EPA coal retirements

A new study by The Brattle Group finds that proposed U.S. Environmental Protection Agency (EPA) regulations on air quality and water for coal-fired power plants could result in more than 50,000 MW of coal plant retirements and require an investment of up to $180 billion for remaining plants to comply with the rules.

According to the study, 40,000 to 55,000 MW of coal capacity 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.

The study said up to 56,000 MW, or three-quarters, of the retirements would be merchant plants with “significantly fewer closures” among regulated coal-fired plants. The retirements would be especially numerous in the Midwest ISO, ERCOT, and PJM areas. Brattle Group said retirements could represent up to 72 percent of all coal plants and up to 15 percent of total installed generating capacity.

“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,” said study co-author Metin Celebi.

Units that would not retire would instead have to install scrubbers, SCRs and cooling towers to comply with the regulations. Investments in these technologies would range from $100 billion to $180 billion, according to the study.

The study found 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 bcf per day. Assuming that all of the lost coal-fired generation was replaced by gas-fired combined-cycle generating plants, CO2 emissions could fall by 150 million tons per year.

The study 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.

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