The Writing on the Wall for the Coal Industry: Wind Power is Displacing Coal in the Midwest

By Casille Systermans, Policy Extern

For over a century, coal served as an invaluable energy resource for the United States. The nation was arguably built on coal. However, time has shown that burning coal is dangerous for human health and the environment, and as a result the country has begun to move away from using coal as a primary fuel source. Coal plants across the country are being slated for shut down, often because they cannot make the upgrades necessary to meet current environmental standards and compete with abundant, cheap natural gas. In response to this shift, political battles over the future of coal production are raging across the United States.

The Trump administration is doing all that it can to “save” coal from the “war on coal.” In September, the U.S. Department of Energy (DOE) issued a notice of proposed rulemaking that effectively aims to subsidize coal and nuclear plants. If the proposed rule were adopted, it would guarantee coal and nuclear plants full recovery of costs plus a fair rate of return in competitive energy markets across the country. However, the efforts of the DOE and the Trump administration are likely futile.

In the Midwest, coal plants are being slated for shut down because they can no longer compete wind energy.

Within a day of President Donald Trump announcing his intention to back out of the Paris Climate Agreement, Kansas City Power and Light Co. (KCP&L) announced its intention to retire three coal-fired power plants. KCP & L cited several reasons for their decision, including a commitment to clean energy and the fact that “[w]ind resources have become a much more economic generation resource for the region.”

In its 2017 IRP, Ameren Missouri, a Missouri utility that serves 1.2 million electric customers in central and eastern Missouri, including the greater St. Louis area, announced its intention to decrease carbon dioxide (CO₂) emissions by 80% by 2050 (based on 2005 levels). To achieve this, Ameren Missouri will add at least 700 MW of wind generation by 2020 as well as 50 MW of solar generation by 2025. The IRP also includes plans to retire more than half of Ameren Missouri’s coal-fired generation capacity.

At the end of October, Empire District Electric Co., a Midwest Utility that serves 172,000 customers in southwest Missouri and parts of Arkansas, Kansas and Oklahoma, submitted a proposal seeking approval to build 800 MW of wind generation and to shut down the coal-fired workhorse of its generation fleet, the Asbury Power Plant. Empire explained that the projected cost of acquiring new wind generation resources is lower than the costs associated with operating and maintaining the Asbury Power Plant.

Coal is swiftly losing the ability to compete with utility-scale wind and in most cases already cannot compete with natural gas. Therefore, fighting to keep coal viable by pushing the costs onto ratepayers is unproductive and serves only to delay the inevitable. Coal is on the way out, utilities in the Midwest and across the country are beginning to recognize this, and it is time for policy makers to recognize this reality as well. Policy makers should be looking forward to what comes next and work to enact policies that will protect the American people during the inevitable transition to cleaner energy sources.

Solar Tariff Case May Throw Shade on Growing Solar Industry: Part II

By Lev Blumenstein, Energy Fellow

Image by Tai Viinikka

Back in September, the United States International Trade Commission (ITC) unanimously found that domestic manufacturers of crystalline silicon photovoltaic (CSPV) cells were harmed by imports of cheap solar panels. The  Commission recently delivered its findings and recommendations to President Donald J. Trump triggering sixty-day period for the President to act. Although the full report has not yet been made public, the Commission has released its recommended remedies.

Legal Framework for ITC Remedies

Under Section 201(a) of the Trade Act of 1974, the President may act to protect domestic industries from serious injury caused by large increases in imports of goods. The President is only to take such actions where the economic and social benefits outweigh the costs. Section 203(e) of the Act limits the initial duration of any imposed remedy to four years. The President may, at a later point, extend the duration of the remedies by up to an additional four years if certain conditions are met. The total duration of the imposed remedies cannot exceed eight years. Section 203(e) imposes other restrictions on potential remedies: they cannot be punitive; an imposed tariff cannot exceed 50% of the value of the goods; and imposed cap on imports should not exceed the average imports of the prior three years; and the remedy, if it is imposed for longer than one year, should be phased down annually.

Proposed Remedies

Although the four members of the Commission were not able to agree on a single set of remedies, they all agreed that a remedy should be imposed for the maximum four years and applied to a number of Free Trade Agreement countries, including Mexico and South Korea.

ITC Commissioners David S. Johanson and Irving A. Williamson proposed a 30% ad valorem tariff on imported CSPV modules. This tariff would decrease by five percentage points per year. Individual CSPV cells are treated differently. In the first year, the Commissioners would exempt the first gigawatt (GW) of imported cells from tariffs. Imported CSPV cells above the exemption would be subject to the same tariff as imported CSPV modules. The exemption amount for imported CSPV cells would increase by two hundred megawatts (MW) per year.

ITC Chairman Rhonda K. Schmidtlein’s recommendations were more stringent. For imported CSPV modules, she proposed a 35% ad valorem tariff that would step down one percentage point per year. Instead of allowing an amount of CSPV cells to be imported tariff-free, she proposed that the first five hundred MW of imported CSPV cells be subject to a 10% ad valorem tariff. CSPV cell imports above the five hundred MW quota would be subjected to a 30% ad valorem tariff. The below-the-quota tariff would decrease by one-half of a percentage point per year and the above-the-quota tariff would decrease by one percentage point per year. The Chairman also recommended that the remedy should be applied to imports from Canada.

