Most electric utilities not fighting Clean Power Plan; market favors natural gas industry

Many of the top electric utilities are embracing the Environmental Protection Agency's Clean Power Plan, rather than fight them, because "economic forces are pushing the power industry inexorably toward a lower-carbon future," Rebecca Smith reports for The Wall Street Journal. "The new regulations just add certainty to companies’ plans to move away from relying on coal to generate electricity, turning instead toward cheap natural gas as well as renewable energy, which is available at increasingly lower cost."

"Switching from an old coal plant to a modern natural-gas one can cut carbon-dioxide emissions by between 50 percent and 60 percent for each megawatt hour of electricity produced, according to the Environmental Protection Agency," Smith writes. "And although coal also remains a relatively cheap fuel, natural-gas plants can produce power at lower prices and are often much more profitable for the companies that own them." (WSJ graphic)

"In much of the U.S., grid operators take bids from generators every day, tapping the lowest-cost resources first—often natural-gas plants," Smith writes. "But the market price is set by the last producer needed to meet that day’s electricity demand, which tends to be a coal plant. So natural-gas plants can often offer electricity at prices lower than coal plants but collect the higher price set by coal units."

"In the wake of the U.S. shale boom, natural gas has become so abundant and so inexpensive—and forecasters expect it to remain so for years—that the EPA’s new carbon rule has provisions that prevent utilities from relying too much on a single fuel," Smith writes. "Instead, the EPA regulation encourages development of renewable-energy projects. Coal consumption by utilities fell so much in the first four months of the year that it may be headed toward a 25-year low, according to data released in August by the U.S. Energy Information Administration." (Read more)