EPA Regulations and Electricity: Update on Agencies' Monitoring Efforts and Coal-Fueled Generating Unit Retirements
Published: 2014-08-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: EPA recently proposed or finalized four regulations affecting coal-fueled electricity generating units, which provide about 37 percent of the nation's electricity supply. These regulations are the: (1) Cross-State Air Pollution Rule; (2) Mercury and Air Toxics Standards; (3) Cooling Water Intake Structures regulation; and (4) Disposal of Coal Combustion Residuals regulation. In 2012, GAO reported that, in response to these regulations and other factors such as low natural gas prices, companies might retire or retrofit some units. GAO reported that these actions may increase electricity prices and, according to some stakeholders, may affect reliability–the ability to meet consumers' demand—in some regions. In 2012, GAO recommended that DOE, EPA, and FERC develop and document a formal, joint process to monitor industry's progress responding to these regulations. In June 2014, EPA proposed new regulations to reduce carbon dioxide emissions that will also affect these units.
GAO was asked to update its 2012 report. This report examines (1) agencies' efforts to respond to GAO's recommendation and (2) what is known about planned retirements and retrofits. GAO reviewed documents, analyzed data, and interviewed agency officials and stakeholders.
section_title: What GAO Found
paragraphs: The Department of Energy (DOE), the Environmental Protection Agency (EPA), and the Federal Energy Regulatory Commission (FERC) have taken initial steps to implement a recommendation GAO made in 2012 that these agencies develop and document a joint process to monitor industry's progress in responding to four proposed or finalized EPA regulations affecting coal-fueled generating units. GAO concluded that such a process was needed until at least 2017 to monitor the complexity of implementation and extent of potential effects on price and reliability. Since that time, DOE, EPA, and FERC have taken initial steps to monitor industry progress responding to EPA regulations including jointly conducting regular meetings with key industry stakeholders. Currently, these monitoring efforts are primarily focused on industry's implementation of one of four EPA regulations—the Mercury and Air Toxics Standards—and the regions with a large amount of capacity that must comply with that regulation. Agency officials told GAO that in light of EPA's recent and pending actions on regulations including those to reduce carbon dioxide emissions from existing generating units, these coordination efforts may need to be revisited.
According to GAO's analysis of public data, power companies now plan to retire a greater percentage of coal-fueled generating capacity and retrofit less capacity with environmental controls than the estimates GAO reported in July 