While the Environmental Protection Agency (EPA) would probably like to see states join regional carbon dioxide trading organizations, such alliances cannot be pulled together fast enough for Clean Power Plan compliance, speakers told PennWell’s one-day GenForum on Dec. 8.
Troutman Sanders Law Partner Margaret Campbell, Peabody Energy (NYSE:BTU) Vice President of Global Energy Analytics Jacob Williams and Siemens Energy Strategic Business Manager Bruce Rising touched on this and other coal-related subjects during the Orlando gathering prior to POWER-GEN International. The speakers were part of panel on the future of coal power during a dash to gas.
EPA has praised programs such as the Regional Greenhouse Gas Initiative (RGGI) among Northeast and Mid-Atlantic states as a means for states to slash their power sector CO2 30% by 2030.
Realistically, regional CO2 trading organizations cannot be organized within the short two-year time frame, laid out within the EPA proposal, Campbell said. Also, affected states are going to have virtually no excess carbon allowances to trade, Campbell said.
“There is nothing to trade,” Campbell said. “Nobody feels they have extra that they can trade,” Campbell said.
The EPA rule proposal, which the federal government hopes to make final next year, would require states to draft plans to cut power sector CO2 30% by 2030. Right now, states are busy trying to figure out how the proposed rule would work, Campbell said. They don’t have time to reach agreements with neighboring states for CO2 trading within the time allotted, Campbell said.
Also, unlike the acid rain program, there is no established commercial scrubber technology to purchase and generate emission credits, Campbell said.
The reduced level of power generation efficiency at power plants is also a financial hurdle for development of commercial carbon capture and storage (CCS), Rising said.
“This [proposed rule] would be truly transformative for the power sector,” Campbell said.
“I’ve never seen anything like this,” said Campbell, who has been practicing Clean Air Act law for 20 years.
“EPA does not set energy policy and that is what it looks like it is doing here,” Campbell said. “I think EPA has got an uphill battle in court when this is challenged,” Campbell went on to say.
“In nine months we are going to completely change the way we regulate the electric markets it took 100 years to build,” said Peabody’s Williams, who said EPA is usurping the roles of FERC and state regulators.
“The EPA proposal would zero out coal in 12 states,” Campbell said. “Some of these states didn’t have much coal to begin with,” she added.
Peabody official warns of overreliance on gas
Williams said coal is the fast growing fuel in the world. Peabody is the largest coal producer in North America.
Coal brought first-time access to electricity to roughly 750 million people in the past two decades, Williams said.
Closer to home, the coal-heavy states tend to have the lowest electricity prices, Williams said. Coal-dependent states tend to have an electricity cost of 9.1 cents/kilowatt hour (kWh). By comparison the coal-light Northeast had a cost of 14.8 cents/kWh and California is at 14.6 cents/kWh, according to 2013 Energy Information Administration (EIA) data.
Also while coal is also depicted as the air pollution bogeyman, the 10 counties in the United States with the most polluted air are in California, which has almost no coal power, said the Peabody official.
If the United States mimics Europe, it could see “very high electric prices” just as does Europe.
“The U.S. power industry is continuously re-inventing itself,” Rising said. “The shift to natural gas, renewables, and improvement in nuclear output are largely responsible for the reduction in the total US CO2 emissions,” the Siemens official added.
Rising cites coal generation’s value to the grid
Despite all the gloom and doom, coal isn’t going away soon, Rising said.
“Some of those assets are just too large and valuable to leave stranded,” Rising said. Nevertheless, some of the increasingly stringent air standards will prove to be “a heavier lift for the coal fleet.”
In fact, installed coal capacity increased from 295,000 MW in 1995 to 310,000 MW in 2013. Of course, the growth in gas-fired capacity has been much more dramatic – going from 146,000 MW in 1995 to 425,000 MW in 2013.
Domestic renewable energy generation has been increasing rapidly and installed wind power is approaching the level of installed nuclear capacity, Rising said.
There is also changing technology to reduce CO2 emissions from conventional fuels like coal, Rising said. Integrated gasification combined-cycle (IGCC) technology, oxy-fuel and chemical looping are also examples of such technology.