From its earliest use in refining metals, to its more regarded use in providing electricity, the abundance of coal has been a consistent source of energy throughout the ages. Worldwide, coal is the most abundant fossil fuel and the dominant source of energy for electricity. Due to increasing regulations in the U.S., specifically and most significant, the Mercury Air Toxin Standards (MATS) has given cause for utilities to look from a budgetary perspective on whether to retrofit plants or shut them down. Currently there are 1,100 operating coal fired units across the country. The coal industry has forecast that around 320 plants will shutter between now and 2017, roughly 29 percent of coal fired units. However, if you look at these shutdowns from an installed capacity perspective, it’s really only 13 percent. In terms of coal consumption while also considering the share of a billion tonne coal market, these 320 shuttered plants represent only eight percent of total US consumption.

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So while coal has lost some of its market share to new regulations and a glut of more affordable natural gas in the United States, pricing for natural gas in 2013 is set to increase making the price of coal, western coal especially, very competitive with natural gas. Coal producers are predicting that consumption of coal will be up 50 million tonnes in the U.S. alone.

“We see coal taking back a very meaningful piece of market share this year because of competitive pricing,” said Deck Stone, Senior Vice President of Strategy and Public Policy, Arch Coal, “In 2008 coal was near 50 percent of power generation in the U.S., by 2020 we see that settling out at around 40 percent. Most of the market share that we were going to lose has already been lost.”

However, that story changes dramatically as you look overseas. China and India alone are expecting 100 new coal plants to go online by 2017. South Korea’s imports have risen nearly 45 percent since 2007 and Europe has increased coal imports as well. As the world population increases and developing nations middle classes continue to grow, the demand for cheap and abundant fuel will grow.

China is a prime example of explosive growth. Over the last decade China’s middle class has grown to 300 million people. This increases demand on every sector of their economy, including manufacturing, which is currently running at full tilt. Increases in electricity consumption are at the heart of each growing sector and China can’t keep up. Last year, Beijing experienced a week-long traffic jam from trucks transporting coal from the countries coal-rich Shanxi Province because of the lack of transportation infrastructure. This makes international seaborne coal very attractive. U.S. coal companies have been exporting 900 million tonnes of coal per year to China.

Even when the proper infrastructure is in place, these companies will still export 100 to 200 million tonnes into China each year, maintaining China’s status as the number one net user of coal. Its demand has forced Chinese coal companies to cut costs in an effort to undermine foreign coal producers. “They’re not paying workers,” said Xizhou Zhou, Director, China Energy, HIS, “and they continue to develop new ways to cut costs.”

Markets like South America and other Asian nations like Vietnam and Thailand are growing too. This surge in demand for coal in growing populations will only increase as more electricity is consumed. The International Energy Agency said that by 2017, India may import more coal then China who is currently import about half of the world’s coal.

The market is there. Although the market for coal in the U.S. has plateaued due to increased regulations and concerns over environmental degradation, growing economies looking for enhanced quality of life filled with experiences and luxuries we in the Western world take for granted will continue to seek coal for electricity and manufacturing.

Just because regulations are imposed here domestically, doesn’t mean they are standardized abroad. Even with the shuttering of nuclear facilities, increasing regulations and concerns of foreign imports for oil and gas, as well as coal reductions in favor of more renewable sources of energy; American’s continue to consume electricity at a pretty flat rate. American’s are also concerned with pricing, deals. Its what has made the U.S. the largest consumer of energy in the world, its affordable.

“Everyone is looking at cheap gas now but what will they be looking at in a few years from now? It’s difficult to have people think 20 and 30 years out but that’s what we plan for,” said James Rogers, Chairman, President and CEO, Duke Energy. Utility companies will continue to dispatch the most affordable fuels in front of another, regardless of type, in order to satisfy customers and keep rates low.

The future of coal really depends on consumers, regardless of their environmental or political stance. Because when consumers come home at night they expect to turn on their lights, be sheltered, clothed and fed; the basic tenants to a quality of life each person in this country has become accustomed to and to which they are hard pressed to give up. As long as there is a need for electricity around the world, there will be a future for coal.

While Americans are trying to reduce the amount of coal in his or her proverbial back yard, it doesn’t mean that same coal won’t exist in someone else’s. “We are wounded as an industry and people are taking shots at us, but we’re a proud industry and we know we provide a valuable service to society,” said Jack Porco, President and COO, Xcoal.

INTRODUCTION Challenges to the nation’s 30 mandatory and 7 voluntary Renewable Portfolio Standards (RPSs) are not a new trend. However, those efforts appeared to gain momentum following the release of the American Legislative Exchange Council’s (ALEC) “Electricity Freedom Act” late last year. While at least a dozen articles have outlined attempts to modify or roll back RPS legislation in the 2013 session (see Appendix A), none have comprehensively reviewed all proposed legislation. This analysis seeks to add perspective to the RPS discussion by evaluating an expanded list of proposals that would increase, modify or decrease a state RPS. As of mid-June, the Center for the New Energy Economy’s AEL Tracker database contained 121 unique RPS-related bills from this legislative session alone. As the 2013 session comes to a close , it is time to take stock of how state RPS polices have fared and which types of proposed policy changes were most common. To begin, Figure 1, below, presents a visual representation of state Standards as of December 2012.

