In the oft-misread study, Brattle Group analysts estimate how many coal-fired power plants will retire rather than install expensive-yet-pointless regulations imposed by the Environmental Protection Agency. A key determinant of how the market will respond to EPA regulations is the price of natural gas, a fuel that competes with coal. Simply put, the lower the price of gas, the more economical it would be for the owner of a coal-fired power plant to cease operations rather than pay for the EPA-mandated retrofits. Both Plumer and Roberts misunderstand the basic parameters of the study, such that they attribute coal power plant retirements solely to relatively low natural gas prices. In fact, these retirements are derivative of a decision faced by individual coal power plant operators across the country: Whether to install hundreds of millions–even billions–of unnecessary capital costs imposed by EPA, in an electricity market characterized by historically cheap gas.
Over the past few years, natural gas has become extraordinarily cheap, thanks to refined “fracking” techniques that allow companies to extract more gas from shale rock. What’s more, wind turbines have been sprouting up around the country and are getting steadily cheaper. The result? Both energy sources have been displacing coal. That would have occurred regardless of anything the EPA did.
And here’s Roberts:
The headline news: Brattle is substantially upping its projection of how many coal plants will retire, by about 25 GW. That’s huge. But it’s not happening because of EPA regulations.
I bolded and italicized the key sentences.
As I noted in my previous post, these power plant retirements likely would not have occurred absent EPA regulations. This is due to the simple fact that coal is less expensive than gas in most of the country, and it is projected to be significantly cheaper than gas in all regions. I know this because it says so on page 2 of the Brattle Group report.
[Update 3:14 P.M., 15 October 2012: Mr. Plumer has since rewritten the post. I can’t tell exactly how so, because he did not track changes, but the piece is completely different. In a nutshell, he reworked it such that the post no longer makes the error I note above. Because that error is a fundamental misreading of his subject matter, the edits were significant. I tried to engage him in the comments section, but he did not respond.]