[Episode #1] – The Real War on Coal

Chris Nelder: Welcome to The Energy Transition Show Mike.

Michael Grunwald: Thanks for having me Chris.

Chris Nelder: So in your piece you wrote that the U.S. had 523 coal fired power plants when Beyond Coal began targeting them three years ago, but that 190 plants have been retired since then. That's 36 percent of the fleet. Why do you think Sierra Club has been so successful with its campaign?

Michael Grunwald: Well now they're up to 200 plants have been scheduled for retirement.

Chris Nelder: Wow.

Michael Grunwald: It's been really remarkable I think one reason for their success of course is that the Obama administration has been helpful with various regulations, with mercury, with soot, with smog. There are a lot of hammers for them to use. And another reason they've been successful is that their campaign has coincided with a spectacular transition in the clean energy economy where you've seen solar get about 75 percent cheaper and wind maybe 60 percent cheaper. That's made them much more cost competitive. They've been the boots on the ground in the war on coal. They're going to every single one of these obscure hearings where some public utility commission or state Department of Environmental Quality is looking at any one of these 523 plants, and they've been very clever about their approach. They don't come in as hippie enviros when they're in Oklahoma. You know I went to some hearings in Oklahoma City where they did not mention the word environment or even the word wind or health. They were just completely talking about cost. And they've been able to make the case as regulations have made coal somewhat more expensive, and these changes in wind and solar have just gotten so much cheaper, they're able to make the case that just on pure economics that shutting down coal plants is better for ratepayers. And that's been a tremendously powerful argument not only in places where environmental justice arguments hold some sway but in places like Georgia and Oklahoma and even Idaho. You're seeing some real changes.

Chris Nelder: You know I wanted to mention that. In your piece you detailed how Beyond Coal attorney Kristin Henry had demonstrated in court that Oklahoma Gas and Electric have massaged its economic models to make coal power look cheaper than it is and pollution controls more expensive than they are, and that in reality new wind power is already cheaper for Oklahomans than even coal plants without pollution controls. And so I think a straight economic argument like that without any tree hugging elements resonates well even in dark red states. As you point out, we've seen similar things happening with the Green Tea Party in Georgia supporting solar over nuclear and coal plants. Do you think straight economics is likely to play an even bigger role in pushing out coal than EPA regulations and legal fights, even if the next president is a Republican?

Michael Grunwald: Well I think it's all connected. EPA regulations are one reason that the economics have gotten so unfavorable for coal. Coal, traditionally, its argument was we may be dirty but we're cheap. And the reason they were so cheap was because they didn't have to clean up their dirtiness. The more you make them clean up their mess, the less cheap they get. And then on the flipside when you have wind at two cents, that's really hard for anybody to compete with. And that's where you're seeing a lot of these states, they actually it's written into their law you know originally by fossil fuel lobbyists that they have to go with the cheapest option. And increasingly that's not coal.

Chris Nelder: That's right. You know since the EPA released the final version of its clean power plant on August 3rd there's been a lot of debate about how ambitious it is or isn't, and what the likely outcomes of it will be. Given all the pressures especially the economic ones the coal is now under, how important do you think the EPA's new rules really are?

Michael Grunwald: Well I think I've been seen as maybe the leader of the this is not a big deal contingent on the Clean Power Plan. And I will say that the draft Clean Power Plan was a joke. It would have had virtually no impact whatsoever. And even the final rule, you know we've discussed how there has been this flurry of coal retirements. Under the Clean Power Plan that flurry will actually subside a bit. The rate of coal retirements through 2030 under the Clean Power Plan would actually abate. It would slow down.

Chris Nelder: It's slower than it would have been without the Clean Power Plan.

Michael Grunwald: Well, that's the question. For the draft, I really feel like it would have been much slower than without the Clean Power Plan. The main change from the draft to the final is that the draft essentially said, and whether it was for political reasons or for legal reasons to try to make sure it passes muster with the Supreme Court, they basically said well if you're a fossil fuel state and if you're a coal rich, we're essentially not going to ask very much of you or really pretty much anything. Kentucky for example would not have had to retire a single plant that it isn't already retiring to meet its targets under the draft rule. But the final rule completely flipped that and really put in some much tougher targets for states like Montana, West Virginia, Kentucky, North Dakota. Places that have been historically dependent on coal and other fossil fuels, so that now even though the overall target they're saying, and that's increased as well but it's still only 32 percent reduction from 2005 levels so we're already halfway there, but if the fossil fuel states have to do their part and the states in the Northeast and California presumably are going to exceed their relatively modest targets, then you really could see the Clean Power Plan having a pretty good impact.

