Energy Ventures Analysis

1901 N. Moore St. Arlington, VA 22209

(703) 276 8900

ASSESSING COAL UNIT RETIREMENT RISK 

Tom Hewson 

Principal 

June 14, 2016

Presentation for the US Energy Information Administration Workshop 

Coal Fleet Aging 
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COAL CAPACITY CHALLENGES 

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 Environmental Regulatory Risk-- Compliance often requires coal units to make large capital 

investment in additional retrofit control measures and/or increase their cost of generation. Power 

providers must evaluate if they will be able to recover these compliance costs or retire units 

– Clean Power Plan (CPP) (Stayed pending litigation outcome) (October 2015)

– Mercury & Air Toxic Standard (MATS) 

– Cross State Air Pollution Rule (CSAPR)

– Regional Haze

– Major modifications triggering New Source Performance Standards

– 316 B Cooling Water Intake Structures (Aug 2014) 

– Steam Electric Effluent BACT Guidelines (Sept 2015) 

– Coal Combustion Residual Rule (December 2014)

– Regional CO2 Cap & Trade Programs (RGGI, California) 

– State Specific Requirements ((e.g. Colorado Clean Air-Clean Jobs , Illinois Multi-Pollutant Standard)

Future

– 2010 short-term SO2 NAAQS (75 ppb) 

– 2015 Ozone NAAQS (70 ppb)

– Regional Haze- Reasonable Forward Progress

– Risk of Future Regulatory programs 
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COAL CAPACITY CHALLENGES 

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 Financial Risk

– Cost of Capital varies– Independent Power Producer, Investor Owned Regulated Utility, Rural Electric 

Coop, and Public Owned Utility 

– Remaining unit lifetime- Steam-electric 65-70 years, NGCC 45 years

 Operation Issues- Ramping, seasonal dispatch (??), age, environmental penalties, 

 Unit Competition

– Unit Delivered Fuel Prices

 Coal versus natural gas (Commodity price outlook changes depending upon regulatory outlook, 

productivity/extraction costs, fuel demand (including outside power market demand), regional coal quality, etc... 

– Nuclear

 Future Relicensing requirements 

– Renewable 

 Production Tax Credit/Investment Tax Credit- recently extended 

 State RPS Standards- REC values

 Clean Power Plan- renewable set-aside incentives to address leakage

 Other renewable financial incentives

 Curtailments (Wind) and Transmission issues 
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ANNOUNCED COAL UNIT RETIREMENTS – CUMULATED BY NERC REGION 

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 An additional 36.86 GW of announced coal unit retirements during period 2016-2025

– 9.51 GW in RFC (26%) 

– 8.78 GW in SERC (24%)

– 8.33 GW in WECC (23%) 

NPCC RFC SERC FRCC MRO SPP TRE WECC Total

2011 439 372 346 0 64 0 0 4 1,224

2012 1,000 7,094 3,789 135 262 92 0 413 12,785

2013 1,524 9,912 7,520 135 381 92 0 608 20,172

2014 1,817 11,773 8,961 135 588 110 138 1,700 25,222

2015 1,892 20,578 16,543 135 2,253 712 138 2,181 44,431

2016 2,328 24,964 20,036 135 2,983 2,094 138 2,593 55,271

2017 3,730 24,964 22,888 385 3,106 2,584 138 4,744 62,539

2018 3,730 26,678 23,629 1,258 3,414 3,588 1,009 4,744 68,050

2019 3,730 26,977 23,629 1,258 3,414 3,686 1,009 5,494 69,197

2020 3,730 27,911 24,005 1,258 3,704 3,686 1,009 6,749 72,052

2021 4,113 27,911 24,142 1,258 3,896 4,026 1,009 7,003 73,359

2022 4,113 28,191 24,737 1,258 4,239 4,026 1,009 7,003 74,577

2023 4,113 30,089 24,737 1,258 4,919 4,026 1,009 7,003 77,155

2024 4,113 30,089 25,322 1,258 4,919 4,026 1,009 7,770 78,507

2025 4,113 30,089 25,322 1,258 4,966 4,026 1,009 10,508 81,292
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OVERVIEW OF EVA’S INTEGRATED BUSINESS PROCESS

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 EVA possesses a suite of 

databases, models , and 

market insight that feeds 

its integrated business 

process

 EVA’s commodity and 

power prices are seamless 

and provide an internally 

consistent outlook

 EVA utilizes the 

AURORAXMP hourly 

dispatch model to 

represent the North 

American electric power 

sector
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COAL GENERATION IS REPLACED BY INCREASING RENEWABLES AND EE

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 With the Clean Power Plan limiting 

the carbon emissions from fossil 

units, the coal generation in 

constrained CPP and national trading 

CPP case declines compared to the no 

carbon case

 CCGT generation increases in the 

constrained trading case to replace 

the lost coal generation 

 Renewable generation goes up by 

~85 TWh in the constrained CPP case 

and by ~95 TWh in the national 

trading case to replace the lost coal 

generation

WIND GENERATION BETWEEN NO CARBON, CONSTRAINED AND NAT’L TRADING

FOSSIL GENERATION BETWEEN NO CARBON, CONSTRAINED AND NAT’L TRADING
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CPP COMPLIANCE COST CAN VARY SIGNIFICANTLY BY REGION

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 2022-2030 average state carbon penalty 

($2015/ton) in CPP mass-based scenario 

with intra-state trading only

– States with highest reduction 

requirements (e.g. ND, NE, KS) have 

highest carbon penalties

– Already established CO2 allowance 

markets (RGGI, CA AB32) see no 

additional cost for CO2 due to the 

stringency of their programs

 2030 state carbon penalties 

compared to national carbon 

penalty

 In national trading scenario, 

compliance cost for states with 

no or low CO2 reduction 

requirement could increase
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OUTLINE

ABOUT EVA

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ABOUT ENERGY VENTURES ANALYSIS

EVA, Inc. is an energy consulting firm located in Arlington, VA. EVA is focused on economic, financial, and

risk analysis for the electric power, coal, natural gas, petroleum, renewable, and emissions sectors.

Since 1981, EVA has been publishing supply, demand,

and price forecasts as part of its FUELCAST

subscription service for these energy sectors.

EVA performs various analyses for an array of clients

that include:

• power utilities

• fuel producers

• fuel transporters

• commodity traders

• regulators

• financial institutions

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ENVIRONMENTAL CONSULTING AREAS

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 Assessment of future environmental policies, for example:

– Mercury & Air Toxic Standard (MATS) 

– 316 B Cooling Tower Intake Structures

– Coal Combustion Residual Rule

– Cross State Air Pollution Rule/Clean Air

Interstate Rule 

 Emission allowance forecasts

– SO2 (Acid rain, CAIR, CATR, CSAPR), NOx (annual, ozone season), CO2 (RGGI, CA AB32, Clean Power Plan) 

 GHG emission offset supply, demand, price balance

 Technology control market studies

 Economic and employment impacts of environmental policies

 Environmental control reagent market forecasts

 Public utility commission audits

 Expert testimony

– Regional CO2 Programs (RGGI, California AB32)

– Regional Haze 

– State legislation (e.g. Colorado Clean Air-Clean 

Jobs , Illinois Multi-Pollutant Standard) 

– State Renewable Portfolio Standards