In May, the federal Environmental Protection Agency (EPA) proposed new rules for coal-fired generation plants with a goal of cutting carbon dioxide emissions from those plants by 30 percent by 2030, based on a 2005 benchmark. With so much discussion about the rules, I’d like to take a step back and go through some background and implications about the proposed rules.
Where did this all start? Believe it or not, with the U.S. Supreme Court. Until 2007, the EPA took the position that Congress did not give it the authority to regulate output of carbon dioxide and other greenhouse gases. In a case called Massachusetts vs. EPA, the court said the EPA did have that authority and directed it to research whether greenhouse gases endangered public health or the environment. In 2009, the EPA concluded those gases are a danger. In a nutshell, that’s what led to the proposed rules.
As of December 2013, the EPA says there were 523 coal power plants in the U.S. with 983 generating units, producing about 37 percent of the electrical power in the country. Coincidentally, the EPA also says these coal plants produce about 38 percent of the country’s carbon dioxide output (transportation is second with 32 percent). So how does that compare to the rest of the world?
Not surprisingly, China is the big dog when it comes to coal. In 2012, China consumed 49 percent of the world’s coal, compared to the U.S. at 11 percent. From 2005 to 2009, the country added the equivalent of all U.S. coal power plants combined, and from 2010 to 2013, added the equivalent of half of all U.S. coal plants combined. That’s nearly 2,000 power plants running on coal, using more than four times the amount of coal the U.S. uses.
What do those numbers mean? More carbon dioxide, sure, but it also signals some possible reasons for those EPA proposals. After the EPA announced the proposed rules, it was revealed advisors to the Chinese government were recommending caps on carbon emissions starting in 2016.
Now when we come back to the U.S., I find it interesting that the target is to reduce carbon emissions by 30 percent (from the 2005 benchmark) by 2030. According to the Energy Information Administration (EIA), by 2013, we had already reduced emissions by 10 percent from that benchmark, just in the energy industry.
If the rules become part of our regulatory landscape, we will see a decline in coal-fired plants over the next few years. To highlight that fact, the EIA says the number of plants being retired by 2016 is at least 9 percent, and could be as high as 24 percent, affecting 9 percent of all electrical generation in the U.S.
That 24 percent of plant retirements calculates to 365 billion kilowatts of electricity, which will need to be replaced somehow, most likely with a combination of natural gas-fired plants and renewables. Based off some rough assumptions, this is equivalent to the electricity needed for 8,306,000 homes (+/- 20 percent). While many peo
ple see this as a step forward, we need to remember that it takes time to bring new power generation plants online, no matter how they generate power.
What’s the net effect on our power environment? First, we need to remember these are proposed rules. Congress could step in and change the game yet again. When it comes to replacement generation sources, I covered the numbers and possibilities in my previous post on coal power.
But no matter what happens, a lot of those concerns are still on the table, and we may have to review our options much sooner than we expected. You can get a copy of the proposed rule changes on the EPA website.