Coal plant retirement analyzed in new research paper

Source: Analysis Group

There has been some debate in energy circles about the factors that have prompted the retirement of a growing number of coal-fired plants in the United States. Many have pointed to new clean-air regulations being released by the U.S. Environmental Protection Agency that would require existing plants to reduce their emissions – which could also require costly plant upgrades. However, “the sharp decline in natural gas prices, the rising cost of coal, and reduced demand for electricity are all contributing factors in the decisions to retire some of the country’s oldest coal-fired generating units,” and these trends preceded the EPA’s new air pollution rules, says Managing Principal Susan F. Tierney in a new white paper.

In the research report “Why Coal Plants Retire: Power Market Fundamentals as of 2012,” Dr. Tierney, a power industry expert who has conducted numerous studies on electricity reliability and who has testified frequently on the topic, outlines the economic factors (apart from regulatory concerns) that plant owners must consider as part of their facility retirement decisions. These power market fundamentals include the tighter price differential between natural gas prices and coal prices in recent years, lower demand for electricity due to the sluggish economy and a mild winter across much of the United States, and broader changes in the utilities labor market.

“It is these other considerations, beyond EPA’s clean air rules, that have been influencing recent coal plant retirement decisions," Dr. Tierney concludes.