Coal regulations could reshape Midwest energy

Sep 1, 2011

The Midwest relies so heavily on one source of power that some call us the "coal belt."

Coal is cheap and plentiful, but that’s about to change.

A wave of government regulations is about to hit the electric industry.

Ed Malley, a Vice President at industry consulting firm, TRC Corporation has a name for all the new rules coming down the track: “The train wreck.”

That "train wreck" is the list of environmental regulations expected to be in place within the next few years.

Electric utilities say this will mean the shutting of power plants, leading to higher prices and less peak capacity for hot summer days. Environmentalists say: about time.

"Utilities spent 20 years fighting the implementation of the clean air act,” says Sandy Buchanan of Ohio Citizen Action. “We now have some court decisions and rules that say yes, you really do have to clean up your coal plants, and they put deadlines on them."

The Environmental Protection Agency has as many as nine new or revised rules affecting coal plants.

They’re at various stages of approval.

Some regulate nitrogen and sulfur dioxide—the causes of acid rain and health problems. Carbon dioxide rules are coming. Others will regulate the waste from coal plants and the condition of the water released into rivers and lakes.

The industry’s big objection here is the timeline, with these rules expected to be in place within just a few years. To prepare, some Midwest utilities have already announced coal plant shut downs, and many more are expected.

“ We’re currently evaluating everything that’s coming from the EPA and making decisions as we speak,” says Bill Sigmon of American Electric Power, a big utility based in Columbus and known to most as AEP.

Already, AEP has announced that it will retire six coal plants in Ohio, which would cut 277 jobs and hit the state’s tax base. Duke Energy is closing a power plant near Cincinnati in 2015. DTE in Michigan says it could close as many as 10 coal burners because of the EPA rules.

The recession has reduced demand for electricity, but some worry that if industry picks up, fewer power plants could mean a strained grid.

Some utilities are looking to alternatives. Besides putting expensive pollution controls on some coal plants, natural gas-fired power plants have emerged as the new favorite.

Ed Malley of TRC says the cost of cleaner-burning natural gas is not that different than coal now.

“Natural gas at this point is plentiful and inexpensive,” he says. “The price of fuels goes up and down, but in the last ten years the price of coal has increased and the price of gas has decreased, pretty dramatically.”

AEP, for one, is hedging its bets in Ohio, building both a new natural gas plant and a new, cleaner coal plant.

“I think coal is a part of the mix going forward as well,” AEP’s Sigmon says. “I think it’s going to take a combination of renewables, natural gas for sure, and keeping some of these coal plants in operation as well.”

And, as utilities decide to clean up coal or build something new, “every penny of that is going to be passed along to consumers in one form or another,” Sandy Buchanan says.

While the industry says these new EPA regulations are going to cost billions of dollars and put our power grid at risk, others say many of these dirty, old coal plants were reaching retirement age anyway, and the benefits to our health are worth far more than the costs of taking plants offline.

For a region sometimes known as the “coal belt,” it might be time for a new name.

Changing Gears is a Michigan Radio project looking at the economic transformation of the Midwest.