U.S. clean air regulations seem to be building toward the decline and fall of the coal-fired electricity industry in the U.S.
The Clean Air Interstate Rule (CAIR), which became effective in 2005, addresses power plant sulfur dioxide (SO2) and nitrogen oxide pollution drift between states. Covering 27 eastern states – plus Texas – and the District of Columbia, it also provides for a limited cap and trade system. CAIR remains in play until such time as the status of the more ambitious – and restrictive – Cross-State Air Pollution Rule intended to replace it is decided by a federal court.
Meanwhile, the Mercury and Air Toxics Standard, finalized in April 2012 with compliance mandated for April 2015, requires that coal- and oil-fired power plants be fitted with SO2- and mercury-removal equipment or be retired. On top of this, the Carbon Pollution Standard for new power plants takes effect in January, and the proposed rule for existing plants will deliver the coup de grace for many existing plants – once the litigation settles.
Even without the new carbon standards, the existing rules would be sufficient to bin many hundreds of coal- and oil-fired power plants that cannot be economically retrofitted with required technology. The cost for emissions control equipment on a plant are not exactly commensurate with size. A large plant will cost a little bit more to retrofit than a small plant. It doesn't scale with generating capacity.
Throughout the U.S., particularly in the East and upper Midwest, there are lots of older, smaller coal units of 200 MW or less that will not be able to justify the cost of adding the required equipment. These will almost certainly be retired. The diminution of coal in light of U.S. air quality regulations is not an automatic pickup for the solar sector, however.
‘My personal belief is that any plant that is less than about 400 MW is going to have a tough time justifying the installation of pollution control equipment,’ says Ron Seidel, a principal of Texas-based RBS Energy Consulting. ‘At the same time, I don't think you can make the argument that just because you are going to have a lot of these coal plants shut down, you're going to have a lot of solar and wind fill in the spaces. Gas will generally fill that in.’
Seidel, who is also a director at Principal Solar Inc., an independent solar energy producer, says he is not trying to be a wet blanket. In fact, he is heavily invested in solar's success. His message is that the solar sector – and developers especially – should understand that the issue is not about making up for retiring capacity. At the same time, the environment for real, sustained growth for solar power has never been better.
‘What will happen is the people who are developing power – the utilities and the independent power producers – they have limited choices now,’ he says. ‘I think natural gas, wind and solar are the only three options available.’
What happens in Texas
In Texas, for example, the impact of coal retirements are expected to be minimal. However, demand for new energy is expected to grow. That demand has to be met with something. And while that something is likely to primarily be natural gas, the desirability of diversified generating portfolios will eventually bring solar to the fore, if only initially, as a hedge price increases for fossil fuels, including natural gas.
‘I believe that in Texas, solar is going to develop a lot like wind,’ Seidel says. ‘Wind started off very small. Once it got some penetration – 1,000 MW or so – it began to get some notice from the Electric Reliability Council of Texas (ERCOT), the Public Utility Commission (PUC) and the legislature. Solar is not there yet.’
But it will be. Texas has huge solar potential, ranking up with New Mexico as the most productive states from a solar irradiance standpoint, according to the National Renewable Energy Laboratory.
‘And it's not just that we have the sun that shines out in West Texas so brightly, but we have the transmission infrastructure out there,’ Seidel says.
Texas currently has about 11,000 MW of wind power, mostly from West Texas. As that built up, the ERCOT moved to improve electricity transmission capacity from that region to the cities. Seidel estimates there is as much as 18,000 MW of transmission capacity available.
‘It was built for wind, but works perfectly for solar,’ he says.
For whatever reason, there really has been no push for solar, except by a couple of cities, such as San Antonio and Austin. Elsewhere in the state, however, solar has not made much of an impact. Seidel says this is because Texas' extremely modest renewable portfolio standard (RPS) of about 5.5 GW was not solar specific and was met overwhelmingly by wind power.
‘If we had a renewable portfolio standard that specified some amount of solar, I believe that would help,’ Seidel says. ‘Yet, we have seen wind develop without an aggressive RPS. We passed it a long time ago and still see lots of wind development. It's really more dependent on the price of power.’
There is no incentive in Texas right now for retail electricity providers to have any solar in their portfolios, he says. They can buy wind and take care of any needs they have. To them, wind and solar are basically the same – they're renewables. There is really no distinction, and there's lots of wind.
What will tip the scales for solar, Seidel believes, is that critical mass about 1 GW or so deployed, where solar will rise to the awareness. At the moment, ERCOT has not scored solar with a capacity reliability rating as it has for wind, which is scored at 8.7%. So if you have 1,000 MW, from a reliability standpoint ERCOT only considers 87 MW of it to be firm.
‘I think you will see ERCOT assign a capacity value to solar in the 25% to 40% range,’ Seidel says. ‘It will be rated significantly higher than wind.’
While the market and regulatory forces in Texas are different than those in other states, the principle is the same. As coal is swept aside, natural gas is likely to take its place as a consistent generation source in much of the country – at least through 2040, according to U.S. Energy Information Agency projections. However, the advantages of solar will rise to the fore, particularly as its installed capacity brings its advantages to the attention of policy-makers and utility planners.
To review a webinar and related materials Seidel has prepared on the prospects for solar as the age of coal comes to a close, click here (free registration required).