In the last 10 years, coal power generation has fallen from providing more than half of the electricity in the United States to less than 30% today. While that number held steady for 2016 and 2017, coal plant owners have announced 13 GW of planned retirements for 2018, the largest since a record 15 GW retired in 2015. Another 10 GW of capacity is already planned for retirement over the next six years; including more than 2 GW by Duke Energy alone, with more announcements likely. The only coal plant that will begin operating this year is a 17 MW unit being installed at a campus microgrid in Fairbanks, Alaska. If shutdowns were to continue at this rate of more than 10 GW per year with no replacements coming online, coal power generation would cease to exist in the United States in less than 25 years. Before we rush to write the epitaph for coal power, let’s take a step back and look at what is driving some of these retirements.

Coal power is facing a lot of headwinds. Wind and solar power generation technology is becoming more efficient, capital costs are decreasing, and cost-effective, utility-scale storage technology is on the horizon. Natural gas fuel prices are projected to remain historically low, gas turbines produce much lower emissions, and they can cycle for flexible operation. In comparison, coal prices are at a five-year high, coal plants produce higher emissions and more byproducts, carbon capture technology has only worked in very limited conditions, and rapid cycling is not feasible for most designs. The current White House leadership and the Secretary of Energy have been very vocal in their support of the coal industry, but their recommendation for rules to subsidize “secure-fuel” power plants (nuclear and coal) was rejected by the Federal Energy Regulatory Committee – for insufficient evidence of retirements impacting grid resiliency or reliability.

^{EIA: Reference case for energy consumption, by fuel, in quadrillion Btu}

The U.S. Energy Information Agency (EIA) recently published their Annual Energy Outlook for 2018, with projections to 2050. An accompanying graph representing the EIA reference case forecasts rising natural gas and renewable energy consumption but curiously indicates a hard stop to the loss of coal generation at between 10%-15%. This breaks from expected reference case forecasts made in previous years but matches prior forecasts for non-implementation of the Clean Power Plan. This projection, however, appears to ignore the various market forces listed above that are driving uneconomic plants to close.

Key Details

• EPA regulations on sulfur, nitrogen, and mercury emissions are continuing to increase operating costs, forcing many coal plants to retire earlier than expected
• Analysis of retired coal plants indicate that these plants are in service longer than expected when they are commissioned, an average of 53 years compared to the often cited 40-year expected life
• Given an average expected lifespan of 53 years, more than 90% of the remaining coal fleet would be expected to retire before 2050

ScottMadden analysis: Scatterplot of Actual Lifespan of Retired Coal Plants by Retirement Year

• The remaining fleet of coal plants are generally larger and newer than those that have been retired
• Lazard’s recent levelized cost of energy analysis indicates that unsubsidized utility-scale solar PV and wind generation are now cheaper than coal generation
• New Source Performance Standard and the Mercury Air Toxics Standard are still in effect while the current administration is fighting in the courts to rescind them

Implications

• If natural gas remains cheaper than coal, it will continue to displace coal in wholesale power markets where the lowest marginal cost resources are the first to be dispatched
• The larger and newer remaining coal plants benefit from better economies of scale and require less retrofitting for refurbishment or pollution control equipment

Union of Concerned Scientists: Visualization of Remaining, Uneconomic, and Retiring Coal Plants

• If environmental regulations are successfully revoked, operating costs for coal plants will improve, which may forestall retirements
• Even a supportive administration may not have the tenure and will to oppose environmental advocates long term

Conclusion

Of the recently constructed coal plants and those retrofitted with pollution controls, some will remain economically sound to operate and provide necessary power and services to the grid for decades to come. However, given the expense of coal power relative to natural gas and renewables and its lack of operational flexibility, it is unlikely that investment in new, coal-fueled power plant construction will occur. When the last of the current fleet retires somewhere around 2070, it is quite possible the United States will see the end of coal.

More Information

Bloomberg New Energy Finance: 2018 Sustainable Energy in America Factbook

EIA: Annual Energy Outlook 2018

Lazard: Levelized Cost of Energy Analysis Version 11.0

Union of Concerned Scientists: A Dwindling Role for Coal

Utility Dive: A Complicated Calculus Keeps the Remaining Coal Fleet Alive

Utility Dive: Duke Issues Climate Report, Charts Path to Reduce Coal Use by 2030

This report is part of ScottMadden’s Fossil Minute series. To view all featured Fossil Minutes, please click here.

Additional Contributing Author: Jonathan Aronoff