‘Affordable Clean Energy’ plan won’t save coal — analysts

Source: Benjamin Storrow, E&E News reporter • Posted: Wednesday, August 22, 2018

President Trump’s diluted Clean Power Plan is unlikely to save the coal industry, but it represents a setback for U.S. efforts to address climate change, analysts say.

In removing a government cap on power plant emissions, Trump leaves American climate policy to the whims of the power market, one of the few areas of the economy to post steep emissions reductions in recent years.

The combination of cheap natural gas, stagnating power demand and advancements in wind and solar has prompted a wave of coal plant closures and slashed power-sector emissions. The U.S. Energy Information Administration estimates that U.S. power-sector emissions decreased 24 percent between 2005 and 2016.

The question is whether that will continue in the absence of a government-mandated cap on power plant emissions.

“The world has shifted dramatically in the last few years to the point where we are going to get pretty close to the targets in the Clean Power Plan even without it, so the effect of weakening it is much smaller,” said Jason Bordoff, director of Columbia University’s Center on Global Energy Policy.

“But that does not mean it does not matter,” he added. “The Clean Power Plan was a starting point. It was a framework within which we could continue to bring down power-sector emissions over time, as required to meet our climate targets. That remains a major loss with this rollback even if market conditions will continue to force coal’s decline in the medium term.”

Indeed, the calculus is even more difficult for coal. Wholesale power prices remain suppressed, power demand is flat and natural gas prices show no signs of increasing. Utilities, meanwhile, are adding renewables at a rapid clip, eager to harvest federal tax credits and meet state clean energy mandates.

EPA’s proposal removes the emissions requirements that made it difficult, if not impossible, to build new coal plants or upgrade existing ones, said Joe Aldina, director of U.S. coal analytics at S&P Global Platts. But it does little to alter utilities’ financial outlook or ease the threat of future carbon regulation.

“There are pure economic reasons why people aren’t building coal plants,” Aldina said. “It’s cheaper to build a natural gas plant. It’s cheaper to run a combined-cycle gas turbine in most parts of the country.”

Under Trump’s plan, EPA would allow states to decide whether or not to cap power plants’ carbon emissions. And where states pursuing emissions reductions could once employ energy efficiency and renewables as part of their emissions strategy, the updated plan limits their options to improvements in coal plant efficiency.

Such improvements are untenable for utilities, Aldina said, noting that small increases in efficiency are likely to come with hefty price tags.

“I don’t think these capital projects pay for themselves in the current environment,” he said.

On the climate front, there are several reasons to think the emissions impact of Trump’s move will be limited. The market has delivered emissions reductions before. Coal-to-gas switching accounted for roughly two-thirds of emissions reductions in the power sector between 2005 and 2016, according to EIA.

The trend is expected to continue. The Rhodium Group, an economic consulting firm, estimates that power companies will close 71 gigawatts of coal-fired capacity by 2030, or about 28 percent of U.S. coal capacity. That represents a best case scenario for coal, in Rhodium’s view, one that assumes gas prices rise, renewables stall and the economy grows at a healthy clip.

Coal’s decline, coupled with a significant injection of new wind and solar, means America is already on track to meet the carbon cuts originally envisioned by the Clean Power Plan, a 32 percent reduction from 2005 levels by 2030.

EPA’s updated analysis, included in talking points circulated prior to the president’s expected announcement in West Virginia today, project that the revised Clean Power Plan will still produce a 33 to 34 percent reduction in carbon dioxide emissions from 2005 levels by 2030.

Robert Stavins, a professor of energy and economic development at Harvard University, said he believes much of the hubbub around the Clean Power Plan is just that. Improvements in hydraulic fracturing mean gas is likely to stay cheap, clouding the prospects for a coal rebound. At the same time, cheap natural gas prices should mute the emissions impact of Trump’s moves.

That may suit the president just fine, Stavins said. Trump, he argued, mainly appears interested in securing a symbolic victory.

“The major impact of the announcement is what I believe the White House most cares about, which is not what the actual outcome is, but what is the effect of the announcement itself of the president’s political base,” Stavins said.

Still, some worry that the market can only deliver so much in the way of carbon reductions.

There’s no guaranteeing that the factors that led to coal’s decline will continue, said Kenneth Kimmell, president of the Union of Concerned Scientists.

“We might get the emission reductions without the Clean Power Plan, but having the Clean Power Plan there was a belt-and-suspenders backstop in case those predictions don’t come true,” Kimmell said.

Even more worrying for environmentalists is the fact that the Clean Power Plan rollback does not arrive in isolation. Instead, it is part of a wider deregulatory blitz, one that includes a freeze of Obama-era tailpipe standards.

Transportation is now the largest source of greenhouse gases in the United States. But if curbing tailpipe emissions has proved a challenge, the power sector has been a relative bright spot.

Power plants accounted for 80 percent of all U.S. energy-related CO2 reductions between 2005 and 2016.

With Trump’s announcement today, future carbon reductions from the power sector may well depend on the price of natural gas.