Report evaluates EPA's new standard for greenhouse gases

A new report by Bloomberg Government says that gas-fired generation will likely become the dominant form of power generation over time in light of the U.S. Environmental Protection Agency’s (EPA’s) new standards for greenhouse gases. The report, “The Twilight of Coal-Fired Power?” finds that new coal plants would effectively be banned because their emission rate is almost double that allowed in the proposed standard.

The report also asserts that while the proposed rule makes room to build coal plants that incorporate carbon capture and storage (CCS) technology, coal plants with CCS will likely be too expensive to build unless Congress enacts programs to subsidize the technology. Electricity generated from coal with CCS is almost 50 percent more expensive than energy generated from conventional coal, according to the U.S. Energy Information Administration (EIA).

EPA recently announced that it will hold two public hearings on the proposed carbon standard. The hearings will be May 24, 2012 in Washington D.C. and Chicago. EPA is also extending the comment period on this proposed rule until June 25 to provide for 30 days for the public to comment after the public hearing. The report estimates that based on the timing of these hearings, a final version of the regulation will likely be issued after the November presidential election.

The report goes on to say that based on the compelling economics of natural gas prices, there are few companies seriously considering the construction of new coal-fired power plants in the U.S. In fact, the average U.S. coal-fired power plant is 38 years old, the study finds. Based on an EIA assessment of the cost of coal-fired power, natural gas prices would need to increase to almost $10/mmBtu for a power plant developer to be indifferent to between building with coal or natural gas, the study point out. Therefore, the proposed greenhouse gas standard may not alter the futures of the power generation mix after all.

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