Coal-Fired Plant Retirements and the Impact on the Energy Market

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Utility-scale generating units planned to retire during 2015

 

Reports filed by the Energy Information Administration (EIA) show that nearly 16 GW of generating capacity is expected to retire in 2015, of which 81 percent (13 GW) is scheduled to come from coal-fired generation. The large number of coal-fired retirements is primarily due to the implementation of the Environmental Protection Agency's Mercury and Air Toxics Standards (MATS), which are scheduled to take effect in April of this year.

Although some non-compliant units have been granted extensions to operate through April 2016, MATS requires large coal- and oil-fired electric generators to meet stricter emissions standards by incorporating emissions control technologies in existing generating facilities. Many coal plant operators have decided to retire their units instead of meeting the heavy costs of retrofitting their facilities, and many of these retirements are due to take place in the Appalachian region. Over 8 GW of combined retirements are forecast to occur in Ohio, West Virginia, Kentucky, Virginia, and Indiana alone in 2015. 

While it is still too early to tell how these coal retirements will ultimately affect the western PJM power grid, there is speculation that the retirements may cause the normal power flow in the region to reverse. Historically, power in this region has travelled from west to east, but with less generating capacity in the western area due to the plant closures, some analysts think that power will need to be brought in from eastern areas to satisfy demand. The net effect would be slightly higher power prices in the area affected (west) due to diminished supply. The potential reversed flow and higher prices may be short-lived though, as cleaner generation and renewable energy may take the place of the retired plants in coming years.

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