Study Finds Renewables Aren’t Coal’s Problem

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Oil & Gas

Barack Obama became president nearly nine years ago. He vowed he would cut greenhouse gas (GHG) emissions. And he did just that.

Under his watch, the Environmental Protection Agency slapped increasingly more stringent GHG emission regulations on fossil fuel-fired energy-generation plants. It affected the worst offenders: coal-fired plants.

Since then, 253 of more than 500 coal-fired plants in the U.S. have closed or will do so by 2021. Those closures have decimated America’s coal industry – something Trump wants to fix.

His solution? Reverse Obama’s executive decisions regarding emissions, and pull out of the Paris climate agreement. And he did just that.

Unfortunately, Trump’s moves aren’t working as well as his predecessor’s. On the same day that Trump announced the U.S. wouldn’t support the Paris climate agreement, three more coal plants closed.

Be Careful What You Wish for…

Enter Trump’s new secretary of energy, Rick Perry. He commissioned a study that he hoped would point to what needed to be changed.

Surely he could get coal flowing out of mines again, right? But then came the big surprise…

The Department of Energy (DOE) released its findings on August 23, 2017. The study didn’t single out increased environmental regulations as the reason why coal-fired generation was rapidly disappearing. Increased renewable generation wasn’t the culprit either.

Instead, the study pointed to cheap natural gas as the biggest driver of coal-fired power plant closures over the last decade.

Back in April, when Perry ordered the DOE to undertake the study, flags went up in the environmental community. He used language that appeared to put renewable sources (solar and wind) in the crosshairs…

He went so far as to state that the White House might even overrule state energy policies. This would be done on “national security grounds” if grid reliability was thought to be at risk.

But renewables don’t have any effect on grid reliability. And they aren’t the reason coal-fired power plants are closing…

The United States: The World’s Largest Natural Gas Producer

It’s all due to our abundance of cheap, available natural gas. In fact, the U.S. is now the world’s largest producer.

Natural gas-fired power plants are cheap to build. And they have far lower operating costs than those of both coal and nuclear plants.

It takes only 18 to 24 months to build a natural gas-fired power plant. And it costs a fraction of what it takes to build a “clean coal” power plant. The most recent example is the Kemper “clean coal” plant in Mississippi.

The DOE and Southern Company (NYSE: SO) were its backers. At $7.5 billion, it’s the most expensive power plant ever finished in the U.S.

That adds up to about $40,000 for every Mississippi Power customer. With the same investment, Southern Company could have installed solar panels and battery backup for every one of its 150,000 residential consumers.

But I digress…

As the study found, “The biggest contributor to coal and nuclear plant retirements has been the advantaged economics of natural gas-fired generation.

“The increased use of natural gas in the electric sector has resulted in sustained low wholesale market prices that reduce the profitability of other generation resources important to the grid.”

Most utility companies have known for a long time that natural gas – and not renewables – is to blame for coal’s shrinking footprint.

Natural Gas Use Continues to Rise

Natural gas generation is becoming increasingly popular with utilities. By 2020, more than 150 new natural gas-fired power plants will come online here in the U.S.

Natural gas is quickly surging toward generating 50% of all power in the U.S.

The bottom line is this: Renewables aren’t the culprit when it comes to coal’s demise. Lower GHG regulations aren’t either.

Trump just needs to understand this. Perhaps Rick Perry will tell him.

The president could easily have his cake and eat it too. All he has to do is start embracing renewables and lowering GHG emissions.

Renewable energy is a huge source of new jobs that far exceeds those lost in the coal industry. And we will all be able to breathe easier with less pollution in the air.

Good investing,

Dave

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