Power plants already reeling from cheap gas, renewables
‘We’re going to see the survival of the fittest”: analyst
President Donald Trump may have just set the stage for a brutal competition among power-plant operators.
Trump’s decision to start the process of reversing the Obama administration’s Clean Power Plan, which called for sharp reductions in carbon emissions from the electricity sector, may lead to some coal plants remaining online that would otherwise have been forced out of business.
As a result, coal, natural gas, nuclear and renewable generators will have to keep battling it out in wholesale markets, likely sending power prices plunging. It’s part of a larger effort by the Trump administration, which has expressed skepticism about climate change, to dismantle regulations across the energy sector to spur production and reduce prices for consumers.
“We’re going to see the survival of the fittest," Kit Konolige, an analyst at Bloomberg Intelligence, said beforehand. “Renewables are going to continue to increase, coal and gas will compete for market share and, at some point, prices may get low enough that nuclear plants shut.”
Competitive markets have been battered by cheap gas as wind and solar generation gain. Given slack demand, power prices have dipped to historic lows, forcing conventional power-plant owners including FirstEnergy Corp. and NRG Energy Inc. to write down billions in assets.
The executive order “should be viewed as more bullish for coal and more bearish for competing generation types in the power sector such as natural gas, renewables, and nuclear,” Barclays PLC analysts Nicholas Potter and Michael Cohen said in a research note published Tuesday.
“Utilities know that coal and nuclear just aren’t competitive in this era of low gas prices and increasing renewables,” Malcolm Woolf, who directs policy at Advanced Energy Economy, which promotes clean energy, said in an interview before the announcement. “That’s why they keep trying to get special treatment to keep them running.”
Utilities have won subsidies for nuclear plants in New York and Illinois and have sought them for coal plants in Ohio. That trend may spread to other states if prices remain depressed.
Overall, it’s “not much of a win for anyone given that soft prices arising from well-supplied or oversupplied markets don’t seem to help any type of existing or new generator,” Christine Tezak, an analyst for ClearView Energy Partners, said before it was announced.
— With assistance by Chris Martin