Catalyst Spring 2013

Ripe for Retirement


 

By Jeff Deyette and Steven Frenkel

Michigan’s St. Clair power plant has provided electricity for families and businesses north of Detroit for decades—its six coal-fired generating units have far exceeded their expected 30-year life span. Like many other aging coal plants across the United States, St. Clair’s generating units lack modern pollution controls needed to limit air emissions. That means St. Clair has been endangering the health and environment of local residents for generations, with sulfur dioxide that causes acid rain, nitrogen oxides that cause smog, mercury that poisons waterways and fish and causes neurological damage in children, and soot that causes asthma attacks, lung disease, and premature death.

Old and dirty coal plants like St. Clair face an increasingly uncertain economic future. Growing competition from cheaper, cleaner, abundant, and reliable energy sources (such as natural gas, renewable energy from the wind and sun, or energy efficiency measures that reduce electricity use) makes it harder for coal plants to produce power economically. Moreover, long-awaited federal clean air rules will now require coal plants to reduce toxic emissions.

St. Clair’s owner, Detroit Edison, faces a critical decision: it can either pay for costly upgrades to keep its outdated coal-fired generators running and pass the costs on to its customers, or retire them and invest in cleaner, lower-cost options. Detroit Edison is not alone; owners of hundreds of U.S. coal plants are making the same calculations. As of May 2012, 288 coal-fired generating units totaling more than 41 gigawatts (GW) of capacity—12 percent of the U.S. coal fleet—have been judged a bad investment by their owners and scheduled for closure. This is a positive step toward a cleaner energy future. But how many more uncompetitive units are still out there? Quite a few, as our report Ripe for Retirement found.

Ripe for Retirement Generating Capacity

The vast majority of economically uncompetitive coal generators are located in the eastern United States; Georgia leads the nation with nearly 7,500 megawatts (MW) of capacity that is ripe for retirement. (Click for larger view.)

 

Totals listed do not include announced retirements. Rankings for top 20 states are given in parentheses.

Hundreds Fail the Test

Our analysis, released in November, calculated the cost of electricity from individual generating units within the remaining U.S. coal fleet and compared it with the cost of electricity from cleaner options. We estimated the cost of modernizing the coal fleet to protect public health and the environment by installing the most effective technologies available to control four major air pollutants: sulfur dioxide, nitrogen oxides, mercury, and particulate matter (or soot). If, after factoring in the cost of installing any missing pollution controls, a coal-fired generator would be more expensive to operate than an efficient natural gas combined-cycle plant or wind power facility, we considered that generator a good candidate for closure—or “ripe for retirement.”

Five of the six coal generators at the St. Clair plant in Michigan are no longer economically competitive compared with cleaner energy options such as wind and natural gas.

We found that 353 coal generators (in addition to those already scheduled for closure) are ripe for retirement, representing 59 GW of capacity—equivalent to nearly 18 percent of the existing U.S. coal fleet. These generators are located in 31 states, but most are concentrated in the eastern half of the country (see the map).

Georgia, for example, is home to the largest amount of uncompetitive generating capacity. Two months after Ripe for Retirement was published, Georgia Power—the largest utility in the state—announced that it will retire 15 coal-fired units, all of which were identified in our report.

Michigan has the greatest number of ripe-for-retirement coal generators: 39, including five of St. Clair’s six. The St. Clair generator that passed our initial economic test failed when we took into account the cost of limiting carbon dioxide (CO2) emissions, the main contributor to global warming (see the sidebar). Given their higher costs compared with cleaner, more affordable options, all the ripe-for-retirement generators on our list should be subject to rigorous review before their owners invest in any upgrades.

As a cautionary tale, consider the Merrimack Station coal plant, owned by Public Service of New Hampshire (PSNH). In 2009, PSNH opted to spend $422 million upgrading two 1960s-era generating units rather than shutting them down. But now, despite the costly upgrade, PSNH has announced it will idle Merrimack for months at a time because it costs substantially more to run the plant than to buy electricity from cleaner-burning natural gas plants elsewhere in New England. Unfortunately, PSNH customers must continue to foot the bill for Merrimack’s costly retrofit—even when the plant is not running.

