Repealing the Clean Power Plan: Devastating Blow to Clean Energy, or Empty Gesture?

On October 10th, following a speech earlier in the week in Kentucky where he declared that “the war against coal is over,” EPA Administrator Scott Pruitt signed a repeal of the Clean Power Plan. The repeal, if successful, will likely be a blow to cleaner energy generation. However, it still might not succeed in keeping coal afloat in the United States energy generation mix.

The Clean Power Plan was an EPA rule finalized by the Obama administration in 2015, which sought to reduce carbon emissions from the electricity generation sector. It sought to cut electricity sector carbon emissions 32% by 2030, based on 2005 levels. The EPA was to set new carbon emission standards for existing power plants, and owners of generating units unable to meet the new emission standards through plant upgrades could engage in “generation-shifting,” which essentially meant offsetting the noncompliant plant’s emissions with cleaner generation sources. This was designed to incentivize utilities to take measures such as retiring old coal plants, converting them to lower-emission natural gas units, or purchasing renewable energy capacity. The plan was key to meeting U.S. Commitments in the Paris Climate Agreement. The Clean Power Plan was created pursuant to a claim of authority under the seldom-utilized Clean Air Act Section 11(d). Energy law experts saw this use of Section 11(d) as a test to the legal bounds of EPA’s regulatory powers going forward. The Clean Power Plan is the subject of ongoing litigation, and never went into effect due to legal challenges. After previously ruling that carbon dioxide was a pollutant which the EPA was obligated to regulate, the Supreme Court froze the rule’s implementation early in 2016 while ongoing legal challenges are sorted out in the D.C. Circuit.

EPA Administrator Pruitt argues that the Clean Power Plan exceeded the EPA’s regulatory authority by directing utilities to make emissions cuts that could only be practically achieved by cutting emissions beyond the level of individual power plants, such as by retiring coal plants in a utility’s generation portfolio, converting them to natural gas, or buying renewable energy capacity. In hearings before the D.C. Circuit Court in 2016, generators had argued that the Clean Power Plan would force them to retire coal plants or subsidize their competitors in renewables and natural gas.

Many energy experts predict that the repeal of the Clean Power Plan will have limited effect on the development trajectory of the electricity generation sector, which is already naturally shifting away from coal towards cleaner, cheaper generation sources. One study suggests that emissions from generation could fall “27% to 35% below 2005 levels” despite repeal of the Clean Power Plan. This is largely because the Clean Power Plan was based on dated projections from 2014 that did not foresee falling natural gas prices, stagnant electricity demand, and quickly declining costs for wind and solar generation.

While the Trump administration has indicated intentions to support coal’s role in United States electricity generation, this prospect may already be dead in the water.

Many utilities have stated their intentions to continue retirement of old, uneconomic coal plants in exchange for cheaper generation alternatives such as natural gas and renewables. A report by the Union of Concerned Scientists suggests that roughly a quarter of existing U.S. coal-fired power plants will close or convert to natural gas in the foreseeable future. The report asserts that many more coal plants are dipping very close to the line of economic viability and could become economical by even small increases in fuel costs and decreases in price of alternative generation sources. In Texas, like many other states, experts project that the state’s Clean Power Plan carbon reduction target will likely not be reached after its repeal. Nonetheless, projections indicate that coal-fired generation is still heading out the door in the Lone Star State. The Texas utility Luminant recently announced plans to retire two more coal-fired plants sometime next year, basing its decision in part on cheap wholesale electricity, natural gas, and renewables such as wind.