Chris Nelder: So on the political element, officials from 17 states that burn a lot of coal are preparing to sue the Obama administration now over the Plan and block its implementation. Their claim is that the EPA is violating Constitutional limits on federal power, that the Clean Air Act prohibits so-called double regulation on power plants whose other emissions are already regulated under another section of the law, and that the EPA lacks the authority to regulate the electric grid outside of power plants. Meanwhile other opponents including Senate Majority Leader Mitch McConnell of Kentucky and Governor Scott Walker of Wisconsin have indicated that their states might simply defy the EPA and just refuse to implement it. I mean how much of a chance to these opponents really have resisting the new rules?

Michael Grunwald: Well I think the first thing I have to say is that if there's a Republican president in 2016 you know you're going to have to assume that there isn't going to be very vigorous enforcement of a Clean Power Plan, if it survives. You also might see a couple of new conservative Supreme Court justices which would be very bad news for the Clean Power Plan. So a lot of this depends on politics. Mitch McConnell is in a bit of an odd position because they were saying even when Kentucky didn't have to shut down any additional power plants, they were describing the Clean Power Plan as Armageddon, it's war on coal, it's killing the industry. They cried so much wolf that now it's going to be a little bit difficult for them to say oh but this plan is even Armageddonier. You know, like are they going to have to go ballisticer? They're in a kind of difficult political position having gone so crazy for no reason. Now they actually have some reason. This is going to be tough for their coal industry, but it's not clear how they raise their voices even higher. You know legally I think you know the Supreme Court rule that the EPA has not just the authority but the responsibility to regulate carbon.

Chris Nelder: An authority and a responsibility given to them by Congress when the EPA was created.

Michael Grunwald: That's right. So I think unless the makeup of the Court changes you've got to assume that that's not going to be a huge winning argument, the idea of where does EPA get off even thinking about carbon.

Chris Nelder: Well and even with a different sort of composition in the Supreme Court, there would take some extremely tricky legal arguments to try to undo what has already been laid down.

Michael Grunwald: Well you know the changing of the Supreme Court I think then all bets are off on all kinds of issues. I do think that beyond the fenceline argument, from an Energy want perspective it's kind of a no brainer right. This idea though that energy efficiency and demand response that these are kind of you know negawatts have the same impact as megawatts and that you ought to be able to deal with the grid in a cleaner way and a cheaper way. But I'm not a lawyer and I don't pretend to know how this Supreme Court is going to interpret how the law is written. And there is some pushing of boundaries on the Clean Power Plan, no question about that. So I wouldn't say that it's a done deal, but as you've mentioned in the past, these kind of regulations send a market signal. So it was interesting with the mercury rule, which the Supreme Court actually did not strike down but essentially set up for being struck down in a decision about a month ago, a decision that most of us thought was kind of crazy basically saying that they didn't look at the costs of the regulation at the right time, they looked at it later. But what was interesting about that decision is it hasn't really had much of an effect because most of these utilities have already kind of baked the mercury rule into their cake. They've already made these decisions and I think regardless of the bluster of some of these red state politicians, I think a lot of these utilities who face the prospect of EPA making these decisions for them in the future if they don't start reacting now, I think they're going to start thinking about carbon rules and how to deal with that. So when they have to make a decision when the ozone rule comes down or dealing with the mercury rule that whether they're going to install very expensive scrubbers, you know when they're thinking do we want to spend 500 million dollars on technology that might turn out to be obsolete in a couple of years because of the carbon rule, we might have to shut this plant down any way and strand the assets, I think that's going to play into their decision. So in all of this you can tell I'm a whether you know from the coal industries perspective I'm a big pessimist, from you know the climate's perspective on this stuff and when it comes to electricity, I'm really an optimist. I think a lot of these changes you know once coal got expensive and the government decided to deal with its mess and once clean energy has gotten cheap, I think some of these changes are going to be really hard to reverse. And they really are in a transition where the political power of the coal industry is going to start to dwindle, and the solar industry now employs more workers than the coal industry, which is yet another reason for politicians to start paying more attention to solar and wind and less to the coal industry. I just think you know there are real questions about how fast this transition is going to go, but it's going.

