The Energy Information Administration (EIA) recently announced that coal plant owners and operators expect to retire about 27 gigawatts of coal-fired capacity by 2016—four times the 6.5 gigawatts of capacity retired between 2007 and 2011. In 2012, electric generators are expected to retire 9 gigawatts of coal-fired capacity, the largest amount of retirements in a single year in America's history.
In 2011, there were 1,387 coal-fired generators in the United States, totaling almost 318 gigawatts. The 27 gigawatts of retiring capacity is 8.5% of total coal-fired capacity. The 2012 record retirements are expected to be exceeded in 2015 when nearly 10 gigawatts of coal-fired capacity are expected to retire. Most of the units retiring are located in the Mid-Atlantic, Ohio River Valley, and Southeastern United States.
The EIA provides several reasons for the retirements, but the largest factor affecting coal-fired generating units are new regulations recently imposed by the Environmental Protection Agency (EPA). For example, the Mercury and Air Toxics Standards require the addition of costly environmental equipment, which will result in the retirement of the older, smaller units that are not used heavily because it is not cost effective to make the additional investment.
Other factors that EIA identifies for the record retirements of coal-fired units are the low price of natural gas due to the boom in shale gas production resulting from hydraulic fracturing technology; modest electricity demand growth that has led to less use of smaller, older, and less efficient plants; the availability of natural gas-fired combined cycle units that are not currently fully utilized; and the cost of complying with state laws and regulations that result in other mandatory investments, such as the Renewable Portfolio Standards which many states have that require investments in qualified renewable generating technologies.
Reliability of the Generating Grid
The question, of course, is whether these retirements are a detriment to the reliability and security of our national generating grid? The North American Electric Reliability Corporation's (NERC) most recent long-term assessment found that existing and proposed environmental regulations affecting fossil fuel plants in the United States may significantly affect bulk power system reliability.
NERC, the nation's leading authority on electric reliability, evaluated four major regulations now being proposed or implemented by the Environmental Protection Agency and found them to expose the United States to significant energy vulnerabilities. NERC estimates that nearly a quarter of our coal-fired capacity could be off-line by 2018 and that as many as 677 coal-fired units (258 gigawatts) would need to be temporarily shut down to install EPA-mandated equipment. These EPA regulations must be implemented within a 3-year window and the mandated equipment takes about 18 months to install. Because EPA's three year timeline is so tight and the regulations affect so many units, utility companies are not sure that they can meet the standards and ensure reliability of the electricity system at the same time.
While we are shuttering our coal-fired power plants, other countries are turning to coal for generating electricity. According to China's National Bureau of Statistics, China's coal consumption increased 9.7% in 2011 to a record 3.7 billion tons, more than 3.5 times the coal consumption of the United States. China is supplying over 70% of its electricity with coal. In India, coal provides 55% of its electricity. And, Germany is generating about 25% of its electricity from coal, having increased coal consumption by 3.3% last year. The power gap in Germany, created by the shutdown of eight nuclear power stations, is largely being filled by lignite coal.
Conclusion
While other countries are turning to coal as a major source of generation, the United States is shuttering coal-fired plants in record numbers, mainly due to environmental regulations imposed by the federal government. This is curious since the United States has the largest coal reserves in the world. NERC has found that these regulations may cause significant vulnerabilities to the reliability of our generating grid. While natural gas remains abundant and inexpensive, it is making the transition away from coal relatively easy. However, once natural gas prices rise, consumers will be confronted with higher electricity prices and will no longer have an inventory of coal-fired plants to provide inexpensive electricity.