My Top 10 Predictions for 2012

The New Year will be pivotal for the power generation industry, as you will read in our 2012 Industry Forecast (p. 26) and my list of predictions below. Looking back over the past year, I again gave myself a B+ on my 2011 predictions (see p. 33 for a rundown of my individual scores).

10. The Kyoto Protocol Dies. The Kyoto Protocol will expire on December 31, 2012. Canada, Japan, and Russia have said they will not participate in a renewed agreement; the U.S. never signed on to Kyoto in the first place; and India is preoccupied with growing its economy. The chance for a new multilateral agreement is nil.

9. Fracking Regulations Increase. The Environmental Protection Agency (EPA) and Department of Energy (DOE) will produce a series of rules that will tangibly reduce the number of natural gas wells that use fracking technology to reach natural gas resources located deep underground.

8. Coal Combustion Residuals Rule Delayed, Again. The EPA’s proposed rule, first published in June 2010, describes two regulatory options: classify ash as a nonhazardous or as a hazardous waste. A final rule, delayed multiple times, is now predicted for a mid-2012 release. Insiders say the EPA wants to make a “hazardous” determination, but others in the Obama administration recognize that such a determination is politically intemperate before the November election. Like the unpopular ozone rule, the EPA will kick the decision into 2013.

7. Cooling Water Intake Structure Rule Goes Live. This rule, affecting the cooling water systems of 670 power plants, effectively eliminates the use of once-through cooling for any new plant additions and requires current users to make modifications to existing systems to “reduce the number of aquatic organisms” entering the cooling water system. The rule will be finalized mid-year, forcing some existing plants to install cooling towers.

6. Grid Reliability Trumps EPA Air Quality Rules. The North American Electric Reliability Council’s recent grid reliability report determined that the EPA’s new air quality rules “may significantly affect bulk power system reliability depending on the scope and timing of the rule implementation and the mechanisms in place to preserve reliability.” The EPA denies the rules will have any effect on system reliability. I predict this standoff will continue until an independent analysis, perhaps by the Federal Energy Regulatory Commission (definitely not the DOE, which has sided with the EPA on this issue). That analysis will conclude that the impact of new EPA rules has a significant impact on system reliability in regions with large amounts of coal-fired generation or excessive transmission congestion.

5. 1603 Treasury Grant Program Will Not Be Renewed. The popularity of a program that writes a check for 30% of the cost of a project and has disbursed $9.8 billion to date to mostly wind and solar project developers is obvious: It is always better to get your money up front. In a recent press release, the Spanish company Iberdrola Renewables noted its “unprecedented success” in obtaining these cash grants—over $1 billion since September 2009. Congress will not renew the program when it expires on December 31, 2011, or at any time during 2012.

4. More Companies with DOE Loan Guarantees Will Fail. On the heels of the $500 million loss incurred by taxpayers when Solyndra failed, expect additional bankruptcies by companies that received DOE-approved loan guarantees. A recent Government Accountability Office audit found that 50% of the loan guarantees it examined were issued before full reviews were conducted, just as with Solyndra. When the losses reach several billion dollars, DOE Secretary Steven Chu will become the administration’s scapegoat, leaving his job before the November elections.

3. Production Tax Credits Will Not Be Renewed. Developers are racing to complete a record number of projects before December 31, 2012, when the production tax credit (PTC) expires. However, the project queue for 2013 and beyond is empty. If the wind industry can’t survive with the current level of subsidies and volume of production, then when? After 20 years, it is time for the wind industry to wean itself from government subsidies and accept the fact that Congress will not renew the PTC in 2012.

2. MACT Rules Will Be Delayed and Rewritten. The proposed utility MACT rule was released in April 2010 and made final in February 2011. A largely revised rule that corrected known flaws was re-released on December 2. Unfortunately, the new rule still requires compliance when compliance is largely impossible by most coal-fired utilities. I predict that because this rule is said to eliminate between 200,000 and 400,000 jobs or more, if you believe the more dire predictions, there will be sufficient congressional bipartisan support for a rewrite that will achieve similar results while providing a realistic compliance schedule.

1. GHG Lawsuits Prevail. Two days of oral arguments are scheduled to begin on February 28 before the U.S. Court of Appeals for the D.C. Circuit in response to the lawsuits filed by Texas on May 24, and joined by 14 states, challenging the EPA’s greenhouse gas (GHG) endangerment finding and tailoring rule. I predict the plaintiffs will prevail in these lawsuits against the EPA, although a final resolution will surely rest with the Supreme Court, perhaps in 2013.

I don’t expect everyone to agree with each of my predictions. If you have strong feelings, aye or nay, let me know at editor@powermag.com.

Dr. Robert Peltier, PE is POWER’s editor-in-chief