Trump’s recent climate rule reboot will slow the decline in coal use over the last decade, but it won’t do much to reverse the shift toward more natural gas and renewables, reported credit-ratings giant Moody’s on Monday.
“We view the proposed approach as a less stringent form of regulation and much more moderate than the [Clean Power Plan],” the Moody’s analysis said. “As a result, we do not expect it to have much of an adverse effect, if any, on the operation or the economics of coal plants.”
The Moody’s report is its first analysis of the Affordable Clean Energy Rule’s effects on the financial standing of coal companies since it was first proposed on Aug. 21. The rule is meant to replace a more strict climate rule issued by the Obama administration called the Clean Power Plan.
Compared with the Clean Power Plan, the Trump rule “should slow the decline of coal usage,” according to Moody’s. The credit-rating firm declared it “credit positive” for coal’s big producers, such as the mining firm Peabody Energy, in addition to power plant operators such as NRG Energy and Chief Power Finance.
Moody’s said that “improved sentiment” around coal has helped some coal firms with distressed credit to restructure their debt and obtain new financing. “But over a longer horizon the economic case against coal remains largely intact,” it said, meaning the decline in coal use can be slowed somewhat, but not reversed.
“Coal producers and coal power plants have been under tremendous economic pressure because the price of natural gas — a competing fuel for generating electricity — has fallen dramatically in the past few years,” Moody’s explained. “Renewable generation could also be a major challenge to coal in the longer term.”
Coal-fired electricity generation has been on a steady decline over the last decade. Coal use fell 18 percentage points since 2007, from providing 48 percent of the nation’s energy mix, to providing 30 percent in 2017. Natural gas is now the No. 1 producer of electricity in the United States, followed by coal and then nuclear energy.
The second big hit to both coal and nuclear plants will come from renewable electricity generators such as solar, Moody’s noted.
“We expect that renewable generation’s contribution to electricity generation will grow, both because of economics and state-based green energy initiatives, and that it will crowd out other forms of generation such as coal and nuclear,” the analysis said.
At the same time, greenhouse gas emissions have been falling because of the switch from coal to natural gas and more renewable energy.
Moody’s explained that even without the Trump administration’s replacement rule, the U.S. is expected to meet the Obama administration’s emission targets ahead of the Clean Power Plan’s 2030 deadline.
“Based on currently scheduled coal-fired and nuclear power plant retirements and new renewable and gas-fired generation additions, we expect carbon dioxide emissions from electricity generation to decline further, and it is likely that the US will meet the carbon dioxide emission target established under the CPP well ahead of the 2030 deadline, despite it having been repealed in 2017,” the report said.
