A new study by The Brattle Group finds that emerging U.S. Environmental Protection Agency (EPA) regulations on air quality and water for coal-fired power plants could result in over 50,000 MW of coal plant retirements and require an investment of up to $180 billion for remaining plants to comply with the likely mandates.
The study, by Brattle economists Metin Celebi and Frank Graves, analyzes the economics of retirement decisions for each coal plant operating in the United States under the proposed and emerging EPA air quality and water regulations, taking into account the predicted profitability and cost of replacement power for both regulated and unregulated plants. The regulations are expected to force coal plants to decide between retiring versus installing expensive control equipment to reduce emissions of SO2, NOx, particulates, and hazardous air pollutants such as mercury, as well as cooling towers to reduce the use of cooling water.
Celebi and Graves estimate that 40,000 to 55,000 MW of coal capacity (depending on the cost of retrofits) would retire if scrubbers and selective catalytic reduction (SCR) equipment were to be mandated by 2015 for all coal units. Another 11,000 to 12,000 MW could retire if cooling towers are also mandated. This would bring the total retirements to between 50,000 to 67,000 MW, or roughly 20 percent of installed coal plant capacity. Most of the retirements would be merchant plants (47,000 to 56,000 MW, or up to three-quarters of the entire merchant coal fleet), with significantly fewer retirements of regulated coal-fired plants. The retirements would be especially large in the Midwest ISO, ERCOT, and PJM areas, representing up to 72 percent of all coal plants and up to 15 percent of total installed generating capacity.
For the units that would not retire, complying with EPA's potential mandates to install scrubbers, SCRs, and cooling towers would require investments in the range of $100 to $180 billion. The combination of retirements and increased operating costs would reduce coal demand by about 15 percent by 2020. Gas demand could increase by up to 5.8 billion cubic feet daily or approximately 10 percent of total gas use. Assuming that all of the lost generation from coal plants were to be replaced by gas-fired combined-cycle generating plants, CO2 emissions could fall by 150 million tons per year, or approximately 7 percent of all CO2 emissions from the electric power sector.
"In contrast to other studies projecting that mostly old and small coal units are at risk for retirement, our analysis finds that roughly one-third of the retirements will be from power plants that are less than 40 years old and larger than 500 MW, resulting in significant challenges for the coal industry as a whole if the EPA regulations pass as expected," Dr. Celebi said today during an EUCI webinar on "Potential Coal Plant Retirements Under Emerging Environmental Regulations."
The generation unit-specific detail of this study also supports the analysis of stranded cost recovery for at-risk plants, in addition to the assessment of location-specific reliability and transmission impacts. The results of the study are available at www.brattle.com.