Bernstein Research said Sept. 10 that it expects U.S. coal fleet retirements will approach 60 GW by late 2015 as many electric utilities conclude that the cost of installing expensive emission controls can’t be easily recovered given today’s low power prices.
The good news for the coal sector is that this loss will be offset somewhat by new, modern coal units coming online over the same period resulting in a net loss of 47 GW of U.S. coal-fired capacity, Bernstein said. Bernstein Research is affiliated with Sanford C. Bernstein & Co. LLC.
In a special report issued by Bernstein researchers, who were led by Senior Analyst Hugh Wynne, the firm notes that 2015 is the final compliance deadline for both the Clean Air Interstate Rule (CAIR) and the Mercury and Air Toxics Standards (MATS).
Last month the U.S. Court of Appeals for the District of Columbia Circuit vacated the Obama administration’s Cross-State Air Pollution Rule (CSAPR). Although the federal courts had struck down CAIR a few years earlier, the D.C. Circuit has said CAIR regulation can remain in effect until the U.S. EPA comes up with a suitable replacement.
Bernstein’s 60 GW coal retirement figure is an estimate toward the higher end of many projections published by various organizations in the past couple of years. For example, Energy Central’s Fossil Fuel Tracker service is currently forecasting 40 GW of coal retirements during that period.
Coal retirements are already off to a fast start. Over the four years from 2009 through 2012 year-to-date, U.S. generators have already retired 12 GW of coal fired capacity, some four times the amount retired over the preceding four years ( roughly3 GW from 2005 through 2008), the Bernstein firm said.
Between 2000 and 2008 the highest level of yearly coal capacity retirement was only 1.4 GW in 2003, according to Bernstein.
When the focus turns to projected retirements, U.S. generators have announced planned retirements of an additional 30 GW through 2015, Bernstein said. Altogether the firm expects 58 GW of coal-fired capacity to be retired by the end of 2015. This conclusion is based upon a plant-by-plant assessment of the cost of the emission controls required to bring each unit into compliance with CAIR and MATS.
PJM among regions hard hit by retirements
Hardest hit by the coal plant retirements announced to date will be the PJM Regional Transmission Organization, where 49% of the capacity to be retired is located; the Southeastern Electric Reliability Council (SERC), where 23% of the capacity to be retired is located; and the Midwest ISO (MISO) where 17% of the capacity to be retired is located, the firm said.
“We expect this loss of coal-fired generation to be offset in part by the output of new coal-fired power plants scheduled to come on line by 2015. We estimate the increase in coal-fired capacity attributable to these new plants at 11 GW, limiting the net loss of coal-fired capacity in the United States to [roughly] 47 GW by 2015, or approximately 14% of the coal-fired fleet,” according to the Bernstein assessment.
But the coal retirements will be significant enough to reduce many regional reserve margins below what the North American Electric Reliability Corp. (NERC) would like to see.
“Our forecast of additional coal plant retirements in MISO, SERC and New England, summing to approximately 19 GW, is sufficiently large as to threaten to bring reserve margins in these regions below NERC’s target levels by 2015. We estimate that 10.3 GW of additional generation would be needed in these regions to meet NERC’s reserve margin targets: 7.0 GW in SERC, 1.9 GW in MISO and 1.4 GW in New England,” according to the Bernstein report.
Most of the coal unit retirements announced so far have been small (average156 MW capacity) and old (56 years), Bernstein reported. The firm estimates that 55 GW of coal-fired capacity will be upgraded with the requisite emission controls.