The Obama administration often says that there is room for coal in our future fuels mix. However, the administration’s actions lead me to believe President Obama has something much more profound in mind.
White House energy adviser Heather Zichal was recently quoted by Politico praising the virtues of coal and its future importance to the U.S. as a power generation fuel. Coal has been "a crucial energy source in the past. It’s a crucial energy source today," she said. "We [the Obama administration] see it certainly playing a role in the future as well."
Zichal’s words do no match the administration’s recent actions and were part of a damage control drill, as you will read below. Recall that President Obama proposed a Clean Energy Standard (CES) in his 2011 State of the Union address that formed the basis of his Blueprint for a Secure Energy Future, released in March 2011. The CES describes the goal of producing 80% of our electricity from "clean" energy sources, including "clean coal," by 2035. The "clean" in the CES is not about avoiding the release of noxious chemicals to the atmosphere but is purely about reducing emissions of carbon dioxide.
I described my views of the proposed CES in a previous editorial as the recycling of a failed energy policy. The 80% CES, using the results of the EIA base case analysis at the time, is virtually identical to the fuels mix that would have resulted from the ill-fated HR 2545, aka Waxman Markey, proposal to establish a carbon market if that proposal were passed by the Senate (which it wasn’t). Since that time, the administration’s approach to combating coal has been to loose the EPA on the electricity industry and ignore Congress in its pursuit of killing coal-fired power plants.
What actions has the administration taken since the CES announcement in January 2011? Setting aside for a moment the 18% higher energy costs predicted by the Energy Information Administration in 2035 should the CES be adopted as law, it appears to me that the administration has taken two distinct actions related to coal and its place in the proposed CES.
First, as you can read in "EPA Banks on CCS Technologies, Sets Carbon Standards for New Coal Units," the EPA has released first-ever rules to reduce carbon emissions from new coal-fired plants larger than 25 MW. The standard for any new coal plant is set as the carbon dioxide emissions from a typical gas-fired combined cycle plant: 1,000 pounds/MWh.
The only possible way to comply with that new standard is by employing some sort of carbon capture and sequestration (CCS) technology. The EPA, acknowledging that CCS is not commercially available today, has graciously provided developers another means for compliance: a 30-year averaging of emissions. A developer may install a new coal plant in anticipation of CCS technology commercialization but must still meet the same average carbon emissions over 30 years of operation. For example, a plant may be permitted with 50% CCS today or with 75% in 10 years to meet the required 30-year averaging period. Is there a public utility commission anywhere in the U.S. (the need for a certain payback on an investment limits the list to regulated utilities) that would allow a company to take such a gamble with the public’s money? Would any utility CEO consider building a new coal plant using the new ground rules?
The known and unknown costs of the CCS lifecycle are terribly high. Virtually every government that has explored the capture and sequester portions of the technology has cancelled projects to the point where only a few pilot projects are proceeding today, and sequestration technology development has come to a virtual standstill. The International Energy Agency’s estimate of the average cost of a full CCS project—about $2 billion for 500 MW—is woefully optimistic. The cost of Duke Energy’s 630-MW Edwardsport integrated gasification combined cycle project is now $3.3 billion (starting from about $2.5 billion) and does not include the cost of collecting the carbon dioxide (or the large auxiliary loads necessary to compress the gas, resulting in lower electricity sales revenue), the cost of the pipeline for moving the gas, or the cost of sequestering the gas in a geological formation for all time.
Given that the cost and regulatory risk to build a new coal-fired plant are more uncertain than ever before, the EPA rule is a de facto moratorium on the construction of new coal-fired plants in the U.S., not a "clean energy" alternative, as painted by the administration.
Clean Coal MIA
The second action taken by the administration on coal-fired generation is curious and gives insight into its mindset. Some time after President Obama announced the CES in January 2011, the president set up his reelection website, which described his support of the CES and his "all of the above strategy." If you go to the Obama-Biden website today, you will see that "clean coal" is prominently displayed as part of his CES strategy.
A visitor to that website prior to May 8 would have seen the term "energy efficiency" instead of "clean coal." The glaring omission rightly prompted a number of responses from coal advocates. When asked why the change was made, Politico reported that "Obama campaign spokeswoman Lis Smith declined to explain why the new wording appeared. Instead she touted the president’s commitment to clean coal and attacked Mitt Romney."
Politico has theorized that Obama is now embracing clean coal on his campaign website 17 months after he announced the CES standard because a jailed felon in Texas pulled in 40% of the vote in a West Virginia Democratic Primary in early May and even won several coal-rich counties.
Coincidence? I doubt that Obama mistakenly omitted "clean coal" from his reelection website, particularly when you consider the context of his "all of the above" strategy that has been touted in numerous campaign stops, press releases, and interviews over the past few months. Instead, I believe it reflects his true views of coal: It’s not a first-rank player in his vision of the nation’s energy future. The regulatory actions of the administration over the past three years suggest a consistent goal of putting an end to coal-fired electricity production in the U.S.
The Name of the Game
If you believe that the regulatory pressure on coal-fired generation can’t get much worse, think again. More waves of regulations (coal combustion residuals, 316(b), particulates, and ozone to name a few) were pushed post-election and are now queued up for release in 2013 and beyond. The EPA, with several of its new regulations undergoing judicial review (again), can’t continue at this regulatory pace indefinitely. So what’s Obama’s real regulatory end game?
I believe Obama still desperately wants a carbon cap-and-trade regime that will tax all forms of energy in the U.S. economy, much like the system used in the European Union. The attraction isn’t reducing carbon emissions, but rather significant new revenue for the federal coffers, legislation that Congress dare not suggest. Obama will patiently use his regulatory muscle to squeeze the power generation industry until the industry willingly accepts some form of cap and trade in return for putting the EPA on a shorter leash. If the industry no longer chafes at a cap-and-trade program, then Congress will go with the flow.
I also believe the regulatory squeeze play will continue until Obama achieves his long-time goal of instituting a cap-and-trade regime (baring an adverse Federal Court or Supreme Court decision, or failing reelection). As a political pragmatist, Obama would much rather cut a deal that results in a defined number of coal-fired plants shuttered in return for the revenue received from selling carbon allowances.
—Dr. Robert Peltier, PE, is COAL POWER’s editor-in-chief.