxide emissions from power plants and determined that these regulations would cause massive rolling blackouts in the Midwest and that preventing these blackouts would increase the cost of complying with the regulations by $246 billion through 2055.

American Experiment’s modeling determined EPA’s modeled generating portfolio in the Integrated Proposal with LNG Update scenario would be unable to serve load for 607 hours using historical hourly demand and wind and solar capacity factors observed in 2019, 2020, 2021, and 2022. The 2021 data produced a devastating 26 GW capacity shortfall, i.e., rolling blackout, in January 2040, representing 19.5 percent of the demand at the time of the capacity shortfall, meaning one in five homes would be subjected to rolling power outages.

The blackouts observed in our modeling would be economically devastating. Using 2019 hourly electricity demand and wind and solar capacity factors would produce 274 hours of capacity shortfalls with an economic cost of $56.7 billion based on the Value of Lost Load (VoLL) criteria, which can be thought of as the Social Cost of Blackouts.

Averting these blackouts will require a significant increase in installed generating capacity that greatly increases the cost of compliance with EPA’s proposed rules. Our analysis determined building and operating this incremental capacity would cost ratepayers an additional $246 billion through 2055, or roughly $7.7 billion per year. An additional $93 billion would be borne by taxpayers in the form of federal subsidies, largely for wind and solar developments.

You can read American Experiment’s One-Pager on the rule by clicking here.

[1] Hourly demand data and wind and solar generation were obtained from the U.S. Energy Information Administration’s Hourly Grid Monitor. Historical wind and solar capacity values were obtained from MISO’s 2023-2024 Wind and Solar Capacity Credit Report

[2] See Value of Lost Load in the Appendix.