Retirement of coal-fired plants in near-term prospect due to toughening environmental standards in the US would increase the share of total electric power generation fueled by natural gas by 6 percentage points, according to Fitch Ratings.
Applied to 2010 data from the US Energy Information Administration, the Fitch estimate implies an increase in gas consumption of 5.3 bcfd within 10 years. Total average gas consumption in the US last year was 66 bcfd.
The Fitch analysis identified 83 Gw of coal-fired power generation capacity placed at risk for retirement in the next 5-10 years by new Environmental Protection Agency rules. The at-risk capacity is in plants smaller than 400 Mw and older than 40 years operating without equipment to control sulfur oxide emissions or needing “substantial” investment or enhancement to meet proposed limits.
The EPA measures likely to have the greatest effect on power plants, according to Fitch, are Mercury and Air Toxic Standards (MATS), Cross-State Air Pollution Rule (CSAPR), New Source Review and Tailoring Rule related to emissions of greenhouse gases, Clean Water Act provisions addressing use of “once-through cooling,” and coal combustion residual disposal regulations.
Fitch noted that MATS and CSAPR were released only recently and remain subject to changes and legal challenges.
As new rules take effect, likely near-term compliance measures are fuel-switching to low-sulfur coal followed by reduced dispatch of coal-fired units.
“The projected retirements of coal-fired generation could materially increase the amount of power generation derived from natural gas,” Fitch said.
The company earlier projected retirement of coal-fired plants with capacities totaling 51 Gw. That analysis covered units smaller than 200 Mw with a weighted average age of nearly 50 years.
In that and the new analysis, electricity now generated by units projected for retirement is replaced by slightly higher production from remaining coal-fired units, new units fueled by renewable energy, and existing or new combined-cycle natural gas plants.
With 83 Gw of coal capacity retired, coal’s share of total US power generation falls to 38% from 45%, while the natural gas share increases to 30% from 24%, Fitch said.
With 51 Gw of coal capacity retired, the new shares are coal 41% and gas 28%. The gas-use increase implied by that share increase over 2010 data is 3.5 bcfd.