Impact of Clean Power Plan on Coal Both Short-Term and Long-Term

           US - Energy News

On October 22nd, the Advanced Energy Economy (AEE), a national business association committed to advanced energy solutions endorsed most goals in the Environmental Protection Agency’s (EPA) Clean Power Plan (CPP). The Agency provided in June a final plan for carbon emissions from existing power plants under section 111 (d) of the Clean Air Act. The CPP sets state-by-state targets for emissions reductions but allows states to develop their own compliance plans.

As stated earlier in the July 2015 Alfa Monthly Energy Report, there is much legal activity from organizations that oppose the plan. The AEE however is actually endorsing a more aggressive plan that will give credit for action taken prior to 2022 (when implementation of the plan starts). Part of their statement is as follows, “the technologies and services needed to meet the Clean Power Plan Goals are widely available in the energy marketplace today and growing. By making full use of advanced energy technologies and services for compliance, states will be able to improve reliability, reduce costs and give customers more energy choices at the same time.”

Clearly coal electricity generation is declining and will feel increased pressure as the Clean Power Plan is implemented and the amount of coal electricity generation has been declining year on year since at least 2010. In 2010 the amount of coal-based electricity in the United States was approximately 48% of total electricity produced while in 2015 it will be closer to 30-35% of total electricity produced. A review of the above chart will show that the price of coal has also been in a bear market along with many commodities.

It is important to highlight that while coal is no longer the preferred fuel for electricity generation, at 35% it is still currently a large part of the electricity supply stack, especially in the PJM area. With so many coal companies (26-according to Carbon Tracker Initiative) declaring bankruptcy or going out of business, there is always the possibility that there could be upward pressure on coal prices as coal production continues to decline even faster than coal based electricity production. Coal will continue to decline as part of the overall USA energy economy but it is possible that this decline may be characterized by volatility in terms of price.

Analyst – David Mousseau
Sources – Advanced Energy Economy (AEE), Carbon Tracker Initiative, Direct Energy, Environmental Protection Agency (EPA)

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