Coal power plants retiring in 2015

The U.S. portfolio of electric power plants will continue to shift in 2015, according to a federal assessment projecting that nearly 16 gigawatts (GW) of generating capacity will retire in 2015.  Most of the capacity to be retired this year is coal-fired generation.  This continues a multi-year trend away from coal, and toward natural gas and renewable resources.

According to the U.S. Energy Information Administration, nearly 16 GW of generating capacity is expected to retire in 2015.  Of this, 81% (12.9 GW) is coal-fired generation.  Generator retirements are heavily composed of coal-fired generation, split between bituminous coal (10.2 GW) and subbituminous coal (2.8 GW).  Most of this retiring coal capacity is found in the Appalachian region, with slightly more than 8 GW combined in Ohio, West Virginia, Kentucky, Virginia, and Indiana.

New environmental regulations and struggles to remain cost-competitive explain most of these retirements.  This year, the Environmental Protection Agency's Mercury and Air Toxics Standards (MATS) take effect.  MATS requires existing large coal- and oil-fired electric generators to meet stricter emissions standards by retrofitting the units with new emissions control technologies.  While some units have been granted extensions to operate through April 2016, some power plant operators are choosing to retire units instead of making cost-prohibitive investments in pollution control.

Most of the coal-fired units slated for retirement are smaller and operate at a lower capacity factor than average coal-fired units in the United States.  According to EIA, the to-be-retired units have an average summer nameplate capacity of 158 MW, just 60% as big as the 261 MW average for other coal-fired units.  In 2014, the average capacity factor for all coal units was 61%, but the subset of coal units retiring in 2015 had an average capacity factor of just 36%.  The relatively small size and low capacity factor of these power plants make it harder for them to compete economically against other generation sources.  This competition is especially difficult if sufficient natural gas-fired generating capacity is available, as the cost of natural gas has fallen to levels not seen since 2012.

The coal capacity retiring in 2015 accounted for 1.6% of total U.S. generation during 2014.  At the same time, electric generating companies expect to add more than 20 GW of utility-scale generating capacity to the power grid.  This new capacity is dominated by wind (9.8 GW), natural gas (6.3 GW), and solar (2.2 GW), which together compose 91% of expected new capacity in 2015.

FERC 2014 State of the Markets report

U.S. energy markets overseen by the Federal Energy Regulatory Commission in 2014 were impacted by extreme weather and changes in the mix of electric generation resources, according to a report by Commission staff.

The 2014 State of the Markets report issued on March 19 by FERC's Office of Enforcement’s Division of Energy Market Oversight presents Commission's staff’s assessment of recent developments in natural gas, electric, and other energy markets.

Extreme cold temperatures in the first quarter of 2014 affected natural gas infrastructure and power markets across the country.  The price of natural gas in the U.S. reached record high levels, driving corresponding spikes in the price of electricity.  For example, the price of natural gas at the Transco Zone 6 Non-NY pricing point hit $123/MMBtu in January -- about 33 times higher than the average 2013 U.S. price.  Largely due to these price spikes, the spot natural gas price at the Henry Hub pricing point averaged $4.32/MMBtu in 2014, a 16% increase over 2013.

Meanwhile, natural gas and renewable resources continued to displace coal as a fuel for electric power generation.  Total U.S. generating capacity increased 10.8 GW in 2014, with natural gas and renewable projects representing the bulk of new capacity.  At the same time, utilities retired coal-fired power plants, continuing a trend that started in 2012.  Commission staff projects continued coal retirements in 2015, particularly after the April effective date of additional air emissions regulations imposed by the Environmental Protection Agency's Mercury and Air Toxics Standards.

FERC's 2014 State of the Markets report also provides a quick look at 2015 year-to-date market performance.  Wholesale electricity prices rose again this winter, although not as sharply as in the first quarter of 2014.  FERC staff's report suggests factors helping to moderate winter prices included better cold-weather preparation of assets, programs like ISO New England's Winter Reliability Program, better coordination between operators of electric transmission and natural gas pipelines, record high levels of natural gas production, the development of new pipeline infrastructure, and low oil prices.

