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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--President Donald Trump and the head of the Environmental Protection Agency (EPA) (Washington, D.C.) have proclaimed the "war on coal" is over, but their recent moves to roll back environmental regulations are unlikely to meaningfully increase coal use by power companies, say coal-burning utilities and bond-rating firm Moody's Investors Service (New York, New York), a unit of Moody's Corporation (NYSE:MCO) (New York, New York).
On March 28, in a White House ceremony surrounded by coal miners, President Trump signed an executive order instructing the EPA to review and revise the Clean Power Plan (CPP), President Obama's signature energy and environment initiative. For more on that, see March 29, 2017, article - Trump Begins Process of Undoing Obama's Climate Change Measures. Two weeks later, on April 13, before visiting a coal mine near Pittsburgh, EPA Administrator Scott Pruitt announced his agency was reviewing and reconsidering the already-finalized effluent guidelines limitations (ELG) for steam electric generation plants.
"The regulatory assault is over," Pruitt told several dozen Pennsylvania coal miners, according to a report from The Associated Press. "We're going to partner together with you. We're going to do it the American way, grow jobs and show the rest of the world how it's done."
Those regulatory actions begin a lengthy process of building separate administrative records to justify the revision of already-finalized federal rules, a process that could take as long as it took to draft the original rules, experts say.
Meanwhile, out in the market, Reuters surveyed 32 coal-burning utilities about the impact of Trump's March 28 action on the CPP. Twenty said it would have no impact on their long-term power generation investment plans. Five others said they were studying the order, six didn't respond and only one utility -- Basin Electric Power Cooperative (Bismarck, North Dakota) -- said it would positively affect their coal-related plans.
"We're in the situation where the executive order takes a lot of pressure off the decisions we had to make in the near term, such as whether to retrofit (or) retire older coal plants," Dale Niezwaag, a spokesman for Basin Electric, told Reuters. "But Trump can be a one-termer, so the reprieve out there is short."
On the other hand, Ben Fowke, chief executive at Xcel Energy Incorporated (NYSE:XEL) (Minneapolis, Minnesota), told Reuters: "I'm not going to build new coal plants in today's environment. And if I'm not going to build new ones, eventually there won't be any." Xcel Energy operates in eight states and generates about 36% of its electricity from coal.
In a similar vein, Jeff Burleson, vice president of system planning at Southern Company (NYSE:SO) (Atlanta, Georgia), told The New York Times that Trump's March 28 action "really doesn't change anything. Whatever happens in the near term in the current administration doesn't affect our long-term planning for future generation. We'll continue to grow the renewables portion of our business and meanwhile rely on natural gas, but we don't see investing in new coal."
Southern Company is parent to four large Southeastern utilities that, collectively, own 46,000 megawatts (MW) of electric generating capacity. Burleson told the Times that Southern Company plans its investment on a 50-year horizon, the expected life span of a new power plant. Its planners do not see coal as economically viable in that time frame.
John McManus, vice president at American Electric Power Company (NYSE:AEP) (Columbus, Ohio), told the Times that Trump's commitment to roll back the CPP, "at this point, in terms of how we've been transitioning our fleet and transmission, it probably won't have a big impact." Like Southern and other power companies, AEP has been closing older, less-efficient coal plants and either switching others to burn natural gas, or installing pollution-control equipment.
All cited the widespread availability of inexpensive natural gas and the declining cost of renewable energy generation, like wind and solar, as more important strategic factors driving their investment decisions in electric generation.
They are echoed by analysts at Moody's, who, in a late-March report, suggested up to 56,000 MW of coal-fired generation in the Great Plains and Midwest could be at risk from wind power. Their report, Rate-Basing Wind Generation Adds Momentum to Renewables, assessed 87,000 MW of coal-fired generation in 15 states and found that a majority--about 64%--are facing tough competition from wind generation. Windfarms are supplying power in these areas for about $20 per megawatt-hour (MW/h), compared to $30 per MW/h for coal.