Clean, Reliable Power

Our analysis found that ripe-for-retirement generators were 45 years old, on average. Some, like those at St. Clair, are considerably older than that. Not surprisingly, these older, inefficient generators are among our nation’s dirtiest power sources. Shutting down all 353 could avoid approximately 1.3 million tons of sulfur dioxide and 300,000 tons of nitrogen oxide emissions each year, as well as significant amounts of mercury, particulates, and other toxic emissions (depending on the type of resources that replace them). It would also keep 260 million tons of CO2 out of the atmosphere each year—a more than 10 percent reduction in 2010 U.S. power sector global warming emissions (assuming they are replaced entirely with zero-emissions resources like wind, solar, and energy efficiency).

Clean Energy Can Replace Coal Retirements by 2020

State-level clean energy policies and underused natural gas plants can replace power currently supplied by ripe-for-retirement generators and announced retirements. (Click for larger view.)


The eight regions in this chart correspond to regional entities that maintain and improve the reliability of the U.S. electricity grid.


What about the cost of carbon?

Future CO2 regulations could make coal even less economical.

Coal-fired power plants are the United States’ single largest source of heat-trapping CO2 emissions. Closing ripe-for-retirement plants would help address this problem, but we would still be left with more than 200 GW of coal-fired generating capacity that could continue warming the atmosphere for years. With the health and economic risks of unchecked climate change becoming increasingly clear, policy makers should take action by putting a price on CO2 emissions.

To measure the effect of such a policy, we evaluated the cost of coal-fired power generation under a scenario in which CO2 emissions are priced at $15 per ton (a conservative figure used in economic analyses by government agencies and other energy experts). This price would nearly double the generating capacity we found to be ripe for retirement: from 59 GW to 115 GW. If that additional capacity were retired, annual CO2 emissions would be reduced between 348 million and 584 million tons (equivalent to 14 to 23 percent of 2010 U.S. power sector emissions), depending on the mix of energy technologies that replace it.

With these costs in mind, making expensive upgrades to the remaining coal fleet should be considered financially risky. A better deal for electricity customers would be investing in cleaner, low- or no-carbon alternatives.

Of course, retiring and replacing all 100 GW of uncompetitive coal generators (i.e., already announced closures plus those we identify as ripe for retirement) will be a big task. But our analysis shows that the nation’s electricity system is well prepared to meet this challenge and continue providing reliable, affordable power. For example, power grid operators project that the United States will have 146 GW of excess generating capacity by 2014, so many coal plants can retire without needing to be replaced at all. In addition, the United States has a significant number of underused natural gas plants that, if further utilized and combined with growth in renewable energy and energy efficiency spurred by state-level policies, would more than make up for all coal generator retirements by 2020 (see the chart). Investments in new transmission lines that bring renewable energy to market, along with a limited number of new natural gas power plants, would also help us transition to a cleaner energy system.

The writing is on the wall: our nation’s coal fleet is becoming outdated and unaffordable. Because the energy choices we make today profoundly affect how quickly and efficiently we can shift to cleaner sources, careful planning is needed now to ensure we create a sustainable, reliable, and affordable energy system while we retire old coal plants. Simply shifting from coal to natural gas, for example, would represent a huge missed opportunity to transition to truly low- or no-carbon resources that protect public health, have less impact on the environment, and achieve the CO2 reductions necessary to avoid global warming’s worst consequences.

Federal, state, and regional policies are needed to achieve this transition at the lowest possible cost and with the greatest benefits to society. Closing ripe-for-retirement coal plants and replacing them primarily with renewable energy and energy efficiency is a good start.

 

Jeff Deyette is assistant director for energy research in the UCS Climate and Energy Program. Steven Frenkel is director of the UCS Midwest office. Read more from Jeff on our blog, The Equation, at http://blog.ucsusa.org.

 

Learn more about how closing America’s costliest coal plants would benefit our health, environment, andeconomy.