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Monday, August 26, 2013

Report paints a bleak future for coal

In the first half of 2013, coal-fired power generation is up 10%, and natural gas generation fell by 13.7%. But the long-term outlook for coal – in the eastern US, at least – might be bleak, according to a recently-published Department of Energy-funded report. 

Current State and Future Direction of Coal-fired Power in the Eastern Interconnection concludes that low-price natural gas, in combination with much-needed Federal emissions regulations, renders the outlook for development of new coal-fired power plants "uncertain" and may well - eventually - doom coal:  
(W)ith persistent low natural gas prices and more environmental regulations, natural gas continues to be the most cost effective generation fuel source. The persistently low historical and near-term forecasted natural gas prices provide with plant developers tremendous incentives to build gas-fired generation capacity in the United States. Levelized costs of electricity are expected to remain low for gas-fired plants, implying that new generation capacity in the US is primarily gas-based. Meanwhile, both existing and new coal capacities face challenges from current and upcoming environmental regulations. New coal development appears to be difficult to justify due to high costs compared to natural gas plants, and a significant fraction of the existing coal capacity is expected to retire within the Eastern Interconnection.
If energy prices remain low, as is currently the case with low gas prices, low load growth, increasing demand resources, and capacity prices remain depressed due to the excess supply of capacity and other factors,  the additional costs of retrofits needed to comply with more stringent environmental regulations might force a greater fraction of the existing coal-fired fleet out of the market through retirement or conversion to natural gas... 
The outlook for coal worsens, according to the report, if carbon capture and storage (CCS) technology is incorporated in coal plants: 
Any requirements to incorporate  CCS technology driven by climate change regulation, with its additional costs and technology risks, will further disadvantage new coal plants relative to gas.
The report says that the commercial viability of CCS is a “vital factor in determining the future of coal-fired plants in the United States,” but “the drive for CCS technologies has become moribund…(T)he development of fully integrated CCS projects is challenged by a variety of factors, including uncertainty in climate policy, commercial availability of the technology and high costs.” 

The report’s authors says that cheap gas – and what I view as the lower overall costs of applying CCS to natgas plants – suggest that future emphasis could be put on deploying CCS for natural gas—not coal—plants. That must happen if natgas is to be more than a short-term climate stabilization tool.

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