Last month, when FirstEnergy Corp. decided to close six coal-fired power plants in its home state of Ohio and two other states, the moves became instant political ammunition for Republicans, who blamed the Obama administration's environmental regulations for the closures.
Because of the regulations on toxic power plant emissions announced last month by U.S. EPA, "500 hardworking Americans in three states will lose their jobs -- not to mention the countless indirect jobs," asserted Rep. Bill Johnson (R-Ohio).
But the causes for the closures were not quite as simple or as immediate as that. Other forces helped push the FirstEnergy plants to the brink, according to energy experts. They include an underperforming U.S. economy, which is suppressing growth of electricity demand, and the lowest natural gas prices in a dozen years, which have made new gas-fired generation a compelling choice for utilities.
Plus, there are offsetting benefits. They begin with the potential for many more jobs in drilling, pipelines, steel, tools, chemicals and related industries -- employment that will be created thanks to the surge in development of natural gas from the Utica and Marcellus shale deposits running underneath the state's east side. The benefits also include a substantial reduction in health threats caused by the toxic emissions, EPA says.
The long, tangled history of the six plants doesn't really lend itself to a political whodunit, according to energy experts. "These decisions combine numerous factors, including future environmental regulations, power prices, gas prices, regulatory treatment of proposed expenditures, the company's financial condition, their appetite for putting in capital expenditures, and how risk-averse the companies are," said Metin Celebi, a principal with the Brattle Group consulting firm.
"There are multiple factors, and they include expected future market prices of power and gas as well as capital costs of retrofit equipment. A good portion of the coal plants facing closure are the old ones," Celebi pointed out.
"They tend to be less efficient to run, with higher heat rates, and tend to require further costs to maintain them, just to keep them operating. In addition to the age factor, most are lacking the major environmental controls. That makes them more at risk of retirement because of the costs of adding controls."
So was it declining energy prices or environmental regulation? "Clearly it is both," said Ira Shavel, a vice president of the Charles River Associates consulting firm. "Market prices are very low. A lot of coal plants can't compete with natural gas" generation, he said.
"Some of the units are fairly old, too. They are small -- all of which makes them more challenged. The small units have relatively high fixed operation and maintenance costs," Shavel said.
EPA's limits for airborne mercury and other toxic emissions, announced in December, affect 1,100 coal-fired plants across the country, 40 percent of which do not have advanced pollution controls. In response to concerns about the impact of the rule on the nation's power plants, the administration encouraged states to add a fourth year to the rule's three-year compliance timetable.
Further extensions could be granted on a case-by-case basis to meet pressing grid reliability issues, the administration said.
A corporate focus on saving larger plants
FirstEnergy spokesman Mark Durbin said the EPA requirements were the critical factor in the decision to close the plants. "It's definitely related to the new rules. ... Each of the units has to have something done to it. We couldn't justify that cost," he said.
At the same time, FirstEnergy faces substantial costs for installing added environmental controls on other coal plants that it will keep online. "Absolutely our focus is on the larger plants and what we have to do to meet the requirements," Durbin said.