Kate Mackenzie at the Financial Times’s EnergySource blog has an interesting take on the future of U.S. coal. Citing a report by Bernstein Research analyst Hugh Wynne, she writes that the recent proposal by the Environmental Protection Agency (EPA) to tighten sulfur dioxide emissions could actually push coal into a “secular decline.”
Existing SO2 standards were implemented nearly 40 years ago and cap emissions at 140 parts per billion as part of a 24-hour “primary standard.” They also include a “secondary standard” for three-hour periods that cap SO2 emissions at 500 parts per billion. The EPA’s proposes a one-hour standard of up to 150, parts per billion, which according to Bernstein Research’s Wynne, could cut SOE emissions by 50 percent by 2015.
The new SO2 regulations, Wynne writes, could convince power utilities to retire old coal-fired power plants at a faster pace because SO2 scrubbers are expensive, costing about $100 million to install on a 350-megawatt power plant.
In a recently issued report, Wynne writes:
We estimate that over the next five years approximately 12 percent of U.S. coal fired generation capacity (equivalent to some 4 percent of total U.S. generation capacity) will be retired.” He adds stricter SO2 emissions rules would accelerate the retirement of older power plants.
To curb the EPA’s regulatory reach Senator Lisa Murkowski (R-Alaska) has drafted an amendment that would block the agency from regulating CO2 and other greenhouse gas emissions. According to Wynne that amendment is unlikely to pass.
Mackenzie does give credence to Wynne’s arguments, noting that the growing popularity of natural gas could indeed lead to a decline in the use of coal. But she also notes that these new EPA regulations might turn out to “be a boon” for regulated utilities, as they will have to increase their rates to pay for SO2 scrubbers.