An analysis released in late August by the Department of Energy predicts that between 35 and 60 gigawatts of coal-fired electricity generation in the eastern half of the country will be shut down within the next five years, due principally to increasingly tough environmental regulations and low natural gas prices resulting from abundant U.S. shale gas supplies. The report, prepared for the Eastern Interconnection States' Planning Council by ICF International, was completed in June 2013, but made available to the public only recently. The Eastern Interconnection electric transmission grid represents 84% of the nation's coal-fired electricity generation, and the report notes that the expected scope of the retirements may require new capacity and/or transmission investments to maintain grid reliability. 

The report provides a comprehensive analysis of the key market factors and developments affecting coal-fired power plants, including a discussion of prospects for commercial deployment of carbon capture and sequestration (CCS) technology, which it concludes will not be in time or affordable enough to save the plants.  The main factors responsible for the predicted shutdowns are:

  • The high cost and long lead time required to build new coal plants, especially compared to less capital intensive options
  • Numerous new environmental regulations on the utility industry over the last 20 years and, in particular, the likelihood of even more restrictive greenhouse gas regulations expected for existing power plants within the next two years, which will hit coal plants harder than other electricity generators
  • Regulatory and cost uncertainty, which have complicate the approval process for regulated utilities that might otherwise be interested in constructing coal plants
  • Shale gas development and resulting natural gas price declines, which have created strong incentives to build gas plants rather than coal facilities
  • Opposition to coal plant construction from environmental and citizens groups

While coal plant retirements have been widely expected, the report's quantification of the scale of the expected shutdowns and the inability of CCS technology to soften the impact, along with implications for reliability, offer significant data points to the overall power generation trend discussion.

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