UCS says 18% of domestic coal fleet ripe for retirement

The Union of Concerned Scientists says in a just-released report that 18% of the nation’s coal-fired power capacity should be considered for retirement for economic reasons.

The UCS report concludes 59 GW of coal-fired electricity that’s now operational could be ready for retirement – that’s in addition to the 41 GW coal-fired retirements announced in recent years.

According to the UCS analysis, the power produced from these generating units will be more expensive than electricity from lower-cost natural gas and, in some cases, wind power.

The peer-reviewed study, based on publicly available data on the U.S. coal fleet, used an economic test to evaluate whether every coal generator could compete – after being upgraded with modern pollution controls – with available cleaner, lower-cost energy resources.

The report, “Ripe for Retirement: The Case for Closing America’s Costliest Coal Plants,” found that as many as 353 coal generators, located in 31 states, may no longer be economically viable after they investing in new pollution controls.

“Our analysis shows that switching to cleaner energy sources and investing in energy efficiency often makes more economic sense than spending billions to extend the life of obsolete coal plants,” said Steve Frenkel, report co-author and director of UCS’s Midwest office.

“Regulators should require utility companies to carefully consider whether ratepayers would be better off by retiring old coal plants and boosting electricity generation from natural gas and renewable energy sources like wind. Spending billions to upgrade old coal plants may simply be throwing good money after bad,” according to the UCS report.

The report says generators can elect to “double down” on coal retrofits at their own economic peril.

For example, Northeast Utilities (NYSE: NU) subsidiary Public Service Co. of New Hampshire (PSNH) invested $422m in installing environmental controls at the Merrimack coal plant a few years ago. “In February 2012, PSNH announced that it expected to idle Merrimack Station for months at a time over the course of the year because it costs the utility substantially more to run the plant than to buy electricity from cleaner-burning natural gas power plants elsewhere in New England,” UCS reported.

Southern has most borderline coal plants

Southern (NYSE: SO) has the most retirement rip coal plants with 15,648 MW, according to the report. Tennessee Valley Authority (TVA) was No. 2 at 5,385 MW.

Others in the top 10 included Duke Energy (NYSE: DUK), American Electric Power (NYSE: AEP), FirstEnergy (NYSE: FE), Public Service Enterprise Group (NYSE: PSEG), Progress Energy, Wisconsin Energy (NYSE: WEC), SCANA (NYSE: SCG) and GenOn Energy (NYSE: GEN).

At the same time, many of these same companies have been actively announcing plans to deactivate or outright retire much coal generation, UCS said. Duke merged with Progress Energy in July; GenOn is in the process of merging with NRG Energy (NYSE: NRG).

During a Nov. 13 conference call with reporters, UCS authors said that the domestic electric grid can keep the lights on with this level of coal retirements. However, some degree of additional investment in electric transmission and natural gas pipelines will be required over time.

USC officials point to the fact that coal’s share of the domestic generating fleet has dropped from 50% to only 37% in the past few years. They also not that much of the natural’s natural gas power fleet is under-utilized.

U.S. gas plants only operated at 39% design capacity in 2010, the report authors said.

In the study, UCS officials looked at age, size, capacity factor and other issues in determining how economic it would be to retrofit them for extended use. The UCS officials said they used a base price of $4.88 mmBtu for natural gas.

Report author Rachel Cleetus, a senior UCS economist, says that the report does not call for an “outright rush to natural gas.” There would be an economic risk from becoming too dependent on natural gas power generation. There are environmental concerns over fracking and other forms of enhanced shale production, Cleetus added.

UCS prediction at upper end of coal retirement projections

Projections of coal plant retirements, due to environmental standards and cheap gas prices, have been something of a cottage industry in the energy sector in recent times.

The UCS suggestion that 59 GW could be retired, on top of the 41 GW already announced, would put this report at the high end of the spectrum said ScottMadden Consulting’s Stu Pearman.

“Ninety to 100-GW is the top end of the range of the estimates I have seen.  Most cluster in the 40-70 band,” Pearman said.

Retirements have been announced in 34 states, with the vast majority in the eastern half of the country. Some of the units have already shut down, while the rest are scheduled to be retired over the next several years. Other retirements may be added to the growing list in the coming months, as the pace of announcements has quickened since the beginning of 2011, UCS said.

“We did not consider new nuclear or coal with carbon capture and storage (CCS) plants as near-term alternatives because of their long construction lead times, high costs, and limited number of proposed projects,” according to the UCS report. “We also did not consider new solar, biomass, or geothermal projects, which are currently more expensive than wind power, but could, make modest near-term contributions in some parts of the country.”

Eighty-seven percent of already retiring generators began operating before 1970. Their average age is 50 years, compared with 38 years for the U.S. coal fleet as a whole, UCS said.

Eighty-eight percent of retiring generators lack at least three of the four air pollutant control technologies evaluated in our analysis, while 56 percent lack all four.

The analysis found that 19 states are each home to more than one GW of coal generating capacity whose power costs exceed those of existing natural gas combined cycle (NGCC) plants and are thus ripe for retirement. Four of the top five states are in the Southeast—Georgia, Alabama, Tennessee, and Florida (in order of capacity that is ripe for retirement)—with 79 generating units totaling more than 21.6 GW.

The analysis said that although Michigan ranks fifth in capacity, it has the greatest number of coal generators ripe for retirement: 39 mostly smaller units averaging 94 MW each. Elsewhere in the Midwest, Wisconsin, Indiana, and Ohio are also among the top states, with 7.1 GW of coal capacity spread over 50 generators that are uneconomic when compared with existing natural gas plants.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.