The new Clean Air Interstate Rule is having an unexpected impact on power generation asset values.
With compliance costs estimated at $50 billion to $60 billion during the next 15 years, the Clean Air Interstate Rule (CAIR) affects just about every market participant in the electric power industry.
Every significant power generator will add scrubbers and NOx controls, or will invest heavily in emissions technologies. American Electric Power Co. says it will spend about $5 billion retrofitting its coal plants, while the Tennessee Valley Authority says it will add $4 billion to $5 billion to the nearly $4 billion it has invested to date in emissions controls. Southern Co., Cinergy, Duke Energy, and Progress Energy also will add emissions controls to respond to these new regulatory requirements.
Global Energy Decisions forecasts that about 52,000 MW of renewable capacity will be built by 2020, at a cost of $53.4 billion, to comply with the renewable portfolio standards adopted by 20 states and the District of Columbia.1 Renewables of this order of magnitude can have a material effect on reducing emissions. With the Energy Policy Act of 2005 extending the federal production tax credit (PTC), wind capacity is expected to more than quadruple during the next five years alone.