Clean Power Plan Impacts Utilities and Generation Technologies

(Continued from Prior Part)

Despite all of the positives that the EPA (U.S. Environmental Protection Agency) and President Obama have mentioned, the CPP (Clean Power Plan) isn’t without challenges.

Perhaps, the most formidable challenge comes from the political considerations. With the Republican majority in both the U.S. House of Representatives and the Senate as well as the presidential elections round the corner, passing the CPP isn’t a done deal. A lot of Republican leaders feel that the issue of climate change lacks an acceptable basis. The GOP has targeted a number of the EPA’s initiatives including the fight against ozone reduction, the Clean Water Act, and the CPP.

Because the CPP is a multi-year plan, how political considerations pan out will be important.

Another key challenge before the EPA is to get all of the states to follow the schedule of submitting their plans by September 2016—September 2018 with an extension. It’s important to note that 15 states are already considering legal ways to postpone the deadline. They want to gain more time to plan for new capacities and the retirement of the old ones. Also, some of the states like Virginia and Wyoming generate substantial revenue and employment through coal. They aren’t happy about coal being phased out from the energy mix in the US. Some states, especially in the western US, are loosely connected to the grid. They could have trouble participating in emission trading—the key to the CPP’s success.

With coal clearly losing out and natural gas merely acting as a bridge fuel, there are concerns about the reliability of renewable energy sources. Solar only works during the day. Wind turbines only generate electricity when the wind is blowing. Relying too much on these sources could make electricity generation volatile. Also, electricity generation might not be reliable.

We have extensive coverage on utilities (XLU), coal (KOL), and solar power (TAN). Visit Market Realist’s Energy and Power page for interesting analysis on industry leaders including NextEra Energy (NEE), Peabody Energy (BTU), FirstSolar (FSLR), and SunEdison (SUNE).

Browse this series on Market Realist:

• Part 1 - Key for Investors: Understanding the EPA’s Clean Power Plan
• Part 2 - Clean Power Plan: How the First Building Block Affects Coal
• Part 3 - Second Building Block: It’s All About Natural Gas