The EPA is expected to enact several key regulations in the coming decade that will have an impact on the U.S. power sector, particularly the fleet of coal-fired power plants. Because the rules have not yet been finalized, their impacts cannot be fully analyzed. However, there are several alternative cases that examine the sensitivity of power generation markets to various assumed requirements for environmental retrofits.
“Coal Continues to account for the largest share of electricity generation through 2035”
The range of coal plant retirements varies considerably across the cases, with a low of 9 gigawatts (3 percent of the coal fleet) and a high of 73 gigawatts (over 20 percent of the coal fleet). The higher end of this range is driven by the somewhat extreme assumptions that all plants must have scrubbers to remove sulfur dioxide and selective catalytic reduction to remove nitrogen oxides, that natural gas wellhead prices remain at or below about $5 through 2035, and that environmental retrofit decisions are based on an assumption that retrofits occur only if plant owners can recover their costs within 5 years. The latter quick cost recovery assumption is meant to represent the possibility of future environmental regulation, including for GHGs.
In all these cases, coal continues to account for the largest share of electricity generation through 2035. Many of the coal plants projected to be retired in these cases had relatively low utilization factors and high heat rates historically, and their contribution to overall coal-fired generation was relatively modest.
Electricity generation from natural gas is higher in 2035 in all the environmental regulation sensitivity. The faster growth in electricity generation with natural gas is supported by low natural gas prices and relatively low capital costs for new natural gas plants, which improve the relative economics of gas when regulatory pressure is placed on the existing coal fleet. In the alternative cases, natural gas generation in 2035 varies from 1,323 billion kilowatthours to 1,797 billion kilowatthours, compared with 1,288 billion kilowatthours.