Power prices for homes, businesses and factories may eventually rise, and nuclear power could return to fashion.
The rule proposed by the Obama administration Friday will have little effect on the mix of power sources and electricity prices anytime soon because it only applies to new power plants and is likely to be challenged in court. Even so, market forces are already reshaping power markets in the same way the rule will. A boom in natural gas production in the U.S. has dramatically increased supplies, sent prices plummeting and prompted a shift away from coal.
The rule requires new coal plants to be built with extremely expensive equipment to reduce carbon dioxide emissions. That will make coal look prohibitively expensive to regulators and utilities planning for the future. By comparison, natural gas-fired plants, which emit half as much carbon dioxide as coal plants, along with wind turbines and solar panels, will look like a bargain.
Jason Bordoff, Director of Columbia University's Center on Global Energy Policy, called the rule "consistent with already evolving market trends toward the use of natural gas instead of coal" and described it as "cost-effective."
Nonetheless, it creates financial winners and losers. Here's how the landscape could change for companies and customers.
— Natural gas. Most new natural gas-fired power plants will stay within the rule's emissions limits without requiring new equipment. That means natural-gas fired plants — already by far the cheapest power plant to build and operate — will likely remain the top choice for utilities.
As utilities rely more on natural gas to generate electricity, demand for the fuel will increase and prices could rise. That would mean more revenue for domestic natural gas drillers such as ExxonMobil and Chesapeake Energy, drilling services companies such as Halliburton and Baker Hughes, and pipeline companies such as Spectra Energy and Kinder Morgan. It will also help makers of natural-gas fired turbines such as General Electric and Siemens.
— Renewable energy. Wind and solar developers, such as NextEra Energy and FirstSolar, may see increased demand for large projects, especially if power prices rise. That would also help rooftop solar installers such as Solar City attract more interest from homes and businesses.
— Nuclear power. Nuclear, like coal, has suffered from the low power prices brought on by cheap natural gas. Utilities have abandoned ambitious plans to build new nuclear plants and they've shut down aging plants that have become too expensive to run. If prices rise, nuclear operators such as Exelon and Entergy will benefit. And because the new rule makes new coal plants so expensive, utilities afraid of relying too heavily on natural gas for future power production may turn instead to nuclear.
— Power generators. If electricity prices rise as coal use declines, companies that sell wholesale electric power, such NRG Energy and Calpine, may benefit.
— Coal miners. The U.S. coal industry is already struggling because coal supplies piled up and prices dropped as natural gas gained favor. U.S. production is expected to fall to a 20-year low this year, and 151 mines that employed 2,658 workers were idled in the first half of this year, according to SNL Energy.
While coal will continue to be an important fuel for electricity generation in the U.S. for decades, it appears to be facing a long, slow decline. The country will get less and less coal from the comparatively high-cost Appalachian region, and more from cheaper-to-access coal deposits in the Illinois Basin and in Wyoming. Companies with large Appalachian operations, such as James River Coal and Alpha Natural Resources, will likely continue to suffer.
— Electric customers. Natural gas prices generally dictate the price of all electricity in the U.S. If demand for natural gas rises faster than drillers supply it, the price will rise and drag power prices up too, possibly boosting electric bills for homes and businesses. In the past, natural gas prices have been extraordinarily volatile.
Industrial companies, who have used low power prices in the U.S. as a competitive advantage, are concerned. The National Association of Manufacturers said in a statement Friday that the rule will "hurt competitiveness and job creation."