Voltage, Cheap and Dirty

The expanding Harvard universe

Call it the high-voltage version of the law of unintended consequences. As states and the federal government deregulate power companies, breaking century-old monopolies on electricity generation and sales, these utilities will no longer service captive customers at fixed rates. Opening up electrical service to market forces may lower its cost. But those savings may come at the price of more polluted air, according to lecturer on public policy Henry Lee '68, M.P.A. '74, director of the Environmental and Natural Resource Program at the Kennedy School's Center for Science and International Affairs. He argues that as utilities strive to compete around the country, they will probably draw more on their cheapest--and dirtiest--sources of power.

Lee analyzes the problem in classic terms of supply and demand. Under competition, he predicts, as prices and market barriers fall, demand for power will rise. Electricity produced by coal plants--located primarily in the Ohio Valley--is cheaper than power from many competing sources, such as the newer and much cleaner plants that burn natural gas. Dozens of coal-fired generators built before 1977 are exempt from most pollution-control requirements of the U.S. Clean Air Act. "You can build new gas plants or you can utilize the coal plants more," Lee says. "My guess is, it will probably be more of the latter."

Midwestern coal plants now run at about 64 percent of their full power capacity, according to Lee. But with rising demand, in a market where utilities dispatch power to other regions, plant owners would have incentives to run their coal burners more--resulting in dirtier air. "In economic terms, older [power] facilities have enjoyed a subsidy in the form of avoiding the environmental costs they impose on society," Lee wrote in a 1995 report titled "Electric Restructuring and the Environment."

The coal-driven pollution takes various forms, including several troublesome gases. Sulfur dioxide leads to acid rain, which damages water, forests, and human habitats. The same power plants that emit sulfur dioxide also release nitrogen oxides, which form ozone when they interact with sunlight; in the upper atmosphere, ozone screens damaging ultraviolet radiation, but closer to the ground, it's harmful to human lungs. Lastly, there is carbon dioxide, the prime "greenhouse" gas blamed for global warming.

Even a 3 percent annual increase in generating capacity would lead by the year 2000 to an 11 percent overall increase in sulfur dioxide emissions, and a 24.6 percent increase in emissions of nitrogen oxides, Lee concludes. Moreover, emissions of carbon dioxide would rise by 43 million tons. That equals 15 percent of the Clinton administration's CO2 reduction target for the year 2000, which aims to cut back the growth of CO2 emissions by 287 million tons. (Meeting that target would hold the carbon dioxide emissions to 1990 levels.)

Though these emissions may originate in the Midwest, the problems they cause are not just regional. Prevailing winds flow from west to east across the United States, a meteorological reality that converts pollution generated in the Midwest into acid rain and ozone drifting over the Northeast. Eastern states are already struggling to control the chemicals that form ozone, and the global warming problem is, well, global.

The air pollution issue worries environmentalists and state regulators in the Northeast, who are already under orders from the U.S. Environmental Protection Agency to improve air quality. A study done last year for New England air quality regulators found that Midwestern power companies have available approximately 60 million excess megawatt hours priced at 3 cents a kilowatt hour or less, while the average industrial electricity rate in New England is 8.22 cents per kilowatt hour. According to the study's worst-case pollution scenario, if all that excess power is sold, sulfur dioxide emissions would increase by 35 percent per year, and emissions of nitrogen oxides by 57 percent.

But, Lee says, there may be an answer to the looming air-pollution issue. The federal government could stay the course--implementing the next phase of sulfur dioxide limits, as the Clean Air Act requires, and new rules that limit the amount of particulate pollution industries can release. That would force the dirtier power plants to clean up their emissions. According to Lee, "What EPA proposes to do would eliminate 90 percent of the problem."

But electric utilities are fighting hard to block the new rules on particulates. "We need to support the EPA," Lee asserts. "It's important to make sure this lobbying effort is not effective in gutting the reforms. Otherwise, we do have a problem."

~ John Dillon

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