Energy and Natural Resources

Coal Can Still Lose Despite Pro-Coal Policies

19 October 2017

The Trump Administration’s energy and environmental policy initiatives tend to favor natural gas as a generation fuel, likely reducing coal production and mining employment. That outlook was reached by new analysis by Brattle Group Principal Marc Chupka, who spoke at an Energy Bar Association meeting in Washington, D.C. in mid-October.

The presentation, “When Coal is the Goal: Environmental Policy and Energy Markets,” showed that selected elements of the Administration’s policy, such as the repeal of the Clean Power Plan (CPP) and the rollback of proposed environmental rules on coal mining operations, could boost U.S. coal production by about 50 million tons per year in 2020 and by 150 million tons in 2030, compared to the baseline coal use projections under the Obama Administration’s policy.

But Chupka says these changes do not take place in isolation. When combined with the pro-natural gas elements of the Trump Administration’s policy, the “all of the above” pro-fossil fuel policy of simultaneously expanding coal and natural gas supply “would also reduce the price of natural gas and continue to favor natural gas as a generation fuel.”

A coal barge approaches an electric power plant along the Ohio River. Credit: WikimediaA coal barge approaches an electric power plant along the Ohio River. Credit: WikimediaHe says this likely could reduce coal production by about 220 million tons in 2020 and by 210 million tons in 2030 compared to the previous administration’s policy.

“This net reduction in coal production would reduce mining employment by between 13,000 and 16,000 jobs,” he said.

“Policies that reduce production costs for all fossil fuels will not necessarily increase the consumption of all fuels,” said Chupka. “The competition between natural gas and coal for generation fuel continues to favor natural gas.”

“Policies that reduce production costs for all fossil fuels will not necessarily increase the consumption of all fuels,” said Chupka. “The competition between natural gas and coal for generation fuel continues to favor natural gas.”

Chupka formerly served as the Acting Assistant Secretary for Policy and International Affairs at the U.S. Department of Energy, and was the Associate Director for Air, Energy and Transportation at the White House Office for Environmental Policy.

FERC Policy

He also discussed the September 2017 baseload plant support policy initiative by U.S. Secretary of Energy Rick Perry. Under the proposal, the U.S. Federal Energy Regulatory Commission (FERC) would be required to offer financial support through tariffs that cover the costs of baseload coal and nuclear plants in restructured wholesale power markets. The goal would be to discourage retirements and maintain grid resilience.

(Read "FERC Rule Change Would Bolster Coal and Nuclear Units.")

Natural gas for electric power generation now competes with coal. Credit: EIANatural gas for electric power generation now competes with coal. Credit: EIAChupka says that less than 20 percent of the nation’s coal fleet and 5 percent of the nuclear fleet have retired in the past 15 years. While these retirements have been concentrated in some areas, such as the PJM market, “the very same markets that have experienced the most retirements continue to have the highest proportion of coal and nuclear capacity.”

As a result, depending on how the financial support is structured, the coal plants in these regions could receive billions of dollars annually without increasing the plants’ overall output.

“The main reason for this disconnect is that financial assurances for fixed cost recovery will not make these plants more economical in the dispatch competition for a share of power production," Chupka said. “Thus, while the proposal may help owners of coal and nuclear plants, it might not affect coal production and mining employment.”

To contact the author of this article, email david.wagman@ieeeglobalspec.com


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Discussion – 1 comment

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Re: Coal Can Still Lose Despite Pro-Coal Policies
#1
2017-Oct-21 2:42 PM

What I don't understand, is why anyone would want to supply all of the energy needs with a 100% of anything. If 20% was coal, 20% natural gas, 20% oil, 20% nuke, 20% burning trash, the whole load could be supplied without 100% dependence on any one thing. The "competition" between the different suppliers for a share beyond any supply/demand limits can be avoided, resulting in a naturally achieved "equilibrium" of whatever percentage it comes out to be. Continuing to make coal clean will ensure that it can supply at least a partial load, even if it does not "win" the competition. Who says that anyone "winning" means that somebody else loses? As long as everybody can participate in the general market to their best ability, then everybody wins. Artificial competition here will not do anyone any good. Can coal still lose? Everybody can lose here. The problem shouldn't be framed in this way. Let's get it right.

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