Cleantech Market Intelligence
EPA Rules Open New Era For Clean Energy in U.S.
The new rules on carbon emissions from power plants proposed last week by the Environmental Protection Agency mark an important milestone for the closing of the coal era in United States history, and potentially for the opening of a new era of clean, distributed power generation – but they really only reinforce broader trends that were already underway.
Acting on the vows taken by President Obama in his second inaugural address and his June 25 speech on climate change, the EPA has said it will restrict new coal-fired units to a limit of 1,100 pounds of carbon dioxide emitted per megawatt-hour (MWh), well below current levels of around 1,800 pounds from modern coal plants. Natural gas-fired turbines at small power plants (under 850 million BTU) would face the same maximum level,while larger gas plants would be limited to 1,000 lbs of CO2 per MWh. To many, the handwriting on the wall for U.S. coal plants has now become an obituary.
“Today’s historic announcement makes it impossible to build new conventional coal plants,” said the Sierra Club’s Bruce Nilles, in a phone conversation. Even before today’s announcement, he adds, coal was already in decline: “an advanced coal plant with full pollution controls, scrubbers, a baghouse, and so on, actually can’t compete against wind power and gas-fired generation.”
From All Sides
As an example, Nilles points to the recent announcement by MidAmerican Energy Corp., an Iowa-based producer part owned by investor Warren Buffett, that it will invest $1.9 billion in new wind power capacity, adding up to 1 gigawatt of new wind capacity by 2015.
Operators of coal-fired power plants are caught in a vise of tightening carbon limits, on one side, and competition from low-cost natural gas and falling prices for wind and solar power, on the other. Dozens of coal plants are likely to be retired in the next 7 years. That’s not to say that coal is going to shuffle quietly off the energy stage. There might be fewer coal plants by 2020, but they are likely to be producing more power, according to Vic Svec, senior vice president for investor relations at Peabody Energy, the largest U.S. coal producer: “Within the U.S. there’s this focus on the fact that there aren’t any new coal plants on horizon, and people see that as the imminent decline of coal use,” Svec told me in a phone briefing. “What’s lost in this discussion is there is significant additional capacity available in the existing fleet. Even if you account for 70 GW of plant retirements in the next decade, we could see a one-third increase in coal use from those remaining plants, before we need to build another coal plant.”
For the coal industry, that’s the optimistic view; investors are less sanguine. In midday trading on the Nasdaq on Friday, Peabody Energy’s share price had dropped more than 3%.