Obama's Clean Power Plan May Be on Hold, Coal's Fate Is Not

  • Coal faces pressure from cheap gas, renewables either way
  • Some states to continue to push for clean energy goals

Meltdown: The Science Behind Climate Change

The U.S. Supreme Court’sdecision putting on hold President Barack Obama’s most aggressive plan to curb power-plant emissions won’t save coal from a shrinking market, or stop some states and utilities from moving forward with their own measures.

The Environmental Protection Agency had projected that coal’s share of America’s power mix would shrink to 27 percent in 2030 under the historic Clean Power Plan. It was already down to 29 percent in November, based on government data, as cheap natural gas and renewables stole market share. U.S. rules including one regulating pollution across state lines and local renewable energy policies will continue to force coal-fired power plants into retirement.

“This might buoy sentiment for coal, but I don’t think there are any practical market implications,” said Cheryl Wilson, an energy policy analyst for Bloomberg Intelligence. “I don’t think you would see a utility change their decisions based on this ruling.”

Tuesday’s 5-4 Supreme Court decision freezes in its tracks a policy at the center of Obama’s energy and environmental legacy. It would require states and utilities to use less coal and employ more wind, solar and natural gas-fired power to achieve carbon emissions cuts of 32 percent by 2030 from 2005 levels.

Serious Concerns

U.S. Coal miner Peabody Energy Corp. described the ruling as a “victory for American families and businesses who value reliability and diversity of energy sources.” Mike Duncan, president of the American Coalition for Clean Coal Electricity, said the decision shows the “Supreme Court has serious concerns with the power plan.”

The Sierra Club cautioned the coal industry against false hope. “The transition we’re experiencing in the electric sector away from coal and other fossil fuels to clean energy has been going on for years and will continue,” Joanne Spalding, managing attorney for the group, said by phone. “EPA is following the trends that are already occurring in the electric sector -- not creating new trends.”

Diversifying Mix

American Electric Power, one of the biggest coal-burning U.S. utilities, said the Supreme Court decision won’t change the company’s plans “to continue to diversify the fuel mix of our generation fleet.” AEP has said it sees a $10 billion investment opportunity in renewable energy over the next 18 years even before considering the impact of the carbon regulations.

Duke Energy Corp. said the company will “continue to build on the progress we have made in the last decade for a lower carbon future and investing in modernizing our system," according to an e-mail statement.

“This is not the end of the story,” Gregory Wetstone, chief executive officer of the American Council on Renewable Energy, said of the court ruling. “Public and private sector momentum behind the shift to lower carbon power generation will continue.”

States including Alabama, West Virginia, Missouri and Texas hailed the court’s decision as a win for those who argue the rules are an overreach. West Virginia Attorney General Patrick Morrisey said “the impact of the regulation already has been felt in the Mountain State.”

Missouri Attorney General Chris Koster said his state would be better off developing low-emission and clean sources of energy “on a more reasonable timeline.”

Continuing Work

“I think some states, more likely blue states, will be trying to come up with a plan anyway to reduce emissions,” said Paul Patterson, a New York-based analyst for Glenrock Associates LLC.

California, which seeks to reduce carbon emissions to 1990 levels by 2020, will continue to push for clean energy and “the good jobs that come from investing in green technologies", said Mary Nichols, chair of the California Air Resources Board.

The EPA will keep working with states that decide to proceed with their plans, the White House said in a statement Tuesday. 

"Coal plants are already struggling due to very poor economics given low gas prices," Citigroup Inc. analyst Praful Mehta said in a research note Wednesday. "Our view on the average life of coal assets at around 15 years wasn’t based on the Clean Power Plan but on the weak economics of coal together with environmental regulation in the 5-10 year time frame."

The suspension suggests that challenges to Obama’s rules may gain traction at the high court, Michael Worms, a New York-based analyst with BMO Capital Markets, said in a note to clients Wednesday.

"The Supreme Court’s decision suggests that there may be some merit to the challenges since the court found it appropriate to stay the case," Worms said. "The stay clearly puts President Obama’s plan in jeopardy."

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