Chris Nelder: I couldn't agree more. I mean especially with all of these coal companies going bankrupt. They're not going to have a lot of money to muster for political lobbying.

Michael Grunwald: Yeah that's right. Or for their trade groups.

Chris Nelder: Yes exactly. I mean there are some important questions in my mind about the competition between natural gas and coal and U.S. power generation, because as we all know what's one of the main forces that's under-cut coal has been how cheap natural gas has become with the U.S. shale gas revolution. But now it appears that U.S. shale gas production may have peaked in the U.S., at least for now, back in May because the drillers are getting dragged down by crashing oil prices. And you know one of the things I wonder about is if shale gas supply actually starts declining and continues to decline and becomes more expensive than coal again, I really wonder if coal would be able to reassert its dominance in U.S. power generation.

Michael Grunwald: I'm just very skeptical. You know there's a lot of wind out there and at two cents you know there are a lot of utilities that are going to want to install it.

Chris Nelder: And it would be a lower risk proposition for them.

Michael Grunwald: I think that's right. And you know also let's not assume that demand is going to keep rising.

Chris Nelder: Let's not assume that because it hasn't been rising for two years.

Michael Grunwald: Exactly. It's barely been rising even with the economy really growing pretty steadily and I think there are good reasons to think that that could actually decrease. I mean you see like Ikea is now only going to sell LEDs. I mean you know lighting is you know it's not 40 percent of our electricity use but it's 15 percent. And if we're going to have a wholesale transition to LEDs over the next few years, I mean LEDs we're talking about like an 80 percent reduction in their actual energy use. So again that's every one of those little percentage points is a percentage point that that comes off the coal industry essentially.

Chris Nelder: That's right.

Michael Grunwald: And so I do think that there is going to be questions about you never know what the price of gas is going to be. And right now the cost of storage for renewable energy is not really competitive but that's going to keep coming down. And in most places the amount of renewable energy on the grid is not really reached a level where it's going to cause huge problems with reliability without storage. So you know I don't know whether it's luck or not, but it seems to be working out pretty nicely where gas really is kind of filling in a gap right now as renewables get cheap and sort of start building up to a significant percentage of the grid. And meanwhile you've got the Teslas of the world investing in storage. You've got some utilities starting to bring storage online. You've got this investment in demand response. You've got things happening in the energy efficiency world. I don't really see a big coal resurgence and the bond markets sure don't either.

Chris Nelder: Those are all excellent points and how we accommodate more renewable energy on the grid and what kind of a role storage and demand response and these other technologies has to play is one of the important questions that I'm looking to explore in this podcast.

Michael Grunwald: Absolutely. Just to mention one more variable is the rise of electric vehicles, which even with oil at $40 a barrel, it's incredible. You know electric vehicles are really growing quite steadily.

Chris Nelder: It is remarkable.

Michael Grunwald: You can see a point in the not too distant future where we start to think of those things as kind of car shaped batteries that are sort of providing storage for the grid, that are making money for their owners as you become well little mini utility in your garage.

Chris Nelder: Sure you become part of the dispatchable electricity supply.

Michael Grunwald: Yeah, I think it's exciting. Especially since you know we've been talking mostly about electricity, and there I really feel like this transition is already unstoppable, while oil is still kind of a really good cheap technology that hasn't yet been beaten.

Chris Nelder: Yeah. You know on a slightly different subject, I really wonder how the people who live in coal country and you know who might be a fourth generation or fifth generation coal miner in Illinois for example, how those people feel about the transition that's going on and how they feel about having seen the coal sector shedding jobs for decades due to all the reasons we've discussed. Plus of course increasing automation in the mining sector which has destroyed a lot of jobs. It just seems a horrible tragedy to me that the political leaders in coal states have simply tried to defend the status quo rather than embrace the new jobs being created in the transition. Wouldn't they be in a much better position today if they had done? The how do rank and file employees in the coal sector feel?