The final proposal from ITC Commissioner Meredith M. Broadbent is the closest to the recommendations of the Solar Energy Industries Association (SEIA). As noted in an earlier blog post, SEIA opposed the trade case filed by Suniva and SolarWorld. The Commissioner proposed a combined quota of 8.9 GW for imported CSPV cells and modules. The quota would increase by 1.4 GW per year. Mexico would have its own quota of 0.72 GW in the first year. Mexico’s quota would increase by approximately 0.12 GW each year. The quotas would be administered by selling licenses to import the products. Commissioner Broadbent anticipated that licenses would cost one cent per watt. No, CSPV cells or modules could be imported into the United States from certain countries without a license. The Commissioner estimated that the sale of licenses would bring in at least $89 million in the first year. That amount would step up by at least $14 million in each subsequent year. These funds would be used to assist the domestic CSPV manufacturing industry.

Setting aside for a moment the wisdom of imposing any tariff, Commissioner Broadbent’s proposal is the least likely to distort the market for CSPV installations. Unlike the other two ITC recommendations, Commissioner Broadbent does not introduce a cliff at the end of the remedy period. A cliff would cause severe distortions at the end of the remedy period by incentivizing companies to hold back imports of products until the day after the remedy period expires. Furthermore, the combination of high tariffs and low quotas in the other two proposals would stifle the growing solar market at a critical juncture.

If President Trump decides to accept the ITC’s findings and impose tariffs, he should adopt Commissioner Broadbent’s proposal because it will adequately compensate domestic manufacturers while not egregiously distorting the market for CSPV. 

American Prosperity and the Role of Environmental Regulation: Part I

By Natascha Smith, Energy Fellow

U.S. National Archives

Recently, Scott Pruitt announced the EPA’s plans to 'withdraw' the Clean Power Plan. While this step is receiving a lot of attention from the media, the Clean Power Plan is just one of 52 environmental rules that President Trump has sought to reverse since he took office in January. During a visit to the EPA in March, President Trump signed an executive order instructing regulators to rewrite many environmental regulations, stating: “We’re ending the theft of American prosperity and rebuilding our beloved country.” These rollbacks of environmental regulations should come as no surprise, since during Trump’s presidential campaign he made clear that he would like to abolish the EPA.

Since several of the EPA regulations on the chopping block concern critical environmental issues, such as climate change, there are a few questions we should be asking ourselves. First, what benefit do we get from the EPA and environmental regulations? Second, why is the Trump Administration pushing to dismantle federal environmental protections? And third, what kind of impacts can we anticipate if Trump succeeds in significantly rolling back environmental protections? This post is part one of a three-part series that aims to consider these issues in further detail.

Part I: The Benefits of Federal Environmental Protections

To fully evaluate the benefits of the EPA, one must consider what our country was like without it. To glimpse what the U.S. environment looked like before the EPA protections, check out "Project Documerica," a photo project commissioned by EPA at its founding to document the state of the environment at the time and the agency’s efforts to improve environmental conditions. This was an era where rivers in industrial areas caught on fire, and where both republicans and democrats agreed that environmental regulation was necessary.

Since its formation in 1970, the EPA has implemented a series of successful regulations, including those prohibiting use of the pesticide DDT, significantly reducing air emissions that cause acid rain, removing lead from gasoline and paint, and regulating asbestos as a pollutant. Despite false and misleading claims by opponents, data indicates that the benefits of environmental regulations far outweigh the costs and supports job creation. EPA regulations have eliminated dangerous toxins from out daily live while simultaneously promoting economic growth and adding social value.

Environmental Regulations Help Create Jobs

A 1994 Economic Policy Institute study reported that “environmental spending has actually boosted aggregate employment.” Moreover, a 2008 study published in the Journal of Environmental Management found that employment in environmental protection industries increased from 700,000 jobs in 1970 to 5 million jobs in 2003. This study concluded that environmental regulations have a positive net effect on employment. While environmental regulations create jobs on an economy-wide scale, localized job losses may occur. However, we can reduce potential negative employment impacts through implementation of policy solutions, such as retraining workers for jobs in cleaner industries. The overall impact of environmental regulations on employment is positive. Similarly, these regulations have positive effects on economy at large and lasting create social benefits.

Environmental Regulations Promote the Economy and Add Social Value

From 2001–2010, the Office of Management and Budget (OMB) conducted a cost-benefit analysis for 106 major regulations. OMB determined that the combined value of these regulations far exceeded their combined costs; in fact, the value of the estimated benefits was seven times the costs associated with these regulations. The OMB study noted that clean air regulations have one of the highest benefit-to-cost ratios. For example, for every dollar of cost associated with the 1990 Clean Air Act Amendments, $25 dollars of benefits accrued. With billions of dollars in economic benefits added to the economy annually, the cost effectiveness of environmental regulations makes them vital for both the environment and the economy.

Another way in which environmental regulations promote the economy is by keeping workers healthy. As a result of the 1990 Clean Air Act Amendments, the U.S. added 13 million days of work and productivity to the economy in 2010. Even more important than the economic impact of the amendments is the social value added. In 2010, the 1990 Clean Air Act Amendments saved an estimated 160,000 lives. By the end of 2011, the estimated number of total lives saved by the amendments will reach approximately 2 million people. Additional societal benefits include 86,000 fewer emergency room visits and 1.7 million fewer asthma attacks. With results like these, it is hard to ignore the benefits of environmental regulations.

So, what benefits do we get from the EPA and environmental regulation? Well, we increase employment, receive benefits that far exceed the costs expended to achieve them, we increase worker productivity, we protect public health, and last but not least we save lives. With pronounced benefits such as these, why would the Trump administration push for rollbacks of environmental regulations? Part two of this series will explore Trump’s motivation for eliminating environmental protections.