And the economics for coal get worse each time coal generation is displaced by wind power, Moody's Analyst Jairo Chung, a co-author of the report, told Greentech Media. "If the capacity factor (of a coal plant) comes down, it produces less and less electricity, and the cost per megawatt-hour produced would increase," she said. A plant's maintenance and capital spending would remain the same, but now an operator would have less output over which to spread that output, increasing the per-MWh cost and making the next increment of generation that much more expensive.
"The utilities and the state legislators see renewable options as viable options for them to invest in," she told Greentech Media. "One thing that is important to point out is that it is not an environmental reason why they're pursuing this. It's an economic reason. Yes, it's good for the environment and the consumers benefit from having cleaner power at a cheaper price, but at the end of the day, it is pursued by the utility because it is much more cost-effective."
The Moody's analyst said you can pick your cliché--"The ship has sailed; the horse is out of the barn"--but regardless of which you choose, coal faces a declining future in the U.S. electric generation market.
Buttressing her assessment, and the views of utility executives, utilities recently announced the closure of three more coal-fired power plants. Dayton Power and Light Company, a subsidiary of AES Corporation (NYSE:AES) (Arlington, Virginia), decided to close the 618-MW Killen Power Station and the 2,318-MW J.M. Stuart Generating Station by mid-2018. The two plants "will not be economically viable beyond mid-2018," the utility said last month in announcing the decision. Killen, located in Adams County, Ohio, began operating in 1982. Stuart, located in Brown County, Ohio, began generating electricity in 1969.
And in Florida, the Saint Johns River Power Park, a 1,252-MW facility, will close by early 2018, according to its co-owners, JEA (Jacksonville, Florida) and Florida Power & Light (Juno Beach, Florida), a unit of NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida). That plant, located in Duval County, Florida, began operating in 1987.
In its most recent Short-Term Energy Outlook, released April 11, the U.S. Energy Information Administration (EIA) (Washington, D.C.) predicted a slight uptick in U.S. coal production in 2017 and 2018. But that small expected gain follows a big reduction from 2014-2016.
Click on the image at right to view EIA's projection of U.S. steam coal production.
Higher natural gas prices in 2017 will cause some utilities to switch back to coal for some of their generation this year and next, the agency forecast. Coal's share of the electric generation market will rise to 31% this year and next, a 1% increase over its share in 2016. Gas, meanwhile, will see its share of the electric generation market falling to 32% this year and next, down from 34% in 2016, EIA predicted.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
On March 28, in a White House ceremony surrounded by coal miners, President Trump signed an executive order instructing the EPA to review and revise the Clean Power Plan (CPP), President Obama's signature energy and environment initiative. For more on that, see March 29, 2017, article - Trump Begins Process of Undoing Obama's Climate Change Measures. Two weeks later, on April 13, before visiting a coal mine near Pittsburgh, EPA Administrator Scott Pruitt announced his agency was reviewing and reconsidering the already-finalized effluent guidelines limitations (ELG) for steam electric generation plants.
"The regulatory assault is over," Pruitt told several dozen Pennsylvania coal miners, according to a report from The Associated Press. "We're going to partner together with you. We're going to do it the American way, grow jobs and show the rest of the world how it's done."
Those regulatory actions begin a lengthy process of building separate administrative records to justify the revision of already-finalized federal rules, a process that could take as long as it took to draft the original rules, experts say.
Meanwhile, out in the market, Reuters surveyed 32 coal-burning utilities about the impact of Trump's March 28 action on the CPP. Twenty said it would have no impact on their long-term power generation investment plans. Five others said they were studying the order, six didn't respond and only one utility -- Basin Electric Power Cooperative (Bismarck, North Dakota) -- said it would positively affect their coal-related plans.
"We're in the situation where the executive order takes a lot of pressure off the decisions we had to make in the near term, such as whether to retrofit (or) retire older coal plants," Dale Niezwaag, a spokesman for Basin Electric, told Reuters. "But Trump can be a one-termer, so the reprieve out there is short."
On the other hand, Ben Fowke, chief executive at Xcel Energy Incorporated (NYSE:XEL) (Minneapolis, Minnesota), told Reuters: "I'm not going to build new coal plants in today's environment. And if I'm not going to build new ones, eventually there won't be any." Xcel Energy operates in eight states and generates about 36% of its electricity from coal.
