THE ENERGY INDUSTRY TIMES - MAY 2017 Final Word 16 Promises set in stone? For Christians around the world, Easter is often a time of reflection and remembering Jesus’ promise of eternal life. As memories of Easter mingle with thoughts of what goes on in the mind of leaders, one wonders to what extent US President Donald Trump sees himself as the great deliverer. As Trump reaches his first 100 days in office, industry observers have been assessing the energy and climate change policy implications of his actions, both for the US and globally. Whether for good or ill, Trump’s actions are certainly in line with his campaign promises – at least on energy. In the run-up to the election he promised to revive the flagging US coal industry as part of a new energy policy that attempts to roll back former President Barack Obama’s Clean Power Plan (CPP). President Trump campaigned on a pledge to bring jobs and production back to a sector that has been on a steady decline for over a decade. But although we live in a world of surprises, it is fairly safe to say that coal is probably beyond resurrection. To restore the coal industry, Trump would have to revive demand for coal by electric utilities but there is little chance of that. Data from Energy Information Administration shows that in 2015 alone, utilities retired power plants generating 22.2 GW of electricity. Coal fired plants accounted for 67 per cent (14.8 GW) of the retirements. Reuters recently surveyed 32 utilities with operations in the 26 states that sued Obama’s administration to block the CPP. It revealed that the bulk of them have no plans to alter their multi-billion dollar, years-long shift away from coal, suggesting demand for the fuel will keep falling despite Trump’s efforts. For example, in early April the operators of the Navajo Generating Station, the largest coal fired power plant in the west, announced plans to close it by 2019. The electric utility Dayton Power & Light will shut two coal plants in southern Ohio by next year. Across the country, at least six other coal fired power plants have shut since November, and nearly 40 more are to close in the next four years. American Electric Power (AEP), an Ohio-based utility that provides power to five million people in 11 states, recently noted that in 2005, 71 per cent of its electricity was coal fired but said that figure has dropped to 47 per cent. It projects that this figure is expected to fall further. AEP noted natural gas fired power has grown to 27 per cent from 20 per cent in 2005, and that share is expected to grow. It also said over the next three years, the company plans to invest about $1 billion in new wind and solar generation. In a recent online survey of 600 utilities in the US and Canada only 4 per cent of executives believe there will be a moderate or significant increase in coal use as part of their utility power mix within the next decade. There are numerous reasons behind the trend: natural gas is cheap and abundant and solar and wind power costs are falling. Another reason is that state environmental laws remain in place; and Trump’s regulatory rollback may not survive legal challenges. Trump has promised to lift environmental regulations that restrict fossil fuel use but while Executive Orders can set the direction of policy, they cannot undo regulation. This may be another promise he cannot deliver. In the same way that Obama faced litigation when attempting to turn policy to law, so will Trump. Legal experts say it is not certain that Trump will succeed in efforts to roll back the CPP. And under the current statute, which has yet to be put into effect, the federal government is still required to regulate carbon dioxide emissions. So, even if Trump does succeed in repealing his predecessor’s carbon dioxide rules, either he or his successor will be required to issue replacement rules. The CPP, finalised in 2015, is the centrepiece of Obama’s 2013 Climate Action Plan. Implementation of the rule was stayed by the Supreme Court in February 2016, pending resolution of legal challenges currently before the D.C. Circuit. Looking beyond his borders, Trump also promised to “rip up” the Paris Agreement but interestingly he has not done so as yet. Kevin Book, Managing Director at ClearView Energy Partners LLC – a Washington-based independent organisation providing research and analysis of macro energy trends – offered his take on the situation. During a recent online media briefing hosted in London by the Energy and Climate Intelligence Unit (ECIU) he said: “Our current view is that the Trump administration will remain within the Paris Agreement, at least for the time being. When President Trump wants to leave a deal, President Trump leaves a deal. If they wanted to leave the deal, that process would already be under way. By staying in, Trump’s administration retains something that pleases the internationalist wing of the Republican party. The opportunity to remain at the table is something the US feels it needs to preserve. “It is also our contention that the Trump administration may be daring other parties to the agreement to cast the first stone.” Book’s thinking is that, to some degree, by remaining at the table but failing to meet the compliance obligation, the Trump administration is forcing a conflict that might have occurred anyway within the contract of the agreement. While countries set emission goals under the agreement, as Book points out, the “uncomfortable question of what to do if anyone comes up short” still remains. The current belief is that the US may well fall short of its UN emissions targets. It will certainly struggle to honour its Paris commitments under a Trump administration. These include cutting US greenhouse gas emissions by at least 26 per cent below 2005 levels by 2025, and giving billions of dollars in aid for poor countries trying to curb their own emissions and cope with climate impacts. Bob Ward, policy director at the Grantham Research Institute on Climate Change and the Environment, in London, said Trump’s actions “make it virtually impossible” for the US to fulfil its nationally determined contribution. With the next stock-take on countries’ progress in 2018 and the next stage of emission setting in 2020, it seems the reason for the Trump administration to leave the agreement imminently is not there. Book noted: “The Paris Agreement is the framework that starts something in motion… and the US plays a leadership role. It also plays a signalling role in terms of whether there will be enforcement or not. Enforcement, however, was not the first concern; the first concern was participation – building the framework to get people in, not keep them out for failure to comply.” With regards to the Trump administration setting itself to renegotiate a global contract, one’s leverage for renegotiation tends to be greater if one waits until there’s some dispute about performance. There is a real expectation that the US, on its current trajectory, will miss its Paris pledge – and probably by a good margin. But it might not be the only country to do so and the Trump administration may find it’s in its interest to stay and wait until the discussion of attainable ambition is framed by other countries’ performance.” He also a notes that if the US is the only country that is on track to miss its ambition, another possibility is that it could force other countries to decide what they are going to do about it; this in itself will strain the framework. “This,” said Book, “could have the de facto effect of scuppering the entire deal.” No doubt much will depend on the world we will be in when these scenarios start to play out. Joan Mc- Naughton, Chair of The Climate Group and Executive Chair of the World Energy Council’s World Energy Trilemma, was also on the expert panel. She commented: “If for example we have had more extreme weather and the signs become more hard edged, I’m not sure there will be that much playing of politics at that level. I think there will be a coalition of the willing to just press on.” Trump’s approach may draw comparisons with the Christian gospel John chapter 8, verses 3-7. But where Jesus sought peace, Trump seems to be seeking division. Inviting others to cast the first stone may not have the desired outcome. Junior Isles Cartoon: jemsoar.com
Energy Industry Times May 2017
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