US heralds the demise of coal

Its lack of a carbon price has led many to think that the United States is doing little about climate change, and has been used by conservative parties in Australia, Canada and elsewhere to justify their own lack of action. But environmental campaigners are confident that coal will no longer be used as a source of energy in the US by 2030 – several decades before such an event could even be contemplated in Australia.

Overnight in the US, the Environmental Protection Authority introduced, for the first time, emissions limits on new coal-fired power stations that effectively rule them out, and also places a limit on new gas-fired generation. The proposed rules ban new power generation with emissions of more than 0.45 tonnes of Co2e per Megawatt-hour. This is way lower than even the lowest target contemplated in Australia (0.7t/MWh in South Australia, or the federal government’s mooted 0.8t/MWh that was abandoned after the carbon price legislation was passed. Victoria’s 0.8t/MW target was dropped along with the rest of the state’s climate change target this week).

The EPA is a trigger that President Obama has been threatening to pull since before Copenhagen in 2009, when it became clear that Congress would oppose a cap-and-trade scheme. It could be argued that the new rules are already redundant, because cheap gas and limits on mercury emissions have effectively displaced new coal as an economically viable source, but these new limits effectively rule it out as an option should gas prices rebound.

As America Electric Power – with 38GW of coal-fired generation – said last night, they have no intention of building any new coal generation. The real test will come in imposing emissions on existing plants, but the Administration is not ready to go there yet; although Oregon, California and Washington have had standards of 0.5 tCO2e/MWh for a number of years.

Bruce Nilles, the head of the Beyond Coal Campaign for US environmental group The Sierra Club, is aiming to end all coal-fired energy production in the US by 2030. The campaign has already claimed the scalps of 106 coal-fired generators that have announced their closure, and claims a further 150 plants have been prevented from opening.

The Beyond Coal Campaign aims to close one third of the remainder by 2020 – an achievement Nilles says will deliver on the US climate change target of a 17 per cent reduction in emissions by 2020 from 2005 levels. The market share of coal-fired generation has already fallen from around 54 per cent to less than 40 per cent.

“It’s a story we realise hasn’t been told,” Nilles told RenewEconomy during a visit to Australia. “The US has been seen as a laggard, but we are seeing the phasing out of the coal industry.”

So if coal is removed by one third by 2020, and completely by 2030, what will replace it? Nilles says solar and wind – around 15 per cent each by 2020, and 20 per cent each by 2030 – along with demand management, energy efficiency, and some geothermal, will do the job.

“Given that we have some states already with 20 per cent wind, we think that is totally doable,” Nilles says. There are several compelling reasons for doing so, not just environmental. Already, the solar and wind industries employ more than coal mining and coal generation combined. By closing one third of the existing coal-fired units by 2020, some 774 million tonnes of CO2 will be averted each year – more than Australia’s entire greenhouse emissions. Around 129GW of wind, solar and geothermal will take its place.

Nilles’ predictions are not a pipe dream. Already, some 40GW has been closed, or at least announced, and to reach the one-third reduction target will require a further 100GW. Analysts and the industry itself had predicted between 60GW and 80GW of closures just from the EPA rules on mercury emissions. Coal’s inability to compete with gas or wind hastens that process.

Nilles says solar will likely beat gas, easily, on daytime energy prices and peaks. Gas is currently cheap, which means that existing gas-fired generation is displacing coal, but Nilles says it is still hard for generators to lock in low prices over the long term to justify many new gas-fired plants, and the best wind sites are able to beat gas even at the current low prices. However, he sees gas playing a key role in load balancing as the amount of renewables is increase, although the group is wary of locking in to much new gas generation.

The emergence of renewables will change the dynamic of the market – something pointed out by NRG CEO David Crane last week – and Nilles says neither coal nor nuclear can cope with the introduction of more solar and wind. “The variability is a direct threat,” Nilles says. “They can’t cope, that’s why gas can play a role.”

He says merchant utilities such as NRG are embracing renewables, particularly solar, because in the US utilities often get a regulated return on the capital invested, so a fuel source with little or no cost, such as solar, is an attractive proposition.

The Beyond Coal Campaign has employed more than 150 people, with thousands of activists helping across the country. It was partially funded by the gas industry – anxious to help coal get shunted to one side – but concerns about the shale gas and fracking techniques led the Sierra Club to decline gas industry donations. It recently received $50 million from a foundation owned by New York mayor Michael Bloomberg.

Nilles is in Australia to lobby against the export of thermal coal from the US to Asian customers. One of the key companies involved in those exports to Asia, which have only recently begun following the decline in domestic use in the US, is Ambre Energy, which is based in Brisbane.

“We have no interest in becoming a resource colony for China and India, we want to be a manufacturer,” Nilles says.