In August of 2015, the Environmental Protection Agency (EPA) put into effect a Clean Power Plan (CPP) as an emission guideline for states to follow in limiting carbon dioxide (CO2) emissions from existing power plants. The plan was designed to reduce emissions in the United States by an estimated 32% below 2005 levels by 20301. The plan has since been placed on hold by the Supreme Court and the EPA is currently planning to roll back requirements put in place by the CPP2. Further, President Trump stated with regard to the Paris Agreement, “…the United States will cease all implementation of the non-binding Paris Accord and the draconian financial and economic burdens the agreement imposes on our country4.” This places the stance of the Unites States being that the cost of striving to reach the emissions targets and de-carbonization drive set by the Paris Agreement and CPP does not outweigh the economic burden that striving to meet those goals places on the power industry and the country.
Political climates are constantly shifting and the with the rest of the countries in the developed world signing the Paris Agreement and striving to meet emissions targets through a de-carbonization drive, the United States may soon be alone in their stance that the economic costs of de-carbonization outweigh the social costs of not reaching emissions targets set by the Paris Agreement. Time will tell, but it is possible that the rest of the world will pressure the United States to participate in the de-carbonization drive, causing the United States to rejoin the Paris Agreement and re-introduce a new modified Clean Power Plan (CPP). Power producers in the United States are aware of these swinging political climates and must prepare for the re-introduction of heightened emissions regulation. Failure to make progress toward de-carbonizing generating fleets now could leave a power producer with a portfolio of plants that are no longer profitable once new emissions regulations are implemented.
Many power producers are preparing to reach these potential emissions targets through retrofit of existing coal-fired and oil-fired units with the latest emissions controls systems. Power producers are also converting existing oil and coal-fired power plants to fire on natural gas as the primary fuel source. These conversions and addition of new emissions controls systems reduce emissions preparing the plants for implementation of a new Clean Power Plan (CPP). The conversion of coal-fired and oil-fired power plants to natural gas also increases profits as the price of natural gas has dropped significantly with advances in shale gas production3.
A belief that many people in the United States appear to have is that the de-carbonization drive and emissions targets set by the CPP are having negative economic effects toward existing coal-fired and oil-fired units. This is most likely true, but one could argue that extreme growth in the installed capacity of natural gas combined cycle units in the early 2000’s, the reduction in natural gas fuel prices, and the limited growth of electricity demand in the United States is more disruptive to many generating plant owners3. If rolling back the requirements of the CPP and pulling out of the Paris Agreement does not reverse the economic effects felt by the industry, public opinion may shift toward setting the social cost of not reaching emissions targets as a higher priority over economic repercussions. This could result in the United States setting new emissions targets for power producers. It is important for plant management and owners to be aware of these potential changes to ensure their facilities will maintain profitability in the event these potential emissions targets become reality sooner than expected.
References:
1 – Clean Power Plan Resources. (2018). Environmental Defense Fund. Retrieved from https://www.edf.org/clean-power-plan-resources
2 – Complying with President Trump’s Executive Order on Energy Independence. (2018). EPA. Retrieved from https://www.epa.gov/energy-independence
3 – David Steinberg, David Bielen, Aaron Townsend. (2018). Science Direct. Evaluating the CO2 emissions reduction potential and cost of power sector re-dispatch. Retrieved from https://www.sciencedirect.com/science/article/pii/S0301421517306262
4 – President Trump. (2017). Statement by President Trump on the Paris Climate Accord. Whitehouse Remarks. Retrieved from https://www.whitehouse.gov/briefings-statements/statement-president-trump-paris-climate-accord/
