Yesterday at Grist, David Roberts posted about a recent Christian Science Monitor article titled, “Study: EPA Regulations Squelch U.S. Coal Industry,” which he labeled “misleading dreck.” According to Roberts,
The story, from “guest blogger” Charles Kennedy, refers to a report [PDF] from the research consultancy Brattle Group. So I went and read the report. And it doesn’t say what Kennedy says it says. At all. In fact, it says something close to the opposite….
The report is an update of its brief from late 2010 on potential coal-plant retirements. The headline news: Brattle is substantially upping its projection of how many coal plants will retire, by about 25 GW. That’s huge. But it’s not happening because of EPA regulations. In fact, say the authors, the change is “primarily due to changing market conditions, not environmental rule revisions, which have trended towards more lenient requirements and schedules” (his emphasis).
Roberts is plainly confused when he writes that “it’s not happening because of EPA regulations.” The entire point of the Brattle Group’s 2010 and 2012 analyses is to forecast how the electricity market will respond to scores of billions of dollars in capital costs being imposed by the EPA on the coal industry. Thus, in a 2010 study, the Brattle Group concluded that 50 GW to 67 GW of coal-fired electricity would retire rather than install EPA-mandated retrofits, given 2010 market conditions (i.e., electricity demand and natural gas prices). And in a 2012 update of the 2010 report, the Brattle Group concluded that 59 GW to 77 GW of coal-fired electricity would retire rather than install EPA-mandated retrofits, given current market conditions (i.e., electricity demand and natural gas prices).
In each analysis, the direct impetus for the retirement of coal units is the cost of retrofits required by EPA regulations. And the cheaper the price of natural gas, the more utilities will opt to fuel switch or participate in the wholesale market, rather than pay for retrofits at their coal-fired power plants. This is why the updated 2012 Brattle Group report estimated a 25 GW increase in coal power plant retirements over the 2010 report–because gas prices are still depressed, so it is more economical for utilities to switch fuels than it is for them to comply with EPA requirements. Roberts, however, implies that utilities would choose to shutter coal power plants based on the price of natural gas alone; he fails to acknowledge that EPA regulations remain the underlying cause of the utilities’ choice to do so.
Given that the price of coal is projected to be significantly cheaper than the price of gas—as it states on page 2 of the 2012 Brattle Group report—it is likely that most, if not all, of these coal-fired power plants would continue operating, were their owners not forced to spend hundreds of millions, even billions of dollars, on EPA-mandated retrofits. To put it another way, natural gas can beat coal, but only with EPA’s help. For similar reasons, Chesapeake Energy (a natural gas company) gave $25 million to Sierra Club’s “Beyond Coal” campaign. Because a war on coal is great for gas!
Now, it would be one thing if these retrofits actually served a public health purpose. Alas, they don’t, which was the subject of a previous post. Instead, EPA is targeting the coal industry with costly, nonsensical regulations for no discernible reason other than to placate the environmentalist wing of the President’s political party. Of course, this is crummy policy making, especially in the midst of a difficult economy.