Pa. coal plants keep closing. Does the state need carbon trading?

By Miranda Willson | 06/09/2023 07:11 AM EDT

Pennsylvania has become a flashpoint for coal as economics batter existing power plants and the state mulls whether to join the Regional Greenhouse Gas Initiative.

Smoke rises from stacks and generators at a power plant.

The Homer City Generating Station in Pennsylvania is pictured in 2014. Keith Srakocic/AP Photo

This story was updated at 10:10 a.m. EDT.

Pennsylvania isn’t part of a big, regional program to slash carbon emissions, but coal plants are closing anyway — fueling a debate about the energy state’s future.

The largest remaining coal-fired power plant in the Keystone State — the Homer City Generating Station — is scheduled to shut down by July 1. Pennsylvania’s four other major coal plants are expected to close or stop burning coal by the end of 2028, primarily because of market forces and EPA regulations.


The closures reflect the economic and regulatory headwinds facing coal nationwide, which has struggled to compete against cheap natural gas and renewable energy. The trend is also highlighting longstanding questions over whether Pennsylvania, the third-largest coal producer in the U.S., should join the Regional Greenhouse Gas Initiative, a carbon trading program that currently includes 11 Eastern states.

Joining RGGI would generate hundreds of millions of dollars in annual revenue through the initiative’s use of carbon allowances. The money could be targeted toward communities affected by coal plant closures, according to environmental groups and some energy scholars. The carbon trading program could also influence what comes next for Pennsylvania’s energy mix — whether the state invests in solar, wind and batteries or doubles down on natural gas, observers said.

“This train of decarbonization of the coal sector is happening,” said Angela Pachon, research director of the Kleinman Center for Energy Policy at the University of Pennsylvania and co-author of a recent report on the program. “It’s better that the state gets those revenues instead of these plants continuing to close and communities not [getting] the support they may require to have this transition.”

RGGI is a cap-and-trade program that aims to reduce greenhouse gas emissions from the electric power sector. In RGGI states, the owners of large power plants must purchase allowances during quarterly auctions for every ton of carbon dioxide they emit, and auction proceeds are reinvested in state-level energy and climate programs.

The possibility of Pennsylvania joining the initiative has attracted fierce resistance from the state’s coal industry and its allies in the Pennsylvania General Assembly. They say it will negatively impact electric reliability and raise energy costs.

Three years after then-Gov. Tom Wolf (D) sought to enter Pennsylvania into the initiative through an executive order, the state remains unable to join due to pending litigation. Shapiro, who assumed office in January, has been noncommittal on the issue, creating more uncertainty about when — if ever — Pennsylvania would become the first major fossil-fuel-producing state to join the program.

The cost of RGGI allowances could significantly raise operating costs for facilities that burn coal, the most carbon-polluting fossil fuel, according to backers of the coal industry in Pennsylvania. The number of allowances available in auctions declines gradually over time, and allowance prices have been on an upward trajectory for more than a decade.

At least two of Pennsylvania’s major coal plants — the Keystone Generating Station and the Conemaugh Generating Station — would likely “not run anymore” if Pennsylvania joined RGGI, said Rachel Gleason, executive director of the Pennsylvania Coal Alliance.

“They’re not going to be able to afford their RGGI tax,” Gleason said of various coal power plant owners.

Still, an analysis issued this week by Synapse Energy Economics Inc. found that electric bill impacts from RGGI would be limited, in part because Pennsylvania participates in a broader, multistate power market.

Commissioned by the environmental advocacy groups Evergreen Collaborative and Ceres, the report found that revenue raised through the program would more than offset any bill increase and result in net annual savings of $24 per year for the average household.

As for Keystone and Conemaugh, both plants are already scheduled to close by the end of 2028 in order to comply with an EPA wastewater discharge rule for coal facilities. Two other major coal plants in the state — the Montour power plant and the Brunner Island Steam Electric Station — will cease burning coal and only burn natural gas by 2025 and 2028, respectively.

Located in western Pennsylvania’s Indiana County, Homer City’s imminent closure is noteworthy given that state lawmakers representing the area have been some of RGGI’s fiercest critics, said Tom Schuster, director of the Sierra Club’s Pennsylvania chapter.

