WaPo’s Wonkblog Mimics Mistake by Grist Blogger [Updated]

by William Yeatman on October 15, 2012

in Blog

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Last week, I blogged about how Grist’s David Roberts confused a recent study by the Brattle Group. This week, Washington Post Wonkblog’s Brad Plumer made the same mistake.

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.

Here’s Plumer:

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.]

Carbonicus October 16, 2012 at 7:08 am

Roberts is an Eco-Socialist misanthropic putz.

William Yeatman October 16, 2012 at 7:21 pm

Your readership is much appreciated. Please don’t make insults. Roberts may or may not be eco-socialist and misanthropic, but he’s no putz.

Marlo Lewis October 16, 2012 at 2:05 pm

Fine post, Will. I just read the Brattle study — some interesting stuff in there.

As you argue, the critical factor accelerating coal power plant retirements is EPA regulation. Because natural gas prices are at historic lows, it’s cheaper for some utilities to retire a coal power plant than to retrofit it with new emission control equipment. However, gas is still a more expensive electricity fuel than coal, and the price premium for gas is expected to increase over the next several years.

Specifically, regional coal prices are in the range of $2-4/MMBtu in 2012, and are assumed in Brattle’s analysis to stay at that level afterwards, whereas gas prices are currently $3-4/MMBtu and are assumed to hit $4-5/MMBtu by 2015 and $6-8/MMBtu by 2025.

Depending on the stringency of EPA air rules, Brattle projects 59 to 77 GW of coal capacity to retire rather than retrofit with emission control equipment. Retirements account for 18-27% of current coal capacity in the PJM region, 17-24% in the MISO region, and 12-16% in the SPP region.

Now consider this tidbit. If, in 2020, the EPA (or Congress) adopts a global warming mitigation policy with an implicit carbon price of $30/ton CO2, then “almost half of the U.S. coal fleet” could retire.

As discussed here (http://cei.org/regulatory-comments-and-testimony/comment-letter-epas-carbon-pollution-standard), the EPA’s proposed greenhouse gas new source performance standards for power plants set the stage for imposing implicit carbon prices on existing coal-fired power plants. This could happen as soon as 2016 or before in a second Obama administration.

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