Legal & Regulatory

Odds Are Against a Coal Comeback, Duke CEO Says

Regardless of recent federal support for a revitalization of coal in the U.S., “the economics are challenged,” Lynn Good, CEO of Duke Energy, said March 1 during a presentation at the U.S. Department of Energy’s (DOE) Advanced Research Projects Agency-Energy (ARPA-E) Energy Innovation Summit.

“I think coal continues to be an important part of a diverse set of resources … about a third of our generation comes from coal, but that will be declining over time,” she said.

The story of the decline of coal is not as cut and dried as many on Capitol Hill have suggested. The regulations passed in the last administration did play a part, but so did the decrease in natural gas pricing, Good said.

Regarding regulation, Good pointed to the Obama administration’s Mercury and Air Toxics Standards (MATS), which forced many energy generators to make some tough decisions. “The mercury rule is the one I would point to most specifically that put a lot of challenge into the coal fleet, whether the investment to address that regulation made sense given the life of each of those plants.”

The U.S. Supreme Court did eventually serve a blow to the MATS rule, finding in June 2015 that the Environmental Protection Agency (EPA) did not adequately consider the cost of compliance in drafting the rule. However, the EPA’s MATS rule remains in place after the agency released a final cost consideration in April 2016. Many power generators have already made their compliance choices, shutting down their plants, or making significant investments.

The coal industry faced significant challenges outside of the federal government, however, as the advent of fracking caused natural gas prices to plummet. “We watched the shale gas revolution… and there was a debate if you think back to 2008, 2009, in our industry on whether or not it was here to stay,” Good said,

Duke decided to assume that shale gas had staying power and acted accordingly. “We began by introducing combined cycle gas plants,” she said. “Since 2008 we’ve built seven of them in the Carolinas, and still some of those seven are under construction.”

The integration of those plants into Duke’s fleet has paid off, according to Good. “It’s been a matter of working with the technology, learning more about the gas industry, figuring out how that fits into our portfolio. We find it to be very complimentary with renewables because of the operating characteristics of natural gas.”

While President Donald Trump has pledged to reinvent the nation’s energy system, Good suspects that most energy companies will be looking more than four to eight years into the future when making business decisions.

“We are running a long-cycle business, trying to make decisions for 2025, 2030, and 2035. We, of course, need to watch what is going on at the federal level and the state level over any election cycle or any administration, but we also have to keep our eye on what we believe makes sense even beyond that administration,” she said.

The future of the energy system will be driven by a continuing desire to decarbonize, she said.

“I think [energy companies will] head in the direction of lowering carbon, is the way I would describe it.”

Abby L. Harvey is a POWER reporter.

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