Coal production for power generation could expand under CAIR

Washington (Platts)--24Oct2005

Regional retail electricity prices are expected to experience only a slight
increase under the Clean Air Interstate Rule to regulate coal-fired power
plants' emissions in the eastern US, according to the Environmental Protection
Agency.

In a presentation to electric utilities, environmental consultants and
executives last week, Sam Napolitano, director of EPA's clean air market
division, showed that regional retail electricity prices with CAIR in place
between 2010 and 2020 would run only slightly above the projected 6?/kWh price
expected without the rule. 

Between 2010 and 2015 when the rule kicks in, Appalachian coal production for
electricity generation is expected to stabilize at 306 million tons while
western coal is expected to dip from 607 million tons to 586 million tons as
more scrubbers are installed to control sulfur dioxide emissions from plants
that burn eastern coal, the agency said. 

EPA still expects the generation mix to stay stable with coal meeting half the
nation's needs as many units undergo retrofits to install scrubbers to control
SO2 and selective catalytic reduction technology to cut emissions of nitrogen
oxides. EPA forecasts coal capacity in the CAIR region at 252 GWs and 318 GWs
nationwide in 2020.

CAIR, which was finalized in March, calls for 28 eastern states and the
District of Columbia to reduce SO2 emissions by 57%, or 5.4 million tons, and
cut NOx emissions by 61%, or 2 million tons, from 2003 levels by 2015. The
rule requires initial reductions of SO2 emissions at about 45% below 2003
levels in 2010 and of NOx emissions at 53% below 2003 levels by 2009. 

Under the rule, affected states can give utilities emission allowances to swap
in their effort to meet the new requirements. The allowance program, like the
Clean Air Act's Acid Rain Program to curb SO2, is heat-based and coal-fired
power plants that over-comply can sell their allowances.

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