In Texas, Market Forces Driving Shift From Coal, Study Says

Texans are on pace to rely more heavily on natural gas, wind and solar energy to power their lives in the coming decades — and much less on coal. That’s regardless of how judges rule in battles over federal regulations meant to speed the shift toward cleaner-burning electricity sources, according to a study being released Tuesday.

Market forces alone could drive the trend, which would barely nudge electricity prices, said the Brattle Group analysis commissioned by the Texas Clean Energy Coalition, which supports natural gas and renewable energy sources.

But a pro-coal group that viewed a summary of the study said it may provide an overly simplistic view of the electricity market that discounts the value of an energy mix that includes coal.

The Brattle Group is a global research firm that often crunches numbers for regulators, like the Texas Public Utility Commission and the Electric Reliability Council of Texas (ERCOT) — the operator for the grid covering most of the state.

The firm’s study offers a glimpse of what Texas’ energy portfolio — and its carbon dioxide footprint — might be if natural gas prices stayed relatively low, as some expect, and solar energy technology keeps getting cheaper. 

That scenario could shutter 60 percent of coal generation on the ERCOT grid by 2020. And by 2035, natural gas, wind and solar power would combine for roughly 85 percent of generation — 65 percent coming from natural gas plants.

Coal-fired power would chip in just 6 percent of ERCOT generation by 2035, down from 28 percent in 2015. 

Aside from inflation, Texans would see “virtually no price increase” in the low-cost gas and solar scenario, Brattle said.

That power sector shift would slash carbon dioxide emissions by an average of 61 million tons per year, putting Texas well below its target under the Clean Power Plan, President Obama’s landmark effort to fight climate change by requiring states to shift from coal. 

Texas and West Virginia are leading a coalition of 27 states that are challenging that regulation in a high-profile legal battle, calling it unconstitutional and saying it would ratchet up electricity prices and threaten reliability on the grid. The U.S. Supreme Court has blocked the rules as that challenge winds through the courts.

Read MoreWith Clean Power Plan Ruling, Texas Dodges Climate Action

Brattle, however, called the Clean Power Plan and another U.S. Environmental Protection Agency regulation that Texas is challenging — the Regional Haze Rule — “largely irrelevant” in changing the face of the state’s power sector.

The haze rule — which requires industrial facilities to install new pollution-curbing technology to improve visibility in wilderness areas and national parks — would contribute to less than 15 percent of Texas coal plant retirements through 2022, according to the report.

Read MoreTexas Sues EPA Over Wilderness Haze Regulations

The Clean Energy Coalition suggested that the findings undercut the state’s arguments in its litigation — particularly its Clean Power Plan challenge.

“Texas should not be wasting millions of dollars fighting the Clean Power Plan in court because market forces already are driving the state closer to meeting the goals outlined by the federal government,” said Julie Hillrichs, a spokeswoman for the coalition.

Critics of the Clean Power Plan suggested that the study's results — taken at face value — could bolster their position that the regulations aren't needed. 

“I think we can learn some things from a study like this,” said Michael Nasi, general counsel for the group Balanced Energy For Texas, which includes several coal interests. “Please believe in the market because this study seems to tell you that you should not fear the market.”

Additionally, Nasi said that the study, while useful, may not paint a full picture of what's happening across the Texas grid. For instance, some coal plant operators may wish to operate facilities even after other fuels become cheaper — a way to recoup costs from major upgrades in recent years. 

What's more, the study did not factor in the potential costs of building power lines needed to deliver electricity from newly built sources. And Nasi suggested that it discounted the value of a "balanced" energy mix that could hedge against any future spikes in natural gas prices — in case Brattle's low price projections didn't pan out.

“Brattle does a lot of good work, but they can’t possibly put a value on fuel diversity in the marketplace," he said.  

Attorney General Ken Paxton and Gov. Greg Abbott have vowed to continue to fight the federal regulations in court. 

In response to a recent poll that showed most Texans supporting some form of state "clean energy plan" even if Texas defeats the Obama administration, Abbott, through a spokesman said, "Texas will not waste millions in taxpayer dollars attempting to comply with a federal statute that the Supreme Court has already found suspect and put on hold."

Read MoreSurvey: Texans Support a Statewide "Clean Energy" Plan

A spokesman for the governor's office declined to comment on the Brattle study. 

The Brattle analysis relied heavily on ERCOT forecasts of fuel prices, but the grid operator has reached different conclusions about the Clean Power Plan’s effect on its power market.

Last October, it predicted that the regulations would force Texas generators to retire about 25 percent of coal-fired power on the grid, threatening reliability and increasing power prices by as much as 16 percent by 2030. 

That analysis, however, focused little on potential gains in efficiency that could help keep prices low by curbing power demands. (The grid operator called efficiency a “potentially cost-effective” method for compliance, but added that “it remains uncertain what role it could play.”)

By 2035, the Brattle study said, efficiency programs would put energy demands roughly 8 percent below what ERCOT predicted.

Former Texas Sen. Kip Averitt, chairman of the clean energy coalition, said a number of legislative actions over the years had primed the state for a shift from coal. That included adopting one of the nation’s first Renewable Energy Portfolio standards, deregulating the nation’s electricity market and pouring billions of dollars into power lines that now bring wind and solar power from secluded West Texas to urban populations elsewhere in the state.

“We hope this new information will help state leaders further understand the forces at work in the Texas electric marketplace and prevent distortions that might interfere with our transition to a cleaner, cost-effective electric grid,” Averitt, a Waco Republican, said in a statement.