Michael Grunwald: I think you raise an excellent point and I think it is sad. You see in his budget this year President Obama put in a few billion dollars to help some of these coal communities make those transitions. And of course you know the Mitch McConnells of the world just say you know we don't want your welfare, just stop killing our industry, when for all the reasons we've been discussing this is not just Obama killing their industry their industry is dying. That said I'm sure it was similar for the buggy whip industry, and I think it's almost too much to expect these politicians to really take the kind of mature view when sort of Obama bashing is obviously excellent politics in a lot of these places. I do feel very badly for these people who are dependent on the coal industry. I feel badly for people who have worked in coal mines because it really seems like horrible work.

Chris Nelder: Yeah. You got to wonder, I mean we've had generations of people in coal country who have suffered terrible health issues on account of the impact of working in coal. Likewise we've had thousands and thousands of deaths a year from people who suffer from health problems because they lived near a power plant that burns coal. I really wonder how those health issues play in these coal dependent states in the near future.

Michael Grunwald: Well it's hard. I spent some time like when I went to that hearing in Oklahoma you know you saw there was this school superintendent from the town in rural Oklahoma where the coal plant came and testified and said the utility gives money that helps keep our schools going, these places do provide jobs. And of course you and I can look at this from outside and say like well wait a minute, wind and solar now provide twice as many jobs as the coal industry. And a lot of the people doing those jobs are getting these horrible health problems from being exposed to these really toxic substances. But transitions are always hard. I wrote a book about change. It's hard. And although I completely agree with you that ultimately these communities are going to need to find a better way to employ their citizenry, and in hopefully a cleaner and less debilitating way, it doesn't surprise me that they're upset at jobs leaving their communities and it doesn't surprise me that politicians are exploiting that disappointment.

Chris Nelder: Well and then as you point out in your piece, after coal oil is probably next. Sierra Club has signaled its intent to target oil next. But unlike electricity where an electron generated by wind or solar is as easily substituted for an electron generated by coal, liquid fuels are very hard to displace. I mean you not only have to switch fuels but you have to change out all devices like cars and trucks that use them. Do you have any insight into what kinds of arguments or strategies Sierra Club might use to support a transition away from oil?

Michael Grunwald: Well I suspect they're putting a lot of hope in electric vehicles. Which is one reason, to the extent we move towards electrification of our economy, all the more important that it's a green or even potentially zero emissions grid that's powering it. You know biofuels I think have been a real disappointment.

Chris Nelder: Well they have and you know frankly I'm I'm not that excited yet about EVs. I mean I certainly see the potential but let's face it, it's for several years now electric vehicles in the U.S. and worldwide have had a .4 percent market share. I mean they're not even half a percent of the new vehicles being sold. So I really wonder you know how much traction does the Sierra Club think they can get with this EV approach?

Michael Grunwald: Well look, I think they're on the strategy side, what Bruce Nilles was hinting at when he said we're meeting all these people in the utility industry and we're fighting them now, but someday we hope to work with them to fight big oil. What they're saying is that there's a clear kind of confluence of interests between utilities and the enviros when it comes to electric vehicles. Because electric vehicles are a huge growth opportunity for them to the extent that their business relies on selling electricity. You know the LEDs and high efficiency air conditioners and solar panels on people's roofs threaten to really destroy their business model. But to the extent you plug your car into your wall and need juice to drive it around, that's a real growth opportunity. And that's, you can see that's also a political opportunity to where environmentalists and people who care about the climate can work with the utilities to promote electric vehicles as an alternative to oil providing the incentives that can maybe help make them grow a little bit more. I've actually been kind of impressed when you think that in 2008 we had no electric vehicles.

Chris Nelder: That's right.

Michael Grunwald: You know we're not going to reach President Obama's goal of a million by 2017, but I think by 2020 that's certainly possible. And one thing about electric vehicles is that people who get them really seem to like them. And particularly as you see these new possibility of pricing schemes, what do they call it the V2G, right, where you can imagine these schemes where you can really make money from your vehicle and let it function as a utility and sell power to the grid when the grid really needs power and suck power out of the grid when it's cheap. You can imagine that growing if not exponentially at least a lot faster than it's been growing. And 40 dollar oil does not help the growth of the electric vehicle.

Chris Nelder: That's true. But you do raise a good point that it certainly sweetens the pot for an owner to be able to actually have their investment in the vehicle generate a little income which is something no gasoline vehicle is ever going to do.