The Brattle Group released a report examining the impact of emerging Environmental Protection Agency (EPA) air quality regulations on coal-fired power plants. The new study, an update to analysis conducted in 2010, found that 59,000 to 77,000MW of coal-fired power plant capacity are likely to retire over the next five years, which is approximately 25,00 MW more than previously estimated.
Since December 2010 when the prior estimates of potential coal plant retirements were released from the Brattle Group, both natural gas prices and the projected demand for power have decreased, and environmental rules have been finalized with less restrictive compliance requirements and deadlines than previously foreseen, the report said.
As of July 2012, about 30,000 MW of coal plants (roughly 10% of total U.S. coal capacity) had announced plans to retire by 2016.
To reflect the remaining regulatory uncertainty, the authors of the report developed both “strict” and “lenient” regulatory scenarios for required environmental control technology. About 59,000MW will likely retire under lenient rules, versus 77,000MW under strict regulations.
The study also highlights that retirement projections are even more sensitive to future market conditions than to regulations, particularly natural gas prices. Likely coal plant retirements drop to between 21,000 and 35,000MW if natural gas prices increase by just USD 1.00/MMBtu relative to April 2012 forward prices. Similarly, projected coal plant retirements would increase to between 115,000 and 141,000MW if natural gas prices were to decrease by USD 1.00/MMBtu.