In a statement announcing the closure earlier this year, Homer City Generation LP said the decision was driven by the rising cost of coal supplies, unseasonably warm winters and more stringent environmental regulations, as well as “ongoing uncertainty” over RGGI.

It’s possible that with the 54-year-old plant’s upcoming closure, the “politics” around the greenhouse gas initiative may start to shift, Schuster said.

“Here we have Homer City shutting down anyway, even though RGGI has not come into force,” Schuster said. “I’m hoping that because of this, the focus starts to shift away from, ‘How do we keep these old, obsolete plants working in perpetuity?’ to ‘What do we do when these plants are gone?’”

Lawsuits and ‘market chaos’

While joining RGGI might not significantly impact upcoming coal plant closures, it could signal to clean energy developers that the state is open for business, according to those who support the initiative. It could also affect how much natural-gas-fired generation is built in Pennsylvania in the coming years.

Pennsylvania currently produces more power than any other state in the region managed by PJM Interconnection LLC, a grid operator whose territory runs across 13 Eastern U.S. states and the District of Columbia. That’s due in part to the state’s large fleet of natural gas power plants, as well as coal and nuclear facilities.

But as of last year, Pennsylvania lagged behind some other major states in the region, such as Ohio and Virginia, when it comes to how much new renewable energy capacity was being proposed, according to PJM’s grid interconnection queue. The queue offers a glimpse of where potential new energy projects are being planned across the PJM region.

“What RGGI does is provide the state additional tools and incentives to ensure that, as the markets continue to select renewable energy and demand response, those are being located in the Commonwealth,” Patrick McDonnell, CEO of the environmental group PennFuture, said in an email.

Controversy about RGGI isn’t limited to Pennsylvania. On Wednesday, Virginia’s Air Pollution Control Board voted for a regulation to repeal the state’s membership in RGGI following Republican Gov. Glenn Youngkin’s criticism of the program.

The outcome of two pending court cases could prevent Pennsylvania from joining RGGI. Filed by opponents of the initiative, including Republican state senators, coal producers and power plant owners, the lawsuits characterize RGGI as an unlawful tax imposed by the state’s executive branch without approval from the Pennsylvania General Assembly.

The Pennsylvania Department of Environmental Protection under both Wolf and Shapiro have argued that the program is a fee — not a tax — on carbon emissions from power plants and therefore is within the purview of the executive branch.

Even so, the Commonwealth Court of Pennsylvania has blocked the state from joining the program while litigation remains pending. Meanwhile, the state Supreme Court heard arguments last month regarding that decision from the lower court.

During recent oral arguments, there were “more indications” that the Supreme Court justices viewed RGGI as a tax than a fee, ClearView Energy Partners LLC said in a research note last week.

“[We] think the courts could vacate the RGGI regulation,” Timothy Fox, a vice president at ClearView, said in an email.

It’s unclear when either the Commonwealth Court or the Supreme Court will rule on the lawsuits. But as long as the issue is being litigated, there is “not much to consider legislatively on any policy issues related to energy,” said state Sen. Majority Leader Joe Pittman (R), an opponent of RGGI whose district includes the Homer City power plant.

Although Pennsylvania has not joined the program, the very possibility of joining has created “market chaos” and affected energy investments in the Keystone State, according to Pittman.

“Long-term investments cannot be made with uncertainty, which means even once the debate on RGGI has concluded, there will be a great deal of work needed to repair the damage that has already been done,” he said in a statement.

RGGI’s impact on natural gas plants in Pennsylvania, meanwhile, may be less certain. All of the states that participate in the initiative still have gas as part of their electric resource mix. But as fewer CO2 allowances become available under RGGI, gas plants may be forced to shut down or capture their carbon emissions, observers said.

“In the long term, the bigger impact is going to be on gas plants and whether or not gas plants continue to be built in Pennsylvania,” said Schuster of the Sierra Club.

A ‘new export’

In the last 20 years, more than 60 coal-fired generating units in Pennsylvania have closed, according to the report from the Kleinman Center’s Pachon and Resources for the Future, a nonprofit think tank that focuses on environmental policy. A single power plant can have multiple units.

