June 1, 2012
Republicans in Congress complain that President Obama is trying to ban coal -- the nation’s most prevalent source of electricity -- through a flurry of rules issued by the Environmental Protection Agency. Nick Akins, the new CEO of American Electric Power, one of the country’s biggest coal utilities, paints a more complicated picture. Edited excerpts of his interview with National Journal follow.
NJ Congressional Republicans say that EPA is waging a war on America’s energy resources—specifically,
coal. The agency says it is just following the market as it moves to natural gas. What’s your take?
AKINS The actual issue is the timing. If EPA was not so aggressive on shutting down coal-fired generation, that would be one thing. You’d be demonstrating it’s a market condition. By truncating 20 to 25 percent of the coal-fired fleet in this country by the end of 2014—perhaps by the end of 2015, if you get the year extension—it just says you’re going to be shutting down generation. And, oh, by the way, we just passed greenhouse-gas rules that really impair the next generation of coal-fired [power]. So, in effect, you’re shutting coal down.
NJ What is the primary cause for coal’s relative decline?
AKINS EPA, with its aggressive treatment of coal-fired generation, has shown you’re really in a struggle to get a new coal mine permitted, to get a new coal-fired capacity-generator permitted. The other issue is market conditions themselves. As coal prices increase, certainly the advent of shale gas, fracking, and directional drilling brings in the notion that natural gas is competing on marginal cost basis with coal. If you’re making capital decisions on new investment in generation, it’s going to be natural gas.
NJ Talk about the dynamic—some people describe it as a war—between natural gas and coal.
AKINS I’m disappointed in it. To have one fuel supply competing with another fuel supply, particularly when you look at the demands in this country and the future, the pie keeps getting bigger, and we actually need everything.
NJ How important is “clean-coal” technology to the future of coal power?
AKINS It’s extremely important, because if you’re trying to scope out a new plant, you really have to consider the greenhouse-gas emissions. To keep coal as part of the portfolio of the future during the time we’re using natural gas as an intermediate fuel, there ought to be continued progress associated with the development of the uses of carbon capture and storage.
NJ Is federal funding necessary?
AKINS It’s absolutely necessary. Private and public funding need to come together to make sure science is advanced at the commercial scale.
NJ Should the government provide money for renewable energy?
AKINS I think the government should incentivize everything that balances an energy portfolio of the future. Don’t disincentivize anything else.
NJ AEP supported the cap-and-trade legislation that the House passed in 2009. That bill would have replaced the rules on carbon emissions that EPA is promulgating now. Do you still prefer a market-based, cap-and-trade approach to reducing greenhouse-gas emissions?
AKINS I think one of the main issues why we supported [the 2009 bill] was that the economy was in very good shape at that point. It also provided allowances for customers, to make sure we were able to make that transition. The third thing is, it was really focused on development of [clean-coal technology] funding. If you had those basic tenets in place, we probably would continue to support it.
NJ Do you think the Earth is warming and that human activity is a primary cause?
AKINS When you’re planning investment for a plant that’s going to last for 40, 50, or 60 years, you have to think about what issues you’re dealing with today before you can get approval to build. Regardless of whether we believe in climate change or not, I think, clearly, AEP has shown we’re very focused and have been focused on the issues associated with carbon. And we’ll continue to move to decarbonize the fleet.
NJ As governor of Massachusetts, Mitt Romney hired Gina McCarthy, who is now chiefly responsible for the EPA air-pollution rules that your company is grappling with. Does that concern you?
AKINS Governor Romney also stood in front of a coal plant to shut it down. Let’s hope, with the passage of time, that people have learned. In the last election, President Obama started saying we could do it all with renewables. And Senator [John] McCain said all nuclear. By end of the election, they were gravitating around more reasonable, available options. I’m hoping that Governor Romney clearly does want to have an all-of-the-above strategy.
June 1, 2012