America is slowly moving toward cleaner sources of energy and using less of it overall. President Barack Obama’s plan to fight climate change will accelerate those trends.
The plan aims to reduce power-plant emissions of carbon dioxide, increase America’s reliance on natural gas and renewables and make trucks, homes and businesses more efficient.
Some parts of the plan will take months to work out and years to go into full effect. The most ambitious part of the plan seeks to rein in one of the biggest sources of carbon dioxide emissions: coal-fired power plants. Obama will direct the Environmental Protection Agency to create the first-ever federal limits on these emissions, which trap heat in the earth’s atmosphere.
Obama also seeks to increase funding for clean energy research by 30 percent to $7.9 billion, and make $8 billion in federal loan guarantees available to projects that could help capture and bury the carbon dioxide produced at power plants.
Here’s how the plan would likely affect companies and consumers:
- Utilities and Coal Producers:
Power plants account for 40 percent of the nation’s carbon dioxide emissions, and most of those emissions come from burning coal. To reduce these emissions, power companies will have to run coal plants less often, install equipment that captures carbon dioxide or shut down plants that become too expensive to operate.
The cost of making these changes will likely be so great that utilities will instead generate more power with natural gas, nuclear, wind and solar power, which will become comparatively less expensive and more profitable.
Very few, if any, new coal-fired plants will be built. A shift toward natural gas power plants is already underway thanks to a boom in natural gas production that has caused the price of the fuel to plummet. Obama’s plan will magnify this trend, analysts say.
The stock prices of the nation’s biggest coal miners, including Peabody Energy Corp., Alpha Natural Resources Inc. and Arch Coal Inc. have fallen more than 10 percent over the past two days as details of Obama’s plan trickled out.
The financial effect on utilities that rely heavily on coal, such as NRG Energy and First Energy, is unclear. While coal-fired power will become more costly, that will be offset by higher electricity prices.
Obama’s plan offers clear benefits to natural gas producers – such as Exxon Mobil and Chesapeake Energy – and to utilities – such as Exelon, Entergy and Calpine – which generate large amounts of electricity using low-carbon sources like nuclear power and natural gas.
- Renewable Energy Companies:
By directing the Interior Department to accelerate permits to clean energy developers who want to use public land, Obama will make it less expensive for companies to build wind, solar and geothermal energy projects.
This will help companies that provide equipment for, build and finance large wind and solar farms, such as First Solar, SunPower, General Electric and Siemens.
Wind, solar and other non-hydroelectric renewable power sources generated 4.8 percent of the nation’s electricity last year, double what those sources contributed to the nation’s energy mix five years ago. Over that same period, total electricity consumption fell by one percent, as the economy slowed and appliances and buildings became more efficient.
Experts predict that U.S. electricity consumption will grow very slowly, if at all, in the years to come.
- Energy Efficiency:
Companies that install windows, insulation and heating and cooling systems stand to benefit from the Obama plan, which will give homeowners and businesses incentives to invest in energy-efficiency improvements. While the upfront costs can be high, the long-term savings can be significant.
Obama also wants the EPA to develop new fuel-efficiency standards for heavy trucks, which are the second-largest source of greenhouse gas emissions in the transportation sector, after cars. Obama has already implemented new fuel economy standards for cars through 2025.
Tighter fuel-efficiency standards and higher gasoline and diesel prices over the last several years have cut sharply into U.S. oil consumption. Last year, total U.S. consumption of petroleum products fell to 18.6 million barrels per day, the lowest level since 1997. Consumption is expected to fall further as newer fuel economy standards take effect.
The new standards for trucks would go into effect for vehicles made in 2018 and beyond. Engine makers and parts suppliers that succeed in developing fuel-efficient technologies could benefit. While trucking companies may face higher equipment costs at first, their fuel bills will decline.
- Electric Customers:
Homeowners and businesses will likely pay more for electricity, because the nation will be relying less on coal, which has historically been the cheapest way to produce electricity.
But more-efficient homes and appliances are helping reduce energy consumption, which will likely offset at least some of the higher electricity cost.
Hugh Wynne, an analyst at Bernstein Research, estimates that a 20 percent nationwide reduction in carbon dioxide emissions would increase retail power prices by about 1 cent per kilowatt hour, or 9 percent. At current rates of electricity use, that would add $9 or so to an average American’s monthly bill. Obama’s plan seeks to reduce carbon dioxide emissions by 17 percent from their 2005 level by 2020.
Nick Akins, CEO of American Electric Power, one of the nation’s largest utilities, said in an interview Tuesday that as long as utilities like his are given enough time to transition to a cleaner fleet of power plants, Obama’s plan can be carried out “without a major impact to customers or the economy.”