Feature

Analysis: Obama's war on coal and the renewable energy opportunity


Felicity Carus

As the presidential elections loom in November, the fossil fuel industry has intensified its counterattack on Obama's war on coal and the EPA's “job killing regulations”.

NB: this article was first published in Renewable Energy Focus magazine. For a free subscription, click here.

Even before he became the 44th president of the United States, Barack Obama declared his “war on coal”.

“If somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas,” he told the San Francisco Chronicle in January 2008.

Under the Clean Air Act, the Environmental Protection Agency (EPA) has introduced or extended regulation of greenhouse gas (GHG) emissions and pollutants such as mercury. Critics claim these mandates are “backdoor bans” that over-reach Congressional authority, while advocates claim Obama's EPA had to fill the policy void after climate change legislation failed to pass Congress in 2010.

As the presidential elections loom in November, the fossil fuel industry has intensified its counterattack on Obama's war on coal and the EPA's “job killing regulations”. The Republican party has rallied to support its corporate sponsors with at least as much zeal as attempts to scrap Obamacare.

Some 57 power plants – or 26GW – of coal-fired power plants are due for retirement under the EPA's regulation of GHG emissions and other pollutants such as mercury, particulates and noxious gases. There are real concerns about the retirement of a fuel source that provided 42% of electricity in 2011.

There are also signs, however, that coal is losing its hold on the US energy economy. In April, the Energy Information Administration (EIA) recorded both gas and coal fired generation as equal for the first time in history, with each fuel providing 32% of total generation.

As the US energy industry undergoes a massive transformation due to the shale gas revolution, natural gas may seem the natural successor to coal. But clean energy advocates are lobbying hard in Washington to try to help fill the energy gap.

Fossil fuel advocates estimate 29,000 jobs are at risk, with some states in the north-east losing as much as 18% of their capacity. On July 16, Paul Vining, the president of Alpha Natural Resources, told a Congressional hearing: “While there is no question that our industry is being detrimentally impacted, I would respectfully assert that this is not just a war on coal. What we are experiencing is a war on affordable electricity, a significant building block of American prosperity.”

A strong EPA

Legal and Congressional challenges to the EPA's authority to regulate emissions have so far failed. Last month, the US Court of Appeals in Washington DC ruled the EPA was “unambiguously correct” in applying the Supreme Court's “endangerment finding” under Massachusetts v EPA in 2007 which determined that GHG emissions from tailpipes and stationary sources are pollutants that should be regulated.

In 2010, the EPA announced stricter permitting requirements that now cover 70% of GHG pollution from stationary sources. It has also strengthened other regulations such as the Utility Maximum Achievable Control Technology to regulate hazardous air pollutants like mercury.

Then in April this year, the EPA proposed additional regulations – New Source Performance Standards – for new power plants. Under the proposal, no new coal-fired power station could be built without carbon capture storage (CCS) technology. The EPA reportedly received two million comments in response to its plan.

The EPA has allowed some flexibility since the technology is not commercially available, notes Kyle Danish, attorney with Van Ness Feldman in Washington. “EPA has provided an alternative compliance option. Effectively, if you can get CCS onto your plant in 10 years you can have a pathway where you exceed the standard for a while provided that you are below the standard afterwards.”

Industry and environmentalists have frequently challenged the EPA under Clean Air Act regulations over the past 20 years, Danish adds. The more recent attacks from the Coalition for Responsible Regulation are no exception, but EPA has never attempted to regulate gas and coal fired power stations with a single regulation before.

“It's maybe emblematic of the litigiousness of US society,” he says. “But it's new for EPA to lump together natural gas and coal fired power stations and impose a standard that really only natural gas plants can meet. That's new and has attracted controversy. The perceived infeasibility of CCS has led a number of industry observers to say this is effectively a ban on new coal-fired power stations.”
An election issue

As Republicans and the fossil fuel industry trade blows with the Obama administration and the EPA, tension over the regulation of GHGs is likely to become an increasing focal point ahead of this year's presidential elections. “The Romney campaign makes it very clear they do not agree the Clean Air Act should be used for GHG regulations and they do not favour a regulatory approach on GHG,” says Danish.

As part of a settlement agreement linked to a legal challenge from environmentalists, he continues, the EPA agreed to develop even stricter regulations for existing power plants. A decision to proceed will be decided by the outcome of this year's elections.

“There seems to be a recognition that there's not much reason to propose something [new] now because if Obama doesn't win it will never get finalised by Romney. If Obama wins, he might be able to propose something more ambitious than he can propose now.”

Renewable energy advocates are keen to characterise the EPA's GHG restrictions as an abdication of king coal and the accession of a sun king with natural gas reining at its side. “Solar is only 0.4% of the US market today,” John Lefebvre, the president of Suntech America, the US subsidiary of the world's largest PV manufacturer, recently told the Intersolar conference in San Francisco. “If you look at the announced closures for coal we're looking at over 26GW of plant closures in the US. Coal represents 42% of the market. Where do you think that energy is going to come from in the future?”

Solar dawn

For Lefebvre the answer is clear: the end of the coal age could be a new dawn for solar, he suggested. “There's a lot of optimism around the 100-year supply of shale gas in the US and it comes with a lot of unknowns and an opportunity for solar to partner with natural gas to really address some peak power issues that we have in the country.”

Lefebvre said Suntech is working “with both sides of the aisle” in advance of the elections. “There's a lot of studies and information that's not being represented fully such as how natural gas and solar can play together,” he said.

Regardless of the election outcome, Congressional action to create national energy policy is anticipated. Lisa Jacobson, president of the Business Council for Sustainable Energy, favours an “all of the above” strategy like the president.

“We'd like to see some kind of national discussion on the energy system to take us into the next couple of decades. We're not anti-certain sectors. We're realistic about what our current energy mix is and where we might go. But we definitely see natural gas, renewables and energy efficiency in any order you want as playing an increasing role as we go out into the next 10-20 years, with or without Congressional action. Right now there's still that lack of clarity and that's not good for investments in the energy sector no matter what part of the sector you're in.”

It is impossible, she adds, to predict the speed of transition given the impact of low natural gas prices on all other sources of energy. But she is clear, the US could lose 26GW of coal-fired plant without the lights going out: “We don't see it as a reliability crisis. We think we can manage this transition.”

Recent EIA figures suggest the US market is turning to natural gas simply due to its low price (around $2/mmbtu). Steve Seidel, senior adviser at the Center for Climate and Energy Solutions, thinks this exposes the US energy industry to the risk of price volatility. “I have a concern that the market is racing towards natural gas when history has shown that prices are volatile,” he says. “We need a more diverse energy mix in the US, which would combine fossil fuels with renewables and nuclear energy. If we had a national energy policy we would be able to maintain that diversity.”

Clean energy advocates, meanwhile, are pressing for the adoption of solar to mitigate price volatility. Last year, a hot spell in Texas sent electricity prices soaring from $438/MWh on June 25 to $3000/MWh the following day as more people flicked the switch on their air-conditioning systems. Solar could mitigate this risk 20- 30 years out, says Lefebvre. “There is a lot of uncertainty over the price of natural gas. Solar can offer a partner to natural gas, a hedge against the cost of natural gas.”

About the author: Felicity Carus previously worked on the environment desk at the UK’s Guardian newspaper. She covers renewable technology and clean energy policy and finance out of San Francisco, CA.

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