King Coal is Soon to be Dethroned

As recently as 2003, coal was used to generate some 53 percent of all electricity consumed in the United States. Its share of the generation mix, however, has dropped significantly since then, accounting for only some 37 percent of the 4 trillion gigawatt-hours (GWh) of electricity generated in 2012, according to the Energy Information Administration (EIA), which tracks U.S. electricity generation trends among other things.

Coal remains king of U.S. electricity generation for now. Natural gas is second at 30 percent, but the EIA predicts that by 2040, natural gas will supply 35 percent of the generation mix and coal will drop to 32 percent of the mix (see Figure 1).

Figure 2 illustrates the history of generation capacity additions and predicted additions. Overall, capacity additions are predicted to slow considerably during the next 25 years. Natural gas is expected to be the fuel of choice for new generation.

EIA predictions for new capacity additions include that: natural gas-fired plants will account for 73 percent of additions through 2040; renewables will account for some 24 percent; nuclear power will provide some 3 percent; and coal-fired power plants will be almost nonexistent for the next 25 years-just 1 percent of new capacity additions.

The main drivers behind decreasing coal-fired generation are low natural gas prices and U.S. Environmental Protection Agency (EPA) regulations.

Natural Gas Prices Squeeze Coal

Low natural gas prices have allowed the most efficient natural gas-fired plants to generate electricity at lower operating costs than coal-fired plants in many U.S. regions. Gas plants, therefore, are being dispatched before coal.

Natural gas prices have dropped significantly because of the U.S. shale gas boom. Natural gas hit its highest price-just more than $15 per million cubic feet (Mcf)-in 2005. Just seven years later in April 2012, natural gas prices hit a decade low of just more than $1.80 per Mcf on the spot market. The price has risen since then, but not much. In 2014, natural gas prices have ranged between just below $4 to about $4.85 per Mcf; high enough to keep most producers drilling and low enough to make natural gas attractive for power generation.

The American Natural Gas Alliance predicts natural gas will remain between $4 and $6 per Mcf through 2035.

Horizontal drilling coupled with hydraulic fracturing, or “fracking,” have allowed producers to recover natural gas from sedimentary rock formations and shale plays. Shale gas, which provided less than 1 percent of natural gas produced in the U.S. in 2000, provides more than 20 percent today and is expected to provide some 53 percent of all natural gas produced in the U.S. by 2040, according to the EIA. (More details on natural gas’ growing role in power generation are available in the article “Natural Gas Heats up Generation Discussions Again” in the Jan/Feb 2014 issue of Electric Light & Power.)

EPA Regulations

Many electricity generation and coal industry experts have accused President Barack Obama and his administration of waging a war on coal. While energy insiders, politicians and regulators debate this, the EPA-headed by Obama appointee Gina McCarthy-has proposed and enacted stringent rules that have made and will continue to make it difficult for many coal-fired plant owners and operators to generate electricity.

During her Climate Action Tour in May, McCarthy called carbon dioxide (CO2) “the biggest public health threat of our time” and said it needs to be regulated now. The EPA is obligated under the Clean Air Act to address pollution from power plants, and it has addressed all other pollutants, McCarthy said.

“Carbon pollution should not be treated any differently,” she said.

The table on Page 22 lists recently proposed and enacted EPA regulations that address CO2 and other power plant emissions. The table is not a complete list of EPA-enacted and proposed coal-related regulations but includes those that have or will have the greatest impacts on coal-fired generators.

Some coal-fired power plants cannot afford to comply with even one of the regulations. As a result, their owners and operators will retire them rather than invest in pollution-control technologies to keep them operating. For many other coal-fired plants, spending money to comply with one or two EPA regulations might be economically feasible, but when combined, the regulations become too costly.

The EIA predicts that between 2012 and 2020, some 60 GW of the nation’s current 310 GW of coal-fired capacity will be retired. Coal plants that will not attempt to comply with EPA regulations are a big part of this number.

Declining electricity demand during a sluggish, post-Great Recession economy and EPA regulations made 2012 a record year for coal plant retirements (see Figure 3). It was the year natural gas prices hit a decade low.

And retirements in 2015 are expected to trump those in 2012. Many of the retirements are planned just before the EPA’s Mercury and Air Toxic Standards (MATS) become effective.

Data from The Brattle Group shows some 93 percent of coal plants lack at least one major piece of equipment required to control air emissions.

The clean power plant standard for new power plants, the 111(b) rule proposed by the EPA in fall 2013, is the main reason no construction is planned for new coal-fired power plants. Under the proposed rules, new coal-fired units would need to emit less than 1,100 pounds of CO2 per MWh. The average U.S. coal plant emits 1,768 pounds of CO2 per MWh; new units would have to use carbon capture and storage (CCS) technology to meet the new requirements. Most utility experts agree that CCS technology is still in research and development and is not ready for large-scale implementation. In addition, it’s expensive.

In comparison, combined-cycle gas turbine (CCGT) plants emit 800-850 pounds of CO2 per MWh; they already meet the standard.

In early June, the EPA proposed its anticipated clean power standard for existing power plants, the 111(d) rule. The plan recommends that coal plants reduce CO2 emissions up to 30 percent by 2030 compared with 2005 levels.

The EPA has given states the authority to determine how they will meet the new targets. States have until June 2016 to submit their detailed plans. It’s unclear what technology plants might use to comply with the proposed reductions, but most states likely will include some sort of carbon trading system as part of their plans. Some states are ahead of the feds in reducing CO2 in plants.

Most experts have said the most successful plan is the Regional Greenhouse Gas Initiative (RGGI), a cooperative carbon reduction plan that is administered by several states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. The RGGI is the first mandatory market-based regulatory program in the U.S. to reduce greenhouse gas emissions. Under the plan, states sell emission allowances through auctions and invest proceeds in energy efficiency, renewable energy and other consumer benefit programs. Each participating state has its own CO2 Budget Trading Program.

Another state-initiated initiative is the Western Climate Initiative (WCI), a cap and trade program that includes British Columbia, California and Quebec.

Despite Challenges, Coal is not Going Away

Although few new coal plants are expected to be built during the next 25 years and some 20 percent of the U.S. coal fleet will be retired soon, coal will continue to provide significantly to the nation’s 1,063 GW of total generating capacity. Effective pollution control, coal-gasification and CCS technologies along with CO2 cap and trade programs will be developed to ensure coal remains viable for electricity generation. Nevertheless, these measures will not allow coal to remain the low-cost fuel for electricity generation that it has been in the U.S.-at least not as long as natural gas remains at or near its current price.

In addition, despite decreased coal use in North America and the EU during the past several years, global coal consumption is at an all-time high and continues to grow. Its increased use is being driven by growing and power-hungry markets around the world, most notable, China and India. Worldwide carbon emissions are growing, as well: 2.2 percent annually on average from 2000 to 2010 and at an even higher annual rate since 2010, according to a report released this year by the Intergovernmental Panel on Climate Change.

Despite the scientific community’s urgent call to reduce carbon emissions, coal remains king globally, and its use is expected to rise.

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