Coal, Gas

Report: Coal plant retirements likely to impact wholesale electricity prices

Consumers Energy delay retiring coal-fired power units Michigan Cobb J.R. Whiting Karn-Weadock

With the combination of coal-fired power plant retirements and a possible increase in natural gas prices, wholesale electricity prices are expected to increase for on-peak and off-peak hours.

According to a report from The Brattle Group that uses a case study for the eastern PJM region, the study says the potential increase in energy prices due only to coal plant retirements could be around $3-$4 per megawatt-hour (MWh) for on-peak hours and $1-$2/MWh for off-peak hours. If gas prices continue to increase due to replacing the retired coal plants, energy prices could be as much as $9-$11/MWh for on-peak hours and $5-$6/MWh for off-peak hours.

The study does say that it is likely that reduced supply for electricity generation, increased operating costs, and changes in fuel demand could drive up market prices. It is also possible that all of these factors are currently reflected in public forecasts or market forward prices because of the time frame and uncertainty around the retirement decisions.

To download the report, “Coal Plant Retirements: Feedback Effects on Wholesale Electricity Prices,” click here.

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