Is New US Coal Law All About Smoke and Mirrors?

June 5, 2014
Denise Mullen

On June 2, 2014, the US EPA issued a proposed rule for reducing carbon dioxide emissions (incorrectly referred to as carbon by some which is a different element[1]). The goals for reductions are 25 per cent below 2005 levels by 2020 and 30 per cent by 2030. The rule is solely focused on coal-fired generation plants.

But is it all smoke and mirrors? I think the answer is yes, in part, because much of the transition was happening anyway with natural gas as a cost competitive alternative fossil fuel and the natural retirement of the aging US coal-fired generation fleet. There has been much hand wringing in Canada about what we will do since we have promised to follow in lock step with the US after they have decided what do to. But Canada should be careful about the next steps and here is why.

First let’s compare total electric generation capacity in Canada and the US. As of 2012, the US has 309,680 MW of generator nameplate capacity. Of this 29% is coal, 49% is petroleum/natural gas/other gas, 9% nuclear, 9% hydro and pumped storage, 5% wind, 2% wood and wood derived fuels with the balance being small combinations of other sources[2]. Canada has 134,000 MW of generation capacity of which is 63% hydro, 15% nuclear, 15% coal (conventional steam), 5% percent natural gas with the balance being a mix of solar, wind and internal combustion.[3] So to start, in terms of potential, the US has substantially more room to make change within the electricity generating sector than Canada. We are almost exactly reversed in terms of thermal versus renewable baseload generation thanks to Canada’s plentiful water resources, which means we have about 15% of total installed generation or ~20,000 MW of coal-fired generation from 22 operating facilities in total[4] to work with while the US has 29% or ~90,000 MW (from 589 plants[5]).

Second, of the total existing US coal fired capacity, 74% is older than 30 years and so in theory ready for natural retirement within the next decade given the normal 40 year average life span of such a facility. That means about 65,000 MW of capacity would be replaced anyway by 2020. It would seem to be a relatively easy set of targets to achieve given the size of the fleet notwithstanding that some states will bear significantly larger costs than others – those like Texas, Ohio, Indiana and Pennsylvania and the corollary impact on states like Kentucky, Wyoming, West Virginia, Pennsylvania and Illinois who have coal mining production and related jobs. The politics of this will also be interesting given that most of these states are also Republican whose representatives have been opposed, for them most part, to climate change related policy actions.

Third, let’s compare standards. Canada’s coal fired GHG limits are 420 kg / MWh. This performance standard applies to new and end-of-life coal units and overall is more stringent but less flexible than the United States. However, Canadian coal-plant end of life is considered to be 50 years so for all practical purposes retirements won’t start until 2020 – but Ontario has committed to phase out its 4 plants by the end of 2014, which means we go from 22 to 18 plants in a relatively short time. The US rule applies only to new fossil fuel-fired electric utility generating units (EGUs) including utility boilers, IGCC units and certain natural gas-fired stationary combustion turbines that generate electricity for sale and are larger than 25 MW that have been operating for more than 40 years. The emissions limits are: 500 kg/MWh over a 12-operating month period or between 450 and 475 kg/MWh over an 84-operating month (7-year) period.

Fourth, let’s also put this into perspective of the Alberta oil sands, which is the source of much domestic Canadian criticism in terms of its contribution to global greenhouse gas emissions. The total annual carbon dioxide emissions from oil sands development has been estimated at 45 megatons C02e. The two largest coal fired generating stations in the US emit the same amount of CO2 as the oil sands. Emissions from the Alberta oil sands represent 2.0% of total US emissions from fossil fired generation and 0.007% percent overall – not even a rounding error in the scheme of things[6].

Will the US achieve reductions? Most definitely yes and then some. Would it have happened anyway? Likely, even though some suggest that without the new rules there is a strong chance that a lot of the capital stock turnover would simply be refurbished or replaced with new coal fired given the cheapness of the coal itself as well as the impacts on employment[7]. Is there really that much difference between the US and Canada? Yes and in particular because of Canada’s already largely clean baseload. Does that mean Canada should avoid doing something? No, but keeping pace with the US is not necessarily the right path.

[1] Carbon is number 6 on the periodic table. When one atom of carbon combines with two atoms of oxygen it becomes carbon dioxide. One ton of carbon equals 44/12 = 3.67 tons of carbon dioxide.

[6] Total US GHG emissions - 6,526 million metric tons of CO2 equivalents. Total US Electric Power Industry emissions from fossil fuel combustion – 2,064 million metric tons of CO2 equivalents.

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