Wave of Coal Retirements Coming by 2016

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There will be many more closures of coal-fired power plants around the country over the next two years than has been announced thus far, according to the Energy Information Administration. As of December 2013, data from power plant companies that reported their plans to the EIA over the next few years suggest that utilities will close 40 gigawatts of coal capacity by 2016. A mix of low electricity demand, low natural gas prices, and environmental regulations are forcing coal plants out of the market.

However, the EIA projects in its Annual Energy Outlook 2014 that coal retirements will be much higher than what power companies are reporting. EIA predicts that around 60 GW of coal capacity will be shuttered by 2020, which would account for about one-fifth of the existing 310 GW of coal-fired capacity. But about 90 percent of those retirements would come before 2016 because new limits on mercury take effect in 2015 (with a possible one-year extension allowed), which will require power plant operators to install equipment to limit emissions of mercury, acid gases, and toxic metals. This pollution control technology is too expensive in many cases, forcing operators to shut the plants down instead.

Utilities have already shut down many coal plants in recent years. For example, in 2012 alone, 85 generating units accounting for 10.2 GW of power were closed. However, plants that closed in the past were much older, smaller, and less efficient. The average size of a coal plant that closed between 2010 and 2012 was only 97 megawatts. Over the next 10 years, the average size of closed plants will be about 145 megawatts. This merely demonstrates that as environmental regulations bite in the coming years, they will begin to cut more into the core of the nation’s coal fleet.

Originally written for OilPrice.com, a website that focuses on news and analysis on topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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