The report, written by ICF International, titled “Assessment of Coal-fired Capacity in the Eastern Interconnection,” examines various coal technologies in the context of demand for electricity, the diversity of resources, notably natural gas, and new environmental requirements. The report is intended to be a resource for future EISPC efforts. It includes a summary of ICF’s research exploring the incentives and disincentives faced by coal-fired generating resources. An accompanying white paper goes into further details on these issues.
ICF International submitted the report for consideration by EISPC and NARUC, supported with funding from the U.S. Department of Energy. EISPC consists of the State-level government agencies responsible for siting transmission across the 39 States, including the District of Columbia, within the Eastern Interconnection electricity system.
Noting that nearly 85 percent of the nation’s coal-fired resources are located within the Eastern Interconnection, the report concludes that the outlook for new coal-fired plants is uncertain because of a number of factors, including:
- Large Capital Investment and Long Lead Time For Developing New Coal Plants
Large capital investment and long lead time are factors that make generator investments difficult. Regulated utilities also face challenges with cost-recovery approval because of fluid policy decisions and a fluctuating market for generation fuel. Additionally, despite uncertainty regarding the exact requirements of the many new environmental regulations under development for the last 20 years (due to lawsuits and pending decisions), it is clear that regulations will be more stringent and so this too will contribute to higher capital investments. Thus, other less capital intensive options can often be more attractive.
- Shale Gas Development
The significant developments around shale gas and the recent decline in gas prices have skewed interest toward the construction of gas-fired plants. Current low gas prices and the lower capital cost of gas plants relative to coal are an impediment to coal plant construction.
- New Source Performance Standards for Greenhouse Gases
The Environmental Protection Agency’s recent New Source Performance Standards for greenhouse gas emissions from power plants effectively requires the inclusion of Carbon Capture and Storage (CCS) for a new coal plant at some point in its life. While currently under reconsideration by EPA, the revised proposal could make new coal construction a risky undertaking until the technology and infrastructure for CCS can be more fully developed and demonstrated.
- Commercial Availability of CCS Technology
Widespread cost-effective deployment of CCS in the Eastern Interconnect requires supportive national policy and regulatory frameworks. The uncertain future of regulatory and legislative carbon policy, coupled with low gas prices, casts doubts on the future development of CCS. Even if a carbon policy comes to fruition, CCS may be first deployed on natural gas plants before coal-fired plants, if natural gas prices remain low.
Of these factors, the ICF report concludes that new environmental regulations and low gas prices are the two principal drivers of the current challenging environment for new and existing coal plants. More than 60 GW of coal capacity is expected to be shut down between 2010 and 2016 because power market prices will not support the required investment in control equipment. Although many states in the Eastern Interconnect have supported coal mining and CCS by providing incentives (tax credits, abatements, grants, inclusion in portfolio standards, etc.), these are not enough to overcome the headwinds posed by environmental regulations and low gas prices.