NCPA - National Center for Policy Analysis

Loss of Coal Will Boost Power Costs by 25 Percent

November 5, 2014

Companies have announced that 27 gigawatts (27,000 megawatts) of coal power will be permanently shut down by 2020, but according to a report from Standard & Poor's, between 40 and 75 gigawatts of coal power might be shut down by the end of the decade. One megawatt, according to Naureen S. Malik and Harry Weber of Bloomberg, can supply power for 800 homes.

Malik and Weber report that 18 percent of the units closed by the end of 2015 will be replaced with renewable energy and natural gas. What do the closures mean for electricity costs? According to a new report from the Brattle Group, the loss of coal will increase the price of power by 25 percent for energy grids that currently supply power for one-third of the nation. The group says that the Midwest and Northeast will be most affected, as the areas get especially cold in the wintertime.

When the "polar vortex" hit last year and sent people scurrying to turn up their thermostats, power companies had to pull out all the stops to meet demand. NRG Energy, which is the largest independent power company in the United States, had to use plants that had been shut down for up to a decade in order to supply enough power. According to NRG's CEO David Crane, "If the polar vortex were to happen two years from now, I don\'t know what would have happened in the Northeast."

Many coal plants will shut down in 2015, because the Environmental Protection Agency's Mercury and Air Toxics Standards (MATS) rule -- also known as Utility MACT -- will take effect next year. MATS required coal plants to install new equipment or shut down operations.

While there are more than 35,000 megawatts worth of gas plant projects across the United States planned for now through 2020, three-fourths of those projects have not begun construction. Malik and Weber report that many of them are waiting for regulatory approval from the government.  

Source: Naureen S. Malik and Harry R. Weber, "Are Environmental Regulations Causing US Utility Bills to Surge?", October 29, 2014. 


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