Environment & Energy Report

Market Reality Stands in Way of Relaxed Rules Helping Coal Plants

Jan. 10, 2019, 11:06 AM

Power utilities won’t simply start shoveling more coal into their plants in light of the EPA’s plans to leave in place or revoke toxic air pollution limits set by the Obama administration.

Southern Co., Duke Energy Corp., and DTE Energy told Bloomberg Environment that the Environmental Protection Agency’s recent re-examination of the mercury and air toxics standards, or MATS, makes no difference to their long-term electricity generation plans.

Instead, the nation’s largest electric utilities will continue to retire uneconomic coal-fired power plants, rely more on natural gas, and add more renewables to their energy mix.

“DTE will not restart any shuttered coal plants,” Eric Younan, a company spokesman, said. “DTE is not going to change its long-term plans. The transformation of our generation fleet from coal to cleaner sources like renewables and natural gas is well underway.”

The Environmental Protection Agency’s Dec. 28 proposal seeks to undo the legal basis for the 2012 limits by arguing that costs for the power sector to comply outweighed the benefits of reducing toxic air pollution like mercury.

Associations representing public, private, and rural electric utilities—which spent billions to comply with the toxic air pollution standards—have asked the EPA to leave them in place so they can continue to recover their compliance costs from ratepayers.

And energy and power market analysts aren’t surprised by the reaction of the electric power utilities to the EPA proposal.

“The utilities won’t restart coal-fired power plants or switch from using natural gas,” said Bloomberg Intelligence mining analyst Andrew Cosgrove. “Those costs are already sunk.”

‘Business as Usual’

For the American Electric Power Co., it is “business as usual” because the mercury limits are still in place. The company, which ranks among the nation’s largest coal-fired utilities, is concerned by the uncertainty the EPA created by seeking comment on revoking the toxic air pollution limits altogether.

St. Louis-based Ameren Corp., Charlotte, N.C.-based Duke Energy, and Atlanta-based Southern Co. said they were reviewing the proposal and wouldn’t comment yet on whether they were concerned about the EPA revoking the standards.

This move is seen by public health and environmental groups as a nod to the “dirty” coal mining industry, notably Murray Energy Corp..

Murray Energy told Bloomberg Environment that “retaining the illegally implemented 2012 standards is troubling.”

Murray, the nation’s largest underground coal mining company, has pushed the EPA to revoke the Obama-era standards, saying demand for coal production dropped as power plants retired or turned to natural gas.

No Price Movement

The proposal caused no change in domestic coal prices, which Cosgrove said are supported more by exports than domestic demand.

Going forward, the more important question is whether utilities will ramp up coal-fired generation if the EPA decides to revoke the standards, William Nelson, Bloomberg NEF’s head of North America Power, said.

Right now, Nelson said, the average coal-fired power plant is running at 49 percent of its capacity.

“We could double our coal-fired generation, or coal burn, simply by ramping up the use of the existing fleet,” Nelson said.

“If they don’t have to use pollution controls then there might be an uptick in coal utilization, and that will have a far greater impact than the calculus of a few coal plants coming back online.”

To contact the reporter on this story: Amena H. Saiyid in Washington at asaiyid@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Andrew Childers at achilders@bloombergenvironment.com; Steven Gibb at sgibb@bloombergenvironment.com

To read more articles log in. To learn more about a subscription click here.