The Federal Energy Regulatory Commission’s (FERC) stunning decision yesterday to reject Department of Energy Secretary Rick Perry’s plan to subsidize operations of financially vulnerable coal plants shows just how powerfully energy markets in the United States are shifting. FERC said the evidence does not support Perry’s claim that retiring more coal and nuclear plants would jeopardize the reliability of the nation’s electricity grid.
The decision spells more long term trouble for many currently-operating coal-fired power plants and is further proof that the retirement of 100 of gigawatts of coal-fired power since 2010 has been caused mostly by market forces, not environmental regulation. The low natural gas prices and increasing use of renewable resources that have undermined the financial viability of many coal plants led the industry to ask its friends in the Trump administration for a bailout to help failing plants. The industry must be really frantic now that FERC has rejected its plea.
Coal’s overall share of energy generation in the U.S. fell from 50 to just over 30 percent between 2008 and 2016. As I outlined in an article for the Oxford Institute for Energy Studies’ recent examination of what’s next for U.S. energy policy, this sea change is being driven by some simple economic facts, among them:
President Donald Trump’s campaign trail promises to revive America’s struggling coal industry and create new mining jobs have failed to materialize. While coal-fired plants did increase output by 5% in the first half of 2017 compared to 2016, recent Department of Energy data showed this growth was not sustained. Coal-fired generation through October 2017 was 2.1% lower than the first ten months of 2016, a figure that does not argue for any, let alone a long-term, recovery for coal. And U.S. utilities have already announced plans to retire more than 15,000 MW of coal capacity, just in 2018.
Another excerpt from the writing on the wall for energy markets.
Any long-term bailout for coal would necessitate viable and affordable carbon capture and sequestration (CCS) technologies, something the U.S. is nowhere close to achieving. Industry experts have estimated that adding CCS technology to existing coal plants would raise generation costs by 60-80%, making an inefficient industry more inefficient. The recently completed Kemper plant in Mississippi, which was supposed to capture CO2 and pipe it for use in enhanced oil recovery went substantially over budget, resulting in decisions to not use the plant for CO2 capture after all. As a result, Kemper is now a $7 billion plus natural gas fired plant that could have been built for $5 billion less.
CCS as it currently stands is neither technically nor economically feasible for existing coal plants. The only feasible way to reduce greenhouse gas emissions from coal plants is to not operate them and to use renewable resources and energy efficiency in their place.
Last February, Bloomberg New Energy Finance’s Head of the Americas Ethan Zinder stated “We don’t foresee any major comeback for coal anytime soon… That’s going to be a difficult transition for a lot of folks… but this is a transition, this is a modern economy, and this is displacement.” Secretary Perry’s failed bailout is just one more way the writing is on the wall for energy transition.
David Schlissel is IEEFA’s director of resource planning analysis.
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