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Monday, February 20, 2012

Low coal demand, not EPA rules, key to closure of old plants; warm winter causes mines to shut

Old, coal-fired power plants are closing because of a long-term decline in demand for coal, not the Environmental Protection Agency's most recent air pollution regulations as the industry has said, according to a study by Susan Tierney, managing principal of The Analysis Group, a consultancy. She says closings are the result of a long-term trend tied to cheap natural gas, rising cost of coal and reduced demand for electricity. The trend, she says, started before EPA announced its new rules.

Regulations do place some financial burden on coal-fired plants, but the other factors put more pressure on the industry. Tierney compares the situation to a family deciding to repair an old family car. "Often, making the repair is more expensive and risky" than buying a new car, and the same holds true for coal-fired power plants, she told Taylor Kuykendall of The State Journal in Charleston, W. Va..

Falling natural gas prices, driven by increased availability of gas hydraulically fractured from deep shales, make it more attractive to utilities than more expensive coal. Companies often blame EPA-required retrofitting of plants as the reason for closure, but Tierney said market conditions contribute more to the final decision to close. (Read more)

In current terms, the warm winter has further depressed demand for coal, and three Eastern Kentucky coal companies have laid off 370 miners. Hazard Herald Editor Cris Ritchie wondered last week what will happen to the region when coal jobs are cut and not promised to return. There isn't much natural gas in the region, fracking is risky to the environment, and there's not much hope for "green energy" in the region because of limited solar and wind potential. Where all this leaves the region, he said, "is ever-dependent on the coal industry." (Read more)

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