Economics likely to trump laws and regulations as fight over coal continues

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California joined this week with 21 other states and seven local governments to sue the federal government in an effort to overturn the Affordable Clean Energy rule the U.S. Environmental Protection Agency adopted in June.

ACE would allow coal-burning power plants to stay open with modest modifications, while attempting to stall momentum toward clean energy sources like solar and wind. It is in line with President Donald Trump’s campaign promise to save the coal industry.

The legal and political fights over coal are likely to prove less consequential in the long run than the mathematics that already set coal power on a declining trajectory.

The U.S. Energy Information Administration forecasts that coal-fired generation as a share of U.S. total utility electricity generation will continue to decline averaging 24% in 2019 and 23% in 2020, down from 27% in 2018, according to a June 25 Fitch Ratings report.

Opponents of the Trump EPA's plan say they will fight it vociferously.

With devastating wildfires, sinking coastlines and choking smog, California doesn’t have time for false substitutes to clean power, State Atty. Gen. Xavier Becerra said at a press conference held in Sacramento.

“It is time for this administration to grow up — and take climate change seriously,” Becerra said. “We intend to confront the Trump Administration head on with this issue.”

California Gov. Gavin Newsom, the state’s Air Resources Board chair Mary Nichols, and Jared Blumenfeld, secretary of California’s Environmental Protection Agency, also spoke at Tuesday's press conference.

Aside from continued state and local legal and regulatory efforts, market forces are already turning the tide against coal.

ACE has a limited near-term effect on public power issuers and will not change the long-term pressure on most public power utilities to reduce carbon dioxide emissions, Fitch analyst Dennis Pidherny said. It may result in a slower decline in coal-fired generation, Pidherny said, but it will not change the dynamics that have driven dramatic increases in both natural-gas fired and renewable generation.

“ACE does not affect our plans to get out of coal,” said Nancy Sutley, chief sustainability officer for the Los Angeles Department of Water and Power.

LADWP has incorporated clean energy mandates from both the state and city in its long range plans. Those mandates include reductions in the use of carbon-based energy and growth in the use of renewable resources.

LADWP had reduced the amount of power it generates from coal to 18% by 2017 from 47% in 2006, according to the department’s latest figures. It had also increased the amount of power generated by renewable resources such as wind and solar to 30% from 7% during the same time frame.

The utility still plans to shutter operations of the coal-burning Intermountain Power Plant in Delta, Utah that it jointly owns with California municipal utilities in Anaheim, Burbank, Glendale, Pasadena and Riverside, Sutley said. The closure of that plant in 2025 represents LADWP’s exit from coal-based power. It will be replaced by a natural gas plant being developed by LADWP and its partners.

“We already divested from Navajo,” said Sutley, referring to LADWP exiting an agreement in 2016 for 20% of the power at the Navajo Generating Station coal power plant in Arizona.

Sutley adds that LADWP does not support the ACE rule; and did support the Obama-era clean power plan.

“We supported the clean power plan, because it considered other methods for reducing emissions, like energy efficiencies, it didn’t just consider what you can do within the fence line of a plant,” Sutley said. “ACE discourages other approaches to reducing greenhouse gas emissions. It lacks the ambition necessary to reach greenhouse reduction goals.”

Fitch doesn’t think ACE can halt the momentum away from dirty energy sources like coal in the short-term, because there are so many other constituencies pushing power companies toward using renewable power sources, Pidherny said.

Competition from natural gas, state level renewable mandates and increasing interest in renewables from consumers, local governments and investors are already driving public power issuers toward emission reduction strategies, he said.

But state leaders and the city governments who supported the lawsuit filed in the U.S. Court of Appeals in Washington saw ACE as an existential threat to the federal EPA’s central mission of protecting the environment.

New York Atty. Gen. Letitia James led the coalition of 22 states and cities including Los Angeles, New York, Boulder and Philadelphia in filing the lawsuit.

James called the Trump Administration rule the “dirty power” rule.

“Without significant course correction, we are careening towards a climate disaster,” James said. “Rather than staying the course with policies aimed at fixing the problem and protecting people’s health, safety, and the environment, the Trump Administration repealed the Clean Power Plan and replaced it with this ‘Dirty Power’ rule.”

The coalition “will fight back against this unlawful, do-nothing rule in order to protect our future from catastrophic climate change,” James said.

“EPA and the Trump Administration want to move us backward with their plan,” Becerra said.

The clean power plan would have reduced carbon emissions equivalent to taking 160 million cars off the road, Becerra said. But instead, the Trump Administration decided to repeal it, Becerra said.

“Trump’s plan is anything but clean energy,” Becerra said. “It violates EPA’s duty to protect the environment.”

Obama’s Clean Power Plan adopted in 2015 never quite took effect, because it was challenged by a 27-state coalition led by West Virginia and Texas attorney generals in late 2015. The U.S. Supreme Court placed a stay on the Obama-era plan in 2016.

The legal action against ACE is just the latest effort by California to counter efforts by the Trump administration to weaken federal environmental protections.

Half of the more than 50 lawsuits that California has lodged against the Trump Administration have been to challenge environmental policies proposed by the EPA and other federal agencies responsible for setting energy and fuel-efficiency standards.

ACE allows states to set carbon emission standards for coal-fueled power plants. The states have three years to submit plans.

It does allow for more flexibility for coal-dominated public power issuers to catch up with a shift to more renewable resources.

The argument that renewables are too costly is getting weaker over time.

“Even in states where renewables aren’t mandated there has been a shift in that direction, because of economics,” Pidherny said. “Intermittency with wind and solar is still an issue, but the prices are difficult to beat.”

The cost of cycle gas generation is in the range of four to seven cents a kilowatt hour, while some wind and solar contracts cost two to three cents a kilowatt hour, he said.

LADWP’s board will be discussing a new solar contract with Eland Solar & Storage Center at its next meeting at 2 cents per kilowatt hour, Sutley said.

Nichols said part of the problem with the proposal is that energy doesn’t happen on a state-by-state basis. Most states have created power resources jointly across state lines.

Newsom said the plan threatened both lives and livelihoods and disputed the notion that job creation and protecting the environment are at odds with each other.

“This is not just about fighting Donald Trump,” Newsom said. “This is about our kids, grandkids and endangered species.”

The Trump administration is trying to roll things back to a state that doesn’t currently exist, Newsom said, by propping up the coal industry.

“California is in the future business,” Newsom said. “And, being in the ‘future business’ has helped the state be an economic driver for the country,” Newsom said.

“We have grown our economy so much that 21% of the nation’s jobs came from the state of California last quarter,” Newsom said.

And California did that while reducing its greenhouse gas emissions, he said.

“ACE is a solution in search of a problem,” Sutley said. “We don’t think the EPA should limit how it uses the Clean Air Act as a tool to get the greenhouse gas emission reductions."

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