ANALYSIS METHODS

For purposes of this analysis, we grouped RPS legislation into three categories: Rollbacks, increases and modifications. Rollback legislation includes outright repeals, and proposals extending target deadlines, reducing targets, or otherwise delaying implementation of the standard. Also included in this category are bills that would add non-renewable fuels and large capacity (>30MW) legacy hydroelectric resources to a standard. Legislation to increase an RPS generally would create a larger market by raising renewable generation targets, creating new carve-outs for specific generation sources, or adding new targets for additional utilities.

The most numerous and diverse set of RPS bills fall under the modification category. Generally, these proposals include provisions that strengthen or weaken a standard, but do not go so far as to increase or rollback an RPS. This type of legislation would add new eligible resources, including small hydroelectric (<30MW), or extend the period of eligibility for certain resources. Other proposals require a certain amount of in-state generation, slightly amend the definition of “load,” or modify credit multipliers. This category also includes bills addressing alternative compliance payments (ACPs), administrative penalties, and changes to provisions related to renewable energy credits (RECs) and Solar RECs (SRECs), including reporting requirements and credit ownership. Lastly, this category includes legislation requiring study of the RPS, whether this is intended to be an evaluation of extending eligibility to a resource or, as in the case of Ohio’s SB 58, is a requirement to study the effects of and potential modifications to the policy itself.

It is important to note that ‘companion bills’, identical legislation introduced in both chambers, were grouped together as one distinct proposal. Our criteria for which companion bill to track was based on the version that made it the furthest and the version with the greatest number of co-sponsors. In cases where companion bills were equivalent in these areas, the House/Assembly version was selected.

KEY FINDINGS

Proposed legislation, grouped by category, is presented in Figure 2, below. Figure 3, following page, provides a visual representation of the outcome of our classification of the 121 unique pieces of legislation proposed in the 2013 session, by state. Legislation grouped by state is provided in Appendix B. All 121 bills, with summaries and links, and grouped by category, are provided in Appendix C at the end of this paper.

RPS ROLLBACK BILLS

Of the proposals that sought to rollback renewable standards, about a third (10 bills) were the types of proposals of the most concern at the start of the 2013 session. Namely, this group includes legislation that extended deadlines, reduced targets or that repealed the standard altogether. While many of these received a great deal of attention, most stalled in committee, though sessions have yet to end in Ohio and North Carolina. Another third of the proposals in this category (9 bills) sought to add large hydroelectric generation or expansions of existing facilities. Maryland’s SB 974 was the only bill in this larger category to attempt a repeal of a carve-out, in this case for solar. Lastly, six proposals sought to expand eligibility to non-renewable fuels. For example, Hawaii’s HB 1107 would have changed the state’s RPS to a Clean Energy Standard (CES), while Wisconsin’s AB 34 would extend eligibility to certain nuclear generation.

RPS INCREASE BILLS

Bills aimed at increasing or strengthening standards only just outnumbered rollbacks (29 bills to 26). Subcategorizing these bills, we found that the majority (18 bills) addressed targets directly. Within this group, two proposals, in Georgia (HB 503) and Kentucky (HB 170), would create new standards; Georgia’s would be a voluntary goal. New Jersey’s AB 3161 would create a new renewable fuel standard for home heating oil. Other proposals set expanded targets, for instance, AB 177 in California sets a 51% goal by 2030 and Oklahoma’s SB 555 would increase the state’s voluntary goal to 20% by 2020. The remaining 11 bills in this category addressed distributed generation carve-outs specifically by expanding or setting new requirements, as in Minnesota’s HF 773.

RPS MODIFICATION BILLS

A total of 66 bills aimed to modify RPS policies. See Figure 4 for a breakdown of legislation by subcategory. Of these, the majority provided eligibility or extended eligibility sunset dates for thermal energy, small hydroelectric generation, and other resources, including waste-to-energy facilities. New Jersey’s SB 293 would add fusion to the list of eligible resources. Bills in Virginia and Texas created requirements for locally generated resources. Another large group of proposals would have modified a variety of regulations regarding RECs and SRECs. Many of these bills provided for cost recovery (IL SB 103), reporting requirements (MT SB 52), or sale and ownership of credits (NV SB 326).

The compliance subcategory is the second largest, with 14 bills that address a range of compliance-related topics including deadlines, carryover provisions, definitional changes, ACPs, and civil and administrative penalties. For instance, Connecticut’s HB 6532 covers a range of provisions, including civil penalties related to RECs while also addressing ACPs, power purchase contracts, and transparency in the REC market. In comparison, Washington’s SB 5432 only amends language related to the definition of load. Three cost cap bills were introduced: New Mexico’s HB 266 expands the cap to all consumers; Illinois’ HB 103 addresses several provisions including cost caps related to the state’s Clean Coal Standard; and Washington introduced a cost cap bill that we discuss in detail below.

As the above discussion reflects, RPS policy was on the minds of state legislators in the 2013 session. Despite the concerns that emerged early in the year, enacted legislation does not reflect a successful attempt to repeal RPSs (see Figure 5 below), we discuss enacted proposals in the next section.

1 - ALEC Electricity Freedom Act. http://www.alec.org/model-legislation/electricity-freedom-act/. 2 - As of June 19th, 37 state sessions have closed, five states are still coming to a close this summer, California’s session runs to September; seven states have year-round sessions. 3 - Note: Ohio, West Virginia, Pennsylvania, and Michigan have less stringent Clean Energy Standards (CES) that allow non-renewable sources. See: C2ES. 2013. Clean Energy Standards: State and Federal Policy Options and Implications. http://www.c2es.org/docUploads/Clean-Energy-Standards-State-and-Federal-Policy-Options-and-Implications.pdf.