How will utility planning be affected by this week's executive order on climate and energy? During today's OnPoint, Andrew Boatright, chairman of the board of the American Public Power Association, explains how the changing politics surrounding climate action are affecting the public power sector.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Andrew Boatright, board chair of the American Public Power Association. Andrew, thanks for joining me.
Andrew Boatright: My pleasure.
Monica Trauzzi: Andrew, this week President Trump unveiled a new executive order that rolls back many of the moves the Obama administration made to tackle climate change. A key focus of the EO is the Clean Power Plan. EPA will now work to pull back the CPP and replace it with something else. What's the state of play for your member groups in the context of the EO and the changing politics surrounding climate change?
Andrew Boatright: Well, we need to learn more details I think surrounding the executive order, but as you may be aware our trade organization, American Public Power Association, is in support of rolling back those regulations. The Clean Power Plan as it stands was really harmful to our membership, who are owners of generation and having to deal with scaling back accordingly with all of the regulations that have been taking place over the last several years.
Monica Trauzzi: Do you think that there should be some kind of regulatory action on climate change?
Andrew Boatright: Well, you know, I think the industry really is doing a good job already and responding to markets — that's — generation is by and large moving away from coal. No new coal plants are in the mill for construction and we're switching to natural gas. Renewables are playing a huge role in the markets today. In our situation in Independence, Missouri, where I'm from, wind is playing a huge role, and we're seeing a big transition of natural gas, fast-responding natural gas plants.
Monica Trauzzi: But are those transitions happening quickly enough and across the country?
Andrew Boatright: Well, it's going to take time. It takes a long time to build a power plant, certainly a coal plant, but you know, gas-fired plants are more nimble and they're easier to construct. They take less time. And we're seeing that there are a number of plants already in the mill being permitted for construction and so on, so I think that's a trend that we're going to see for the foreseeable future.
Monica Trauzzi: How do utilities prepare for regulatory change when there's uncertainty surrounding what that is actually going to look like?
Andrew Boatright: Well, I think that's a great question, and we I think are going to have to respond as we have been, with what's happening with markets. Markets are driven by cheap natural gas, and largely renewables have come into the fold in a big way. So we've got to maybe shorten our planning horizon. It used to be 10 or plus years; now we're looking at maybe five years in terms of getting assets in our portfolios that work in markets like this.
Monica Trauzzi: So cheap natural gas, renewables — those are the key drivers. Does that mean that what the president is saying about coal and bringing coal jobs back to the U.S. — does that make all of that sort of untrue?
Andrew Boatright: Well, I'm not going to opine on that. I think there are opportunities for clean coal, and I believe the executive order would enable that to happen. Those things are going to take time. Those are expensive technologies. There's a lot of research that needs to be done in that regard. So I really think natural gas is going to be the driver for our industry for the foreseeable future.
Monica Trauzzi: What do you project coal's role will be in the electric power sector?
Andrew Boatright: Well, I think because of the rollback we're going to see that maybe some planning horizons change for some utilities who expected that regulations would force a shutdown in the near term. So there may be some deferral of shutdowns or phasing out of coal. But you know, the train's kind of left the station. Many plants are already being scheduled to be shut down and have been shut down, and frankly coal is not in the money, as I've been alluding to here.
Monica Trauzzi: This week's EO also calls for the social cost of carbon to be revisited. Do you believe that the social cost of carbon should be considered in regulatory actions?
Andrew Boatright: You know, I'm going to leave that up to the experts. I believe there is a — we need to of course be good stewards to our environment, so I'm going to let the association weigh in on that one.
Monica Trauzzi: Obviously infrastructure development is a key promise of this administration, and you believe that President Trump will move to cap or eliminate tax exemptions for municipal bonds. Those are bonds that public power uses for infrastructure development. So what's the pitch to the administration on municipal bonds?
Andrew Boatright: Well, we do expect that tax reform legislation will be occurring, and to that end we're already working with our legislative contingent to share the good word about, you know, municipal tax exempt financing. I mean, we use this to the tune of $10 billion per year for infrastructure improvements in the municipal and state government. And a high percentage of that amount is used for power infrastructure. So you know, if we have to go to a situation where we're limiting interest or rolling that back, it's going to cost the industry a tremendous amount more money. It's going to reflect in the pocketbooks of our consumers. So we are trying to send the message that, hey, look, back home these things are important. If you want to expand infrastructure in this country, you need to keep that valuable tool in place.
Monica Trauzzi: OK, a lot to watch. We'll end it there. Thank you for coming on the show.
Andrew Boatright: All right, thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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