Bernstein analyst says Obama elevates climate issue; puts heat on coal

President Obama’s June 25 address on climate change put national focus on carbon pollution and increased the pressure on existing coal plants, Bernstein Research Senior Analyst Hugh Wynne said in a June 26 review.

If there is a silver lining for the coal sector it could be that the EPA is expected to re-propose carbon dioxide limits for new power plants – and this time it will make a distinction between coal and natural gas plants, Wynne said.

“In our view, the speech was significant primarily in that it elevated the issue of climate change to a key second term priority for the administration; provided the president’s political backing to the EPA in regulating utility emissions of CO2 under the Clean Air Act; and set a schedule to complete these regulations before Obama leaves office,” the Bernstein Research analyst said.

Obama has instructed the EPA to use its authority under sections 111(b) and 111(d) of the Clean Air Act to issue standards, regulations or guidelines to address CO2 emissions from existing power plants.

The White House has set a timetable for the EPA’s efforts, setting a target of June 1, 2014, for the EPA to issue proposed standards for existing plants, and a target of June 1, 2015, for these standards to become final. The state implementation plans required under section 111(d) to implement the EPA’s standards are to be submitted to and approved by the EPA no later than June 30, 2016.

EPA has already published on April 13 of this year, a proposed greenhouse gas (GHG) emission standard for new power plants. But in light of comments received it is EPA’s intention to issue a new proposal. This new proposal on new plants is expected no later than Sept. 20 of this year.

“In particular, they noted that the president’s instructions confirmed that EPA plans to re-propose the CO2 emissions standards for new power plants that the agency had offered for public comment in April of last year,” according to the Bernstein report. The EPA has originally proposed that both new coal units and combined-cycle gas turbines be held to a single emissions standard of 1000 lbs of CO2 per MWh. Even the most efficient coal plants could not meet that standard, Wynne said. This time around, however, industry expects EPA to propose separate standards for new coal and gas-fired power plants.

The Obama speech, as well as the background materials released by the White House, were both silent as to the nature of the limits to be imposed on power plant emissions of CO2 and the scale of targeted reductions, according to the Bernstein review.

 But meeting the president’s earlier stated goal of cutting greenhouse emissions by about 17% from 2005 levels by the end of the decade could be difficult, Wynne said. By 2011, U.S. GHG emissions were only 7% below 2005 levels. To meet the 17% target, GHG emissions would have to be cut by a further 730 million tons per year.

If no other sectors are regulated, “achieving the president’s goal of a further 10% reduction in GHG emissions by 2020 would require a further 19% cut in the emissions of the transport and power sectors,” Wynne wrote.

New CO2 rules are certain to be tough on coal, Wynne said. When the CO2 sources that are “too-small-to-regulate” are excluded, electric utilities account for over 40% of addressable emissions. “Second, within the power sector, coal fired generators account for 80% of the total CO2 emissions.”

Bernstein Research is also known as Sanford C. Bernstein & Co.

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.