Now that Donald Trump will be swown in as the next US president, it could spell doom for the Clean Power Plan that is dedicated to reducing carbon emissions and that Trump said he opposes. But that won’t doom renewables and other clean energies, nor does it save coal.
“Plain ole economics is the main thing,” says Charles Bayless, former chief executive of Fortis Inc.’s Tucson Electric Co. and Ameren Corp.’s Illinois Power, in a telephone call. “A gas plant is much cheaper to build than a coal plant and it is much simpler to run. But if natural gas were still high-priced, we might not have that option.”
Given that power plants are 50-year investments, utilities — for better or worse — often take the path of least of resistance. “What I worry about now,” he adds, “is relying too heavily on natural gas.”
Blame it on Obama? No. Blame it on market forces, which have not just provided the tools to dig out shale gas but to also commercialize advanced windmills and solar panels. In lay terms, coal’s financial and political troubles are because the electorate wants cleaner air and water, which has fostered innovation.
According to US Energy Information Administration, the growth in electricity uses through 2040 would be 24% in the aggregate with the Clean Power Plan and it would be 27% without it. Rising demand for power because of economic growth is offset by gains in energy efficiency tools. It’s especially true for the retail sector, which has seen its electricity demand growth slow every year since the 1950s: from 9.8% a year to 0.5% between 2000 and 2015, says the energy agency.
The Clean Power Plan, now under review by the a US district court — a ruling that will kicked back up to the US Supreme Court — requires 32% cuts in carbon emissions by 2030. States have a choice of how they want to comply, either by changing out their older coal units for cleaner facilities or by implement renewable portfolio standards or by trading emissions credits amongst each other. The energy agency assumes that the states will choose to comply.
But the biggest changes will come about because natural gas will replace coal as a fuel to generate electricity. In this regard, some 60,000 megawatts of coal are expected to retire by 2030. Meantime, it says that the growth in renewables increases from 3.2% a year to 3.8% even if there is no Clean Power Plan. Hydro, meanwhile, goes from 4.5% growth a year without the Clean Power Plan to 5.3%.
“The decline in natural gas prices since 2009 has threatened the cost competitiveness of existing U.S. coal-fired generators, resulting in a 25% reduction in coal-fired generation in 2015 from its level in the mid-2000s,” the energy information group says. “The coal share of total electricity generation falls from 48% in 2008 to 31% in 2029, when the natural gas share surpasses it, and then continues to decline, falling to a 26% share in 2040,” without the Clean Power Plan.
If the ruling is tossed, then the best that the coal sector could hope for is that some utilities would keep certain coal-fired plants alive. That, in turn, would curb the growth of natural gas by 11 percent from today, says the energy agency.
Wouldn’t the Clean Power Plan create a clear dividing line between the coal and natural gas industries, given that they compete against each other for a share of the electricity generation market place? How will those dynamics change public policy?
“Some of these coal plants could survive,” says Rob Barnett, an analyst with Bloomberg Intelligence. “Natural gas has not taken a proactive approach. On the litigation side, a number of natural gas-heavy utilities are backing EPA: Dominion Resources, Pacific Gas & Electric, NextEra Energy and Southern California Edison.”
But don’t mistake the interest of utilities, which are looking to meet the needs of their customers in the most cost-efficient manner, with those of coal developers and oil and gas explorers. Despite their quiet approval of the Clean Power Plan, gas drillers have an omni-present fear that regulators will eventually crack down on them; the burning of natural gas releases about half of the overall emissions as does coal, including carbon.