Utilities may not have to close coal plants after all

On June 29th the US Supreme Court threw out EPA’s coal emissions regulations that if implemented would have forced many utilities to close older coal-fired plants.

The new emissions controls are aimed at mercury and other toxic pollutants which are not removed from stack emissions by current air pollution controls.

Had the regulations gone through, they would have stimulated several responses from utilities.

First, they would have closed older coal-fired plants that were too costly to upgrade to meet new emissions standards. Some utilities, such as Ohio’s First Energy, have already done so.

Second, it would have set off a construction boom in gas fired power plants to make up for the lost generation capacity. TVA is already going down this road.

Finally, it might have opened the door for some utilities to look more closely at small modular nuclear reactors (SMRs) as replacements for coal fired power plants. First Energy, TVA, and Ameren were among the utilities investing time in exploring this option.

The court ruling will require EPA to reconsider the regulations in light of the cost-benefit issue. if it comes forward with new regulations, which are less costly to industry, they will also surely be less stringent in their effects on utilities. Some coal-fired plants will still likely close, and be replaced by gas plants.

Less demand for SMRs

However, less pressure on utilities to give up coal plants altogether due to new emissions controls will also reduce interest in SMRs as replacements for them.

In the absence of action-forcing mechanisms of one kind or another, few utilities are going to shift from fossil to nuclear just because the science of global warming is established fact.

Some energy analysts, and investors in SMRs, believe that once the regulations came into effect, some utilities might be interested in SMRs to replace coal fired boilers at existing sites since all the other infrastructure was already in place.

SMR designs range from 50-300 MW and some vendors plan to offer duplex or six pack configurations which easily match smaller coal fired plants in terms of power generation capacity.

However, two of the early leaders in the field, B&W and Westinghouse, more or less stopped all development work in 2014 citing a lack of customer interest.

This latest development may affect the remaining vendor, NuScale, which is proceeding towards submitting a design to the NRC for safety review sometime in 2016. NuScale’s work is being supported by a cost sharing agreement with the Department of Energy.

EPA still may come forward in the future with a new set of stringent regulations, based on new calculations. If it does, the pressure may be back on to shift from coal to SMRs, but that scenario is still likely to take place sometime in the future.

NuScale and other SMR developers may be watching EPA closely to see what it does to re-issue the coal emissions regulations. If the agency does come forward with a defensible and strong set of new standards, they may yet provide an incentive for utilities to consider SMRs.

History of the Court Case

The New York Times reports industry groups and some 20 states challenged EPA’s efforts to regulate the emissions. The court said the agency did not properly account for the costs of regulatory compliance relative to the costs that would be imposed on utilities. .

The NYT notes that industry groups said the government had imposed annual costs of $9.6 billion to achieve about $6 million in benefits. The agency said the costs yielded tens of billions of dollars in benefits.

The decision, Michigan v. Environmental Protection Agency, No. 14-46 was a setback for environmentalists.

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