Is coal power headed for a downsizing in US?
Utilities may close up to 1 in 5 coal-fired power plants after tougher EPA air pollution rules go into effect next year, Wall Street investment banker Credit Suisse recently reported. Coal power is losing its price edge to natural gas, too.
The Kentucky Utilities Electric power pant, pictured here, is one of many coal fired power plants in the US.
Ken Stewart/ZUMA Press/File
Tougher federal air pollution rules coming next year could prompt electricity companies to close as many as 1 in every 5 coal-burning power plants in America, primarily facilities more than 40 years old that lack emissions controls, according to a recent Wall Street analysis.
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The regulations now being crafted by the Environmental Protection Agency (EPA), expected to go into force next April and November in accordance with the Clean Air Act, are part of a long ratcheting back of mercury, acid-rain, and smog-forming emissions from utility smokestacks.
What's surprising is the extent to which those EPA rules – combined with a recent drop in the price of natural gas – could over the next four to five years cause the utility industry to accelerate retirement of old coal-fired power plants rather than spend to upgrade the plants' emissions controls, says the study by Credit Suisse, a Wall Street investment banking firm.
"If the EPA rules were not bad enough for coal generators, we think a large chunk of the US coal fleet is vulnerable to closure simply due to crummy economics where we see coal pricing at a premium to natural gas," says the study, released late last month. "We see the company specific implications of EPA policy as interesting when considering that 15-30 percent of the US coal fleet is at risk of either closure or needing significant [capital expenditure] to stay in operation."
Entitled "Growth From Subtraction: Impact of EPA Rules on Power Markets," the 86-page study sees positive long-term outcomes for investors as big utility companies are forced by 2016 to shed older, inefficient equipment. Yet the study notes that the "EPA rules simply accelerate an inevitable market tightening by 4-5 years" as coal, which for decades has been the low-cost fuel for producing electricity, takes a back seat to natural gas.
Small, old coal plants at high risk of closure
Coal power, with about 340,000 megawatts of generating capacity, today produces about half of US electricity. After expected emissions upgrades, the coal fleet will continue to have plants, producing about 103,000 megawatts, that are still "lacking any major emission controls," the study says. The oldest, smallest coal plants with few emissions controls make up an "at-risk" (of closure) portion that account for about 20 percent of total US coal-fired generating capacity, or 69,000 megawatts.
The cost to cut sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury emissions could run $50 billion to $70 billion, not counting the oldest plants. Upgrading those would cost another $80 billion to $110 billion. It's that last chunk of change that may mean hundreds of power plants get boarded up – and new gas turbines and wind farms and other lower-cost power-fuel options get built instead, the report authors say.
Utility industry executives are keenly aware of this scenario, even if the public generally is not, said Jim Owen, a spokesman for the Edison Electric Institute, a Washington trade group that represents investor-owned utilities. (Investor-owned utilities supply about 70 percent of US electric power.)