In a similar vein, Jeff Burleson, vice president of system planning at Southern Company (NYSE:SO) (Atlanta, Georgia), told The New York Times that Trump's March 28 action "really doesn't change anything. Whatever happens in the near term in the current administration doesn't affect our long-term planning for future generation. We'll continue to grow the renewables portion of our business and meanwhile rely on natural gas, but we don't see investing in new coal."
Southern Company is parent to four large Southeastern utilities that, collectively, own 46,000 megawatts (MW) of electric generating capacity. Burleson told the Times that Southern Company plans its investment on a 50-year horizon, the expected life span of a new power plant. Its planners do not see coal as economically viable in that time frame.
John McManus, vice president at American Electric Power Company (NYSE:AEP) (Columbus, Ohio), told the Times that Trump's commitment to roll back the CPP, "at this point, in terms of how we've been transitioning our fleet and transmission, it probably won't have a big impact." Like Southern and other power companies, AEP has been closing older, less-efficient coal plants and either switching others to burn natural gas, or installing pollution-control equipment.
All cited the widespread availability of inexpensive natural gas and the declining cost of renewable energy generation, like wind and solar, as more important strategic factors driving their investment decisions in electric generation.
They are echoed by analysts at Moody's, who, in a late-March report, suggested up to 56,000 MW of coal-fired generation in the Great Plains and Midwest could be at risk from wind power. Their report, Rate-Basing Wind Generation Adds Momentum to Renewables, assessed 87,000 MW of coal-fired generation in 15 states and found that a majority--about 64%--are facing tough competition from wind generation. Windfarms are supplying power in these areas for about $20 per megawatt-hour (MW/h), compared to $30 per MW/h for coal.
And the economics for coal get worse each time coal generation is displaced by wind power, Moody's Analyst Jairo Chung, a co-author of the report, told Greentech Media. "If the capacity factor (of a coal plant) comes down, it produces less and less electricity, and the cost per megawatt-hour produced would increase," she said. A plant's maintenance and capital spending would remain the same, but now an operator would have less output over which to spread that output, increasing the per-MWh cost and making the next increment of generation that much more expensive.
"The utilities and the state legislators see renewable options as viable options for them to invest in," she told Greentech Media. "One thing that is important to point out is that it is not an environmental reason why they're pursuing this. It's an economic reason. Yes, it's good for the environment and the consumers benefit from having cleaner power at a cheaper price, but at the end of the day, it is pursued by the utility because it is much more cost-effective."
The Moody's analyst said you can pick your cliché--"The ship has sailed; the horse is out of the barn"--but regardless of which you choose, coal faces a declining future in the U.S. electric generation market.
Buttressing her assessment, and the views of utility executives, utilities recently announced the closure of three more coal-fired power plants. Dayton Power and Light Company, a subsidiary of AES Corporation (NYSE:AES) (Arlington, Virginia), decided to close the 618-MW Killen Power Station and the 2,318-MW J.M. Stuart Generating Station by mid-2018. The two plants "will not be economically viable beyond mid-2018," the utility said last month in announcing the decision. Killen, located in Adams County, Ohio, began operating in 1982. Stuart, located in Brown County, Ohio, began generating electricity in 1969.
And in Florida, the Saint Johns River Power Park, a 1,252-MW facility, will close by early 2018, according to its co-owners, JEA (Jacksonville, Florida) and Florida Power & Light (Juno Beach, Florida), a unit of NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida). That plant, located in Duval County, Florida, began operating in 1987.
In its most recent Short-Term Energy Outlook, released April 11, the U.S. Energy Information Administration (EIA) (Washington, D.C.) predicted a slight uptick in U.S. coal production in 2017 and 2018. But that small expected gain follows a big reduction from 2014-2016.
Click on the image at right to view EIA's projection of U.S. steam coal production.Higher natural gas prices in 2017 will cause some utilities to switch back to coal for some of their generation this year and next, the agency forecast. Coal's share of the electric generation market will rise to 31% this year and next, a 1% increase over its share in 2016. Gas, meanwhile, will see its share of the electric generation market falling to 32% this year and next, down from 34% in 2016, EIA predicted.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
