- First, there is little demand growth in the mature US electricity market to begin with – and what little growth there is, is taken up mostly by renewables in states with mandatory renewable portfolio standards (RPS);
- Second, ample supplies of natural gas at reasonable prices has reduced the attractiveness of coal; and
- Third, existing and projected environmental restrictions coming from the Environmental Protection Agency (EPA) plus concerns about future carbon regulations makes coal even less of an option.
These realities are reflected in the latest data from the EIA (graph on left), which suggests little appetite for coal moving forward. Adding to coal’s woes are EPA’s proposed regulation that would limit CO2 emissions from existing coal-fired power plants under Clean Power Plan – which includes CO2 emission reduction goals for power plants in each state with the aim of cutting US greenhouse gas emissions 30% below 2005 level by 2030.
During the first 6 months of 2014, 2,200 MW of natural gas power generating capacity was added, 60% more than the same period in 2013. Solar capacity rose by 1,100 MW during the same period – up 70% from the corresponding period last year – followed by wind.
Moving forward there are strong indications that there will be few if any new coal fired plants built in the US – ever. Hence the future of coal – not unlike the future of US nuclear industry – depends on assumptions on how long the existing fleet will be around.
Predictions vary but most agree on a gradual decline over time as older, less efficient and more polluting plants are taken out of service for economic and/or environmental reasons. A recent study by Ventyx and Alliance Bernstein, for example, concludes that coal-fired generation in the US is likely to fall by one quarter between now and 2020 due to mandatory RPS targets and tightening emission rules.
As illustrated in graph above, most predictions assume virtually no additions (green color below the line, don’t ask why additions are shown as negative) starting in 2014 and significant retirements between 2015- 2020.
The Bernstein report: The coming sea change in coal and gas sector demand, predicts the continued displacement of coal by gas fired generation coupled with the growth of renewables by 2020. It suggests that US demand for coal will drop by nearly 230 million tonnes by the end of the decade. As a point of reference, this is roughly equal to Australia’s current annual coal exports.
Currently 29 states have mandatory RPS targets (map below), and they account for two thirds of the country’s total demand. Together, they will require roughly 165 million MWh of non-hydro renewable energy production by 2020. That would amount to around 7% of US retail electricity sales to be supplied by 2015; 10% by 2020.
The Bernstein report points out that fighting for its survival, the fossil fuel lobby – particularly coal – has launched “intense campaigns in state legislatures to try and have the renewable energy targets rescinded”.
With the sole exception of Ohio, where a temporary moratorium on RPS has been introduced, all such efforts have failed thus far. The states where RPS targets are in effect tend to be environmentally leaning and/or vote Democratic, where green policies are popular.
According to the report, US coal consumption for electricity generation will fall by about 25 million tonnes a year by 2020 as a result of these renewable targets. Not everyone is happy to see coal’s gradual demise – but that is where it appears to be heading, at least in the US.
Perry Sioshansi is president of Menlo Energy Economics, a consultancy based in San Francisco, CA and editor/publisher of EEnergy Informer, a monthly newsletter with international circulation. He can be reached at fpsioshansi@aol.com
