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Davis: Not even Supreme Court can save Big Coal's eclipse in U.S.

The U.S. coal industry chalked up a rare win this summer, when the U.S. Supreme Court issued a ruling limiting the government’s ability to regulate greenhouse gas emissions from power plants. But that doesn’t mean coal-fired power plants are poised for a comeback.

As an economist, I analyze the coal industry, including power plant construction and retirement plans. I see three main reasons U.S. coal plants will continue to close down.

A detail related to the Supreme Court case helps tell the story.

The case, West Virginia v. the Environmental Protection Agency, involved the Clean Power Plan, a set of Obama-era regulations proposed in 2015 that would have required power plants to make deep cuts in greenhouse gas emissions.

For those powered by coal — historically the dominant source of carbon dioxide emissions in the electricity sector — that likely would have meant doing away with coal altogether.

But the Clean Power Plan never went into effect, and coal use has declined so much anyway that the U.S. power sector has already met the plan’s 2030 target — eight years early.

At its peak in 2007, coal was responsible for almost 2 trillion kilowatt-hours of electricity generation in the U.S., enough to  power 186 million homes. By 2021, that total had dropped 55%.

The drop was due in large part to an industrywide shift from coal to gas, solar and wind. That shift is happening for three main reasons.

 

1. Natural gas supply and pricing

Natural gas prices have decreased significantly — more than 60% between 2003 and 2019. That’s mainly due to improvements in hydraulic fracturing and horizontal drilling, which serve to allow drillers to extract more gas from shale.

The increased supply and decreased cost have led to substantial construction of new state-of-the-art, high-efficiency gas-fired generators.

In addition to being cheaper and more efficient, they are able to come online at full power in one to 12 hours, while a coal-fired generator may take up to 24 hours to begin producing power. The long lead time makes it hard to rely on coal when rising demand means the power grid needs more electricity quickly.

The electrical system faces its highest demand between 7 a.m. and 11 p.m. weekdays. If demand spikes, a coal-fired generator will miss that window, where gas will not.

 

2. The rise of renewable energy

Solar and wind energy are now cost competitive with fossil-fueled power, thanks to technological advancements.

In addition, the federal government and many state governments are offering incentives for renewable energy production, which lowers the cost.

President Joe Biden’s climate plan aims to increase those incentives. And, once built, renewable energy sources have no fuel costs and relatively low operational costs, compared with coal-fired generators.

Solar energy accounts for 46% of all new electricity generating capacity expected to join the grid in 2022, about 21.5 gigawatts.

A record 17.1 gigawatts of wind capacity came online in the U.S. last year, after a tax incentive was extended, and another 7.6 gigawatts is expected this year.

 

3. Environmental regulation

The government has instituted several environmental regulations over the past few decades aimed at reducing sulfur dioxide, nitrogen oxides, particulate matter, mercury and other hazardous air pollutants emitted by the electric power sector.

These hazardous emissions are linked to health problems, including respiratory illnesses and neurological and developmental damage, as well as smog, acid rain and climate change. And according to the U.S. Government Accountability Office, coal-fired generators are by far the largest sources of damaging emissions in the electricity sector.

To comply with the regulations, coal-powered plants have had to install scrubbers to remove the pollutants from their emissions, switch to lower-sulfur coal and invest in the reduction of sulfur and other impurities. As a result, costs have increased for the coal-fired fleet.

These higher environmental mitigation costs, coupled with lower wholesale electricity prices over recent years, make it harder for the operators of such plants to recover the capital investment needed to maintain an aging set of coal-fired generators. As a result, such units are increasingly being retired.

So what does this mean for the future of coal power in the U.S.?

The U.S. Energy Information Administration reports that coal generators account for 85% of the electric generating capacity being retired this year nationwide.

This trend is expected to continue, with substantial coal generator retirements occurring by 2030. This is a result of both market factors — cheap natural gas and affordable renewable energy — and regulatory measures.

Coal is used more widely in other countries, including China. As a result, U.S. coal companies have increased their exports in recent years.

However, at the 2021 United Nations climate change conference, more than 40 countries committed to completely shifting away from coal, and 20 others, including the U.S., pledged to stop government financing of coal use, unless it includes carbon capture technology.

The Biden administration, which has struggled to get its climate policies through a deeply divided Congress, appeared to have movement on a large climate change package in late July. An agreement announced by Sen. Joe Manchin of West Virginia, a major coal-producing state, included support for renewable energy and electric vehicles.

Meanwhile, the administration is weighing new regulatory options that could further affect the cost of generating electricity with coal. And this all adds up to a difficult economic environment for coal-fired generation in the U.S. for the foreseeable future.

From The Conversation, an online repository of lay versions of academic research findings found at https://theconversation.com/us. Used with permission.

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