July 2015
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World Coal
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61
The decline of coal-fired power generation in North America has been widely
reported.
Garrick Hoops, ABB Enterprise Software, USA,
provides a
detailed look at the factors contributing to this decline and its impact on the
broader energy markets.
B
ased on an in-depth
analysis by the advisors
team at ABB, the future of
coal‑fired generation
appears to be somewhat of a mixed bag
over the next several years. As utilities
and independent power generators
respond to the combined factors facing
them, coal‑fired generation will decline
near term after a modest recovery in
2013 and 2014. The analysis in a recent
base case scenario indicates a modest
recovery in the latter portion of this
decade.
1
Electric power sector (EPS)
coal use will rise as dramatically
increased demand for gas puts upward
pressure on prices. The picture beyond
2020 is more opaque. The US
Environmental Protection Agency’s
(EPA) proposed Clean Power Plan
(CPP) aims to cut US greenhouse gas
(GHG) emissions 30% by 2030.
2
According to analysis of the EPA’s
plan, coal’s share of North American
generation could fall from 35 – 37%
today to 22% in 2020 (currently the first
year of the plan’s implementation) and
to 17% by 2030.
The level of uncertainty about how
and when the CPP is implemented is
high. Questions about whether the EPA
overstepped its regulatory authority
have legal and policy experts coming
down on both sides of the issue. The
Republican gains in November 2014
will increase the potential for
legislative action to derail or delay
implementation of various EPA rules in
the 114
th
US Congress. Perhaps most
importantly, though, numerous
analyses of the rule indicate that there
are serious issues around many of the
assumptions the EPA used to calculate
state targets and important questions
about grid reliability that could require
substantial revision in the final version.
For better or worse this article is
US-centric, simply because the vast
majority of coal‑fired electric
generation in North America is in the
US and by virtue of the potential
impact of the EPA’s rules on GHG
emissions.
Regarding Canada, in September
2012 the Canadian federal government
enacted the Reduction of Carbon
Dioxide Emissions from Coal‑fired
Generation of Electricity Regulations.
The regulations allows existing coal
units up to 50 yr of operational life
before they must either retire or retrofit
with carbon capture and storage (CCS).
The first significant retirements are
expected to occur in 2019.
The decline of coal‑fired
generation
Evolution of natural gas as
the preferred fuel for power
generation
Recent history has been fraught with
challenges for many operators of
coal‑fired resources in North America.
Hydraulic fracturing, coupled with
advances in data collection and analytics,
as well as a supportive economic and
market framework in the US, are all
factors that have enabled what many
label a revolution in extraction of gas and
petroleum liquids from shale and tight
sands formations. These geologies have
widely varying estimates of ultimately
recoverable oil and gas resources, but all
of the estimates for gas resources are
large: 45 – 90 yr at current levels of
consumption. Much of the resource is
expected to be available at prices that are
only modestly higher than today’s US
prices, with high volatility made largely
a thing of the past.
Of the challenges facing coal‑fired
power, the steep decline in the price of
gas has arguably had the largest impact.
Advances on the supply side of the
natural gas market have reduced the
average cost of gas delivered to US
gas‑fired power plants from
US$7.10/million Btu in 2007 to
US$4.35/million Btu in 2013. Gas
combined cycle units compete directly
with coal in the portion of the supply
stack where marginal generation most
often falls. They are efficient and can
follow load without losing much of that
efficiency. The 50+ GW of new gas
combined cycle capacity added since
2007 enabled steady improvement in the
overall heat rate of the fleet. This
improvement in average heat rates
contributed about 10% of the nearly 50%
reduction in fuel costs from
US$60 – 70/MWh in 2007 – 2008 to
US$39.50 in 2014.
The EPA is focused on coal
The EPA’s efforts to enforce the
Clean Air Act over the last decade have
primarily focused on cleaning up
emissions from coal‑fired generation.
This has often been referred to as a “war
on coal,” though the EPA has expressed
that it is simply doing its best to enforce
the law. The term “war on coal” might
be best applied to the very successful
effort on the part of environmental
organisations to challenge every new
coal plant using litigation on every
possible front. It is undeniable that EPA
rules have made coal more expensive as
a source of electric power by further
reducing externalities, particularly air
