Coal’s Loss is Renewable Energy’s Gain

Last week the EPA proposed that carbon dioxide be considered one of six greenhouse gases which endanger the public health and welfare of US citizens. Well, it’s about time! The EPA is now seeking public comment on the proposed ruling, which consists of two parts: that the six greenhouse gases contribute to a litany of climate-related problems, and that motor vehicle emissions send four of those gases into the atmosphere.  What could this mean for CO2-intensive energy sources, and what are some implications for clean energy?

In the US, the largest emitting sectors of CO2- equivalent emissions are electric power generation (34% of US emissions), transportation (28%) and industry (19%), and the proposed rule could have severe implications for those sectors. While the US may or may not achieve CO2 emissions regulation this year, at a minimum the EPA’s proposed rule and Congressional debate on the Waxman-Markey bill will increase public awareness on the topic. With so much ongoing discussion, major players in the energy sector have initiated strategic planning efforts to adapt to possible emissions regulation.

The skinny: Coal-dependent regions and industries will need to brace for increased energy costs, including considerable electricity price hikes. States in the Southeast and Midwest, this means you (see chart below). Ameren UE, a Missouri-based utility company, estimates their costs of generating electricity could double. American Electric Power, an Ohio-based utility, is evaluating plant closures and rate increases of 25-50% in the event of emissions regulation.

(continued after the graph)

The upside: these same coal-dependent regions and industries will be the next boom opportunity for adoption of proven but relatively expensive renewable energy technologies, such as wind and solar power. Last year, DOE highlighted a swath of Midwest and Great Plains states as the US’ best onshore wind resource. A few Southeast utilities are already adding solar power to their generation portfolios (Duke Energy, Florida Power & Light), though some projects have stalled. Look for more wind and solar projects as capital unfreezes and talk of carbon legislation continues.

Utilities, businesses and residents across the Midwest and Southeast should seriously consider solar power as well. Solar in the Midwest? Believe it. Most states along the Ohio and Mississippi Rivers average 4.5 to 5.5 kWh/m² of sun each day – a useless factoid until you realize that’s a full hour per day more than Germany, the world leader in installed solar capacity. To be sure, Germany’s solar binge has been fueled by lucrative feed-in tariffs and not by a sudden discovery of gloriously sunny weather. But, couple the Midwest’s slightly better solar radiation with federal carbon legislation, and electricity prices in coal-dependent regions could rise dramatically enough to drive aggressive solar adoption.  A doubling of power prices (not a completely unlikely scenario for the historically cheap power sold in the Midwest and Southeast) could drastically reduce the payback time on solar power projects.

Will the Midwest and Southeast lead US growth in wind and solar power projects? Tell the EPA and your Congressperson to regulate carbon dioxide emissions and it just may happen.