Why Perry’s coal rule could be a climate bomb

Source: Benjamin Storrow, E&E News reporter • Posted: Thursday, October 19, 2017

Energy Secretary Rick Perry’s proposal to pay coal plants to stockpile fuel has the potential to derail U.S. climate efforts, analysts say, halting emission reductions from the power sector and stalling attempts to decarbonize the American economy.

U.S. carbon emissions have been on a downward trajectory for much of the last decade, in large part due to reductions from the power sector.

Where transportation emissions have plateaued, emissions associated with electricity generation fell 24 percent between 2005 and 2016, according to Energy Department figures. The reduction has largely been made possible by cheap natural gas and the falling cost of renewables, which has prompted a wave of coal plant closures nationwide.

“This actually changes those trends,” said John Larsen, an analyst at the Rhodium Group. “Coal plants that were on the ropes or looking for the exit, now they’ll stick around.”

Under Perry’s proposal, coal and nuclear plant operators would be paid for maintaining 90 days of fuel at their facilities. The Energy secretary contends the payments are needed to prevent premature plant retirements and ensure the resilience of the U.S. grid.

The sheer number of coal plants that would be aided by the plan would likely outstrip the climate benefit of keeping several nuclear facilities online, Larsen said. He argued the proposal could be a larger setback to U.S. climate efforts than the repeal of the Clean Power Plan, former President Obama’s proposed emission caps on power plants, or the withdrawal from the Paris accord.

“The Clean Power Plan mattered to some states a little, but overall the trends were in the right direction there. Paris is a framework. It is not a series of regulations,” Larsen said.

A trade case involving solar imports could also increase emissions by making panels more expensive, he said, “but I do think the DOE [notice of proposed rulemaking] is probably the biggest deal, depending on where it lands.”

Much about Perry’s proposal remains uncertain. It is unclear whether it will pass muster with the Federal Energy Regulatory Commission, which will decide the measure’s fate.

Several FERC commissioners have publicly questioned Perry’s plan, raising doubts about its passage.

Many climate analysts have not modeled the emissions impact of the proposal because they view its passage as extremely unlikely, said Armond Cohen, executive director of the Clean Air Task Force, a nonprofit.

“I think it’s almost an academic question,” he said of the proposal’s climate impacts.

Even if FERC did approve Perry’s plan, its emissions impact will depend on how it is ultimately implemented. If payments to power plant owners are tied to facilities’ output, coal production would likely increase and emissions will rise, analysts said.

But the impact would be marginal if payments are designed to ensure that coal plants simply remain available for electricity generation. In that scenario, coal plants would likely remain open but seldom run, analysts said.

Natural gas prices may be even more important. While the Trump administration has taken a series of actions to bolster the coal industry, miners’ and plant owners’ fortunes remain very much tied to the price of gas, according to a recent analysis by the Brattle Group, a consulting firm.

“It is surprising to many people that the primary determinant of coal use in this country is not the price of coal or the EPA, it’s the price of natural gas,” said Marc Chupka, a Brattle principal and the report’s author.

Additional coal plant closures are likely if natural gas prices remain low, Chupka said. Conversely, policies like Perry’s stockpiling plan will give coal an added boost if natural gas prices rise.

“Whether the proposed rule can stand to thwart those trends, I think it could deter or forestall retirements,” Chupka said. “And then the implementation of the rule would determine whether it alters generation.”

Josh Freed, vice president for clean energy at Third Way, a think tank, argued Perry’s proposal may be most notable for the signal it sends. A power sector long preoccupied with how to slash emissions without increasing costs or jeopardizing reliability is now contemplating concerns about resilience and coal mining jobs, he said.

“The federal government is moving away from climate and reducing emissions being contributing factors or driving forces in energy policy at the same time when in the private sector in the United States and both the private sectors and governments around the world are doing the opposite,” Freed said. “It is putting the U.S. at a competitive disadvantage.”