The shifting economics of coal-fired generation

December 11, 2013 | By Barbara Vergetis Lundin

Just months after the U.S. Environmental Protection Agency (EPA) announced carbon emission standards for new power plants and proposed standards for existing power plants are expected next year, updated research is showing a shift in the economics of coal-fired generation. Market factors are making an increasing number of the nation's coal-fired power plants less viable, economically, especially in Michigan, Alabama, Georgia, Indiana and Texas, according to researchers at the Union of Concerned Scientists (UCS).

Xcel coal-fired Energy Bay Front Power Plant in Wisconsin. Credit: Seth Tisue/Wikimedia Commons

"Coal-fired generation is getting increasingly expensive compared with cleaner power sources," said Jeff Deyette, assistant director of energy research at UCS and co-author of the study. "This shift in economics is a historic opportunity to modernize our electric sector and gain the economic, health and climate benefits that come with it."

In addition to the 18 GW of coal units that were retired between 2011 and 2013 and the 28 GW that have been announced for retirement by 2025, another 59 GW, or about 329 generators, are no longer economically competitive and should be considered for closure, the report says. Once the costs of installing modern pollution controls are included, these generators produce electricity that is more expensive than that of an average existing natural gas plant.

Many of the nation's natural gas plants are running well below maximum capacity and could be ramped up to replace the electricity from these coal-fired generators, the report contends. Projected investments in energy efficiency and renewable energy driven by strong state policies could also more than replace the uneconomic coal generation in most regions of the country, according to the report, while only requiring a modest increase in generation from existing natural gas plants in a few regions.

According to the report, Southern Company holds the top spot for utilities with the most coal-fired capacity deemed ready for retirement followed by Tennessee Valley Authority, Duke Energy, DTE Energy, and CMS Energy. Texas is first in the nation for the most retirement-ready coal generation capacity when comparing coal-fired electricity costs with that of new wind power projects supported by federal tax incentives. Texas led the nation with 12.2 GW of installed wind capacity at the end of 2012 and has a significant untapped potential of low cost wind resources still available. Michigan, Alabama, Georgia, Oklahoma and Indiana are next in the rankings.

The declining economics of many coal generators is being noticed by utilities nationwide, with coal-fired electricity falling from nearly half of U.S. generation in 2008 to 37 percent in 2012. The competitiveness of natural gas and renewable energy combined with greater energy efficiency efforts will continue that trend, with the U.S. Energy Information Administration's latest projections showing that few new coal plants will be built through 2040.

Realizing the benefits of a shift away from coal toward renewable energy and energy efficiency --including reducing costs, improving public health, and reducing emissions that drive climate change --will depend on state and federal policies such as a national power plant carbon standard, strong renewable electricity and efficiency standards, tax credits, and improved planning and development of the power grid.

"Utilities, investors, grid operators, and regulators should seriously assess whether cleaner alternatives can more affordably meet customers' energy needs instead of burdening ratepayers with hundreds of millions of dollars of capital investments to extend the life of uneconomic coal plants," the research concludes. "Thoughtful planning about how to retire coal plants can help maximize economic returns, human health, and environmental benefits of a cleaner energy future, while maintaining reliable and affordable power for American families and businesses."

For more:
- see this report

http://www.fierceenergy.com/story/shifting-economics-coal-fired-generation/2013-12-11