Weak Demand, Cheap Gas Reduces Impact Of New Emissions Standards

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The EPA’s new limits on carbon emissions make it difficult to impossible to open a new coal plant, but with falling demand growth, cheap gas, and improved renewables, new coal plants aren’t essential to meeting the country’s energy needs anyways. The bigger question is what will happen next year when the EPA is expected to come out with a rule restricting emissions from existing plants.

The need for new power plants in the U.S. relatively low

Between increased energy efficiency measures, solar panel distribution, and demand-management, power demand growth has been falling for the last few years, including every region in the continental U.S. other than California and Texas. Twenty-five states have binding energy efficiency standards that are projected to save more than 6 percent of U.S. electricity sales—with steady and, in some places, falling demand, the need for new power plants is relatively low.


Fast-start natural gas plants are a much better fit than coal

At the same time, renewable energy sources have become more competitive and more prevalent. Intermittency is still an issue (total power generation rises and falls unpredictably) so green energy needs to be supplemented with a traditional power source. Fast-start natural gas plants are a much better fit than coal, because they can be turned on and off quickly, while coal plants need time to build heat.

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“There is a perception that this is a war on coal,” writes Citi commodities analysts Edward Morse and Anthony Yuen, “but it does appear that the President’s plan for an all-of-the-above energy policy and loan guarantee programs are helpful toward the development of clean coal and CCS, so that coal could have a place in a low carbon world.”

‘Clean coal’ better for environment but difficult to implement

Proponents of ‘clean coal’ have pointed towards coal capture and sequestration (CCS) as a way of having plentiful cheap energy without damaging the environment, but the technology has proven difficult to implement and too expensive to compete with natural gas. To help things along, the Department of Energy has been authorized to issue up to $8 billion in loans for research into clean coal—$6 billion for coal-based power generation and $2 billion for advanced coal gasification. Seen in this light, the EPA’s New Source Performance Standards (NSPS) don’t constitute a ‘war on coal’ so much as the insistence that clean coal finally live up to its hype.

“The more important ongoing development is the upcoming proposed rule by the EPA regulating existing power plants’ emissions,” write Morse and Yuen. The new rule is expected to come out sometime next summer, and it will restrict carbon emissions from existing coal plants. If existing plants are held to NSPS levels, they would essentially have to shut down. “The opposition to this proposed rule could be much stronger, since it involves plants currently in operation,” state Morse and Yurn, “with lengthy litigation even if the final rule is implemented.”

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