When the Clean Air Act was updated in 1977, existing power plants got a free pass: They didn’t have to meet new standards until the next time their owners invested in them. So a number of pre-1977 plants simply never upgraded. (This is always a good thing to keep in mind during discussions of coal power.) (You do have discussions about coal power, don’t you? At family reunions and the like?)
Some of these grandfathered coal plants have simply been shut down. But coal power has traditionally been so profitable that massive, expensive upgrades to old plants are worth the investment.
That may no longer be the case. From a Bloomberg News report:
An indication of how much new emissions rules and cheaper natural gas have hammered the value of coal-burning generation will come when Exelon announces the results of the first big sale of U.S. coal-fired power plants in four years.
Exelon, the largest U.S. power company, may have to take a 40 percent discount for three Maryland plants it’s seeking to sell by the end of August. Bidders including NRG Energy Inc. (NRG) have offered $600 million to $700 million for the units, which have a fair value of $1 billion, said Travis Miller, Chicago-based director of utilities research for Morningstar Inc.
“This is going to be the first meaningful transaction for coal assets since the downturn,” Julien Dumoulin-Smith, a New York-based analyst with UBS AG, said in a phone interview. “You can get a little anxious about what the repercussions are.”
The good news, of course, is that more power companies may elect to shutter existing facilities entirely, investing instead in cleaner, cheaper natural gas facilities — as they are in fact doing.
The bad news is that estimates of spending on pollution control (read: spending on jobs) will be lower than might have been expected. Over the long run, that’s probably a trade worth making.
Coal-Plant Plunge Threatens Billions In Pollution Spending, Bloomberg News.