As a result of fossil fuel retirements, Pennsylvania’s power plant emissions have declined.

That trend could work to Pennsylvania’s advantage, at least for the next few years, if the state were to join RGGI, said William Shobe, a professor of public policy at the University of Virginia who helped design the program’s carbon allowance auctions.

Under RGGI, states develop their own allowance program based on their historical carbon dioxide emissions, climate goals and other factors. Each state’s program is then reviewed for approval by other participating states.   

But because so many coal plants have closed in Pennsylvania relatively quickly, remaining power plants in the state would be granted more than enough allowances for the next few years to cover their emissions, according to Shobe.

In fact, power plants in Pennsylvania would have extra allowances that they could sell, or “export,” bringing more revenue into the state, he said.

“They [would] have net revenue from allowances. It’s like a new export for the state,” Shobe said. “It’s not a huge export, but it does mean there’s a net gain there from the selling of allowances, just because they have lowered their emissions faster than people expected when the [RGGI] budget was set.”

Revenues raised through auctions could be used for various initiatives as determined by the Pennsylvania Department of Environmental Protection.

Shapiro’s proposed budget for the next fiscal year assumes that the state will join the initiative and that auction proceeds would bring in more than $663 million for a yearlong period beginning July 1.

Those proceeds would go toward greenhouse gas abatement measures, energy efficiency programs and clean energy projects, according to the budget, which is expected to go through various changes in the coming weeks. It will require approval from the General Assembly.

Still, some observers questioned how much Shapiro may fight to bring the state into RGGI if one of the Pennsylvania courts ultimately strikes down the program. If the Commonwealth Court were to determine that RGGI is an unlawful tax, for example, the Shapiro administration could have the option of appealing to the state Supreme Court.

Manuel Bonder, a Shapiro spokesperson, said in a statement this week that the governor aims to develop “a comprehensive climate and energy policy that protects and creates energy jobs, takes real action to address climate change, protects consumers and ensures Pennsylvania has reliable, affordable, and clean power for the long term.”

To that end, the governor established a working group earlier this year with environmental advocates, business leaders and labor union representatives to discuss RGGI’s future.

The working group could help Shapiro assess alternative measures for addressing climate change that might be more popular than RGGI, said Christopher Borick, a professor of political science at Muhlenberg College and director of the college’s Institute of Public Opinion.

“Carbon pricing is often not very popular; I’ve done a lot of polling on this,” Borick said. “But investing in clean energy and energy efficiency is incredibly popular.”

With or without RGGI, meanwhile, small, waste coal-burning power plants in Pennsylvania may also be on their way out.

Home to more abandoned coal mine lands than anywhere else in the U.S., Pennsylvania currently has 10 small power plants that burn leftover coal waste.

The plants have a combined total electric capacity of 1,200 megawatts, according to Jaret Gibbons, executive director of the Appalachian Region Independent Power Producers Association. That’s smaller than the size of each of the remaining large coal plants in Pennsylvania that burn nonwaste coal.

RGGI would not significantly affect waste coal-burning facilities, which receive special energy credits in Pennsylvania to encourage the cleanup of mine lands, Gibbons said. But waste coal plants are still subject to federal environmental regulations, and their future is limited by the amount of coal refuse in the state, he said.

Five coal-waste-burning plants in Pennsylvania have shut down since 2013, according to Gibbons.

“The industry probably doesn’t have more than 20 years’ worth, give or take, of supply, so ideally, those in the industry and government will continue allowing these facilities to basically finish their mission, and we can have most, if not all, of these piles cleaned up,” he said.

As the current trend of coal plant closures continues, Pennsylvania is projected to gain new jobs in renewable energy, especially solar installations, and lose jobs at mines and coal power plants, said Pachon of the Kleinman Center. With the revenue generated through RGGI, however, the state could target new investments in clean energy toward historic energy communities, she said.

“How the government spends those revenues can guarantee we’re having a more just transition, because there will always be winners and losers,” Pachon said.

Reporter Sean Reilly contributed.