'War on coal'? Why Obama might not be industry's worst enemy.
Environmental regulations by the Obama administration come at a cost to coal plants and mines, but the rise of cheap natural gas appears to be a greater threat.
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Those costs could also factor in to decisions to retire about one-sixth of the nation's existing coal-fired generating capacity by 2020, the EIA said.Skip to next paragraph
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But how culpable are regulations versus broader changes in the energy market?
In the long term, the EPA regulations could become more of a factor, says Jesse Gilbert, senior industry analyst with SNL Energy in Charlottesville, Va., who authored its new study. But what is going on now has much more to do with coal becoming less profitable – regardless of EPA rules, he says.
"Why retire a [coal-fired] plant three years before any regulation requires it?" he adds. "What it comes down to is that these plants are just not economical to run anyway."
In January, Great River Energy, a North Dakota cooperative serving 650,000 customers in the upper Midwest, announced it would immediately mothball a new coal-fired power plant it had just completed at a cost of $437 million. Officials cited weakening power demand and competition from cheaper sources of electricity, such as wind and natural gas.
"We could run it – and lose money half the time," Rick Lancaster, vice president for generation at Great River Energy, told the Minneapolis Star Tribune.
And last year, Texas-based Luminant warned that it would have to shutter two of three generators at its Monticello power plant – one of the state's largest coal-fired plants – and three coal mines. Officials blamed a looming federal emissions law intended to curb sulfur dioxide and nitrogen oxide.
"To meet the rule's unrealistic deadline and requirements, Luminant reluctantly must take the difficult steps of idling two generating units and ceasing mining Texas lignite at three mines," the company said in a September 2011 press release.
In March, when those new EPA rules were struck down by a federal appeals court and the "EPA overlords" were defeated, according to Texas Attorney General Greg Abbott, the plant appeared to get a reprieve. But Luminant officials announced that two of the three generators would be shuttered for at least six months anyway. Low electricity prices – driven by market rate-setting natural gas plants – had made them uneconomical outside the peak summer season, they said.
"The reason we're looking to do this is due to persistently low wholesale power prices that have made these two units unprofitable except during the summer months," says Ashley Barrie, a company spokeswoman. "It doesn't make sense for us to operate these units at a loss."
"It had nothing to do with environmental regulations – this is purely an economic decision," Ms. Barrie says.