FERC testifies on EPA carbon regulations and electric reliability

The U.S. Environmental Protection Agency's proposed Clean Power Plan rule is projected to limit carbon dioxide emissions from power plants, improve human health and save money -- but will it jeopardize the reliability of the nation's electricity grid?

Poorly implemented carbon regulations could increase the risk of widespread power outages, but this risk can be managed, according to testimony offered by the Commissioners of the Federal Energy Regulatory Commission to the House Energy & Commerce Subcommittee on Energy & Power earlier this week.

In her written testimony, Acting Chairman Cheryl LaFleur acknowledged concerns that EPA's carbon rule may have an "adverse impact on the overall reliability of the bulk power system."  Noting that EPA's plan leaves much of the implementation to individual states, she suggested that the FERC work closely with states to consider how state implementation plans will affect the operation of the grid. 

Commissioner Philip Moeller's testimony was more critical of EPA's proposed rule, which he described as infringing upon the FERC's jurisdiction over electric system reliability.  Noting that electricity markets are interstate in nature, Commissioner Moeller warned that "the proposal’s state-by-state approach results in an enforcement regime that would be awkward at best, and potentially very inefficient and expensive."  He also expressed skepticism at the plan's inclusion of increased use of existing natural gas-fired generation as one "building block" states may use to reduce their power sector's carbon intensity.  Commissioner Moeller also pointed to EPA's Mercury and Air Toxics Standards (MATS) rule as giving him reliability concerns.  On the positive side, he urged state regulators to speed adoption of real-time pricing at the retail level, so consumers can feel price signals that could reduce the overall cost of energy.  Commissioner Moeller concluded with a plea that FERC be given a formal role in EPA's regulation of the electric power sector.

Commissioner John Norris testified that EPA's proposed rule is "an important first step that addresses climate change by appropriately seeking to reduce carbon emitted by our nation’s electric power system."  While he acknowledges that transitioning to a low-carbon economy is challenging, he expressed confidence that "we as a nation should be well positioned to meet those challenges."  Commissioner Norris cited the MATS standards as an example of our readiness: while EPA's MATS rule led to the retirement of many older, inefficient coal-fired power plants, the grid has generally responded in a way that will maintain reliability.  Commissioner Norris urged cooperation with electric reliability organization North American Electric Reliability Corporation (NERC) and states, and to be flexible in making market rule changes to enable states, regional transmission organizations and other system planners to meet resource adequacy requirements.

Commissioner Tony Clark testified that while the grid is more reliable than before, it remains vulnerable to cyberattack, physical security threats, and geomagnetic disturbances.  He also described environmental regulations as another source of risk, and warned of the "seismic" shift in EPA authority over the energy sector embodied in the rule.  Commissioner Clark described the Clean Power Plan as the most comprehensive reordering he has seen of the jurisdictional relationship between the federal government and states as it relates to the regulation of public utilities and energy development.  He painted a picture of states forced to choose between surrendering their authority over power plants willingly or losing it to federal supremacy.

Current FERC enforcement director Norman Bay also testified, noting that he was confirmed by the Senate as a Commissioner on July 15, but that he has not yet been sworn in.  His brief testimony focused on the need for cooperation between FERC, EPA, NERC, states, and regional transmission organizations to ensure reliability.

What happens next remains to be seen.  As expressed in the opening statements of Energy and Power Subcommittee Chairman Ed Whitfield and Energy and Commerce Committee Chairman Fred Upton, many remain concerned about what they perceive as an effort by EPA to assert control and new regulatory authorities over states’ electricity decision-making.  Will EPA's Clean Power Plan ultimately come into effect -- and if so, what path will it take?

U.S. natural gas to pass coal as electricity fuel in 2035

Coal will continue to fuel the largest share of electricity generated in the U.S. until 2035, when natural gas will surpass it, according to a recent federal report.

The U.S. Energy Information Administration's 2014 Annual Energy Outlook presents a long-term forecast of energy supply, demand, and prices from the present through 2040.  Its scope includes predictions about shifts in the portfolio of types of electricity generating resources used to produce power.  The largest such trend projected in EIA's 2014 report is that the market share of coal and nuclear generators will likely decline over the next two decades, as natural gas-fired and renewable electricity sources grow in prominence.

Historically, coal has fueled the largest share of electricity generated in the U.S.  Typically operating as baseload generation, coal has traditionally been a relatively low-cost fuel for electric production.  Coal's share of the electricity mix peaked in 2007, at 49% of all electric power generated.  Since then, coal's share has declined; in 2012, coal-fired generators produced 39% of all electricity generated by utilities -- still the largest piece of the generation portfolio, despite a significant decline.

Coal's role in the nation's energy mix is under challenge from multiple fronts.  Economically, the increased availability of lower-cost natural gas has made coal less competitive.  Meanwhile, tighter environmental regulations -- such as the U.S. Environmental Protection Agency's Mercury and Air Toxics Standards, or MATS rules -- have placed additional pressure on coal plant operators to either invest in upgraded environmental controls or shut down.

At the end of 2012, 310 gigawatts of coal-fired generating capacity was available to run in the U.S.  Of that, EIA projects that 50 gigawatts will be retired by 2020 under its base case model.

Under EIA's model, natural gas will grow its market share while coal declines.  EIA projects that 70% of all new capacity added before 2040 will be fueled by natural gas.  If EIA's assumptions hold, natural gas will surpass coal as a fuel for electricity generation in 2035.

While EIA's model rests on a series of assumptions, all of the alternative cases examined by EIA assume that coal-fired capacity will be retired, while natural gas-fired and renewable generation will grow.  What will the future hold for the U.S. energy mix?

Georgia Power to close many coal-fired plants

Following the current trend of coal-fired power plant closures, electric utility Georgia Power has announced plans to retire 15 coal- and oil-fired generating units by April 2016.

Georgia Power is a vertically-integrated investor-owned public utility serving most of Georgia.  A Southern Company subsidiary, Georgia Power currently has 18,623 MW of generating capacity.  While its portfolio includes nuclear, natural gas and hydro generation, the bulk of Georgia Power's capacity is fueled by coal, with 11,387 MW of coal-fueled generation at 10 plants across Georgia.

This week, Georgia Power announced that it will request approval from the Georgia Public Service Commission to decertify and retire 15 coal- and oil-fired generating units, with a total capacity of 2,061 MW.  The company plans to request decertification of most of the units by April 16, 2015, the effective date of the U.S. Environmental Protection Agency's (EPA) Mercury and Air Toxics (MATS) rule requiring more stringent air emissions controls for fossil fuel-fired plants.  The utility cited factors including the cost to comply with existing and future environmental regulations, recent and forecasted economic conditions, and lower natural gas prices, as contributing to the decision to close these units.

Georgia Power's announcement follows other similar utility decisions to close coal-fired power plants, including Progress Energy Carolinas and Dominion.

Environmental regulations and grid reliability

As newly approved air emissions regulations for electric utility plants begin to take effect, federal and state regulators are forming plans to maintain the reliability of the electric grid while complying with the new regulations.  Last month, the U.S. Environmental Protection Agency issued its final Mercury and Air Toxics Standards.  The MATS rules require many utility generation units to use "maximum achievable control technology".  For this reason, the rules are sometimes also known as "utility MACT".

Before the rules were finalized, the nation's electric reliability organization NERC expressed concerns that the new air emissions rules could increase the risk of power outages and stress on the grid by forcing the early retirement of a significant portion of the nation's coal-fired generating stations.  In a battle of words that played out over November and December 2011, EPA and the U.S. Department of Energy countered by pointing out flaws in NERC's analysis.  The federal agencies also noted that NERC seemed to assume that no one would plan for or manage grid reliability in the face of coal plant retirements.  Nevertheless, the mercury standards and other anticipated rules are likely to affect the electric power industry to some degree.

Now that the air standards are final, federal and state energy regulators are planning a series of meetings to explore reliability issues provoked by these new and pending environmental rules for the power sector.  Commissioners from the Federal Energy Regulatory Commission (FERC) and will meet with members of the National Association of Regulatory Utility Commissioners (NARUC), the national organization of state public utilities commissioners.

FERC and NARUC hope that the open forum will provoke a broad discussion of utility issues in the wake of the new environmental regulations.  The first meeting of the FERC-NARUC Forum on Reliability and the Environment will take place in Washington on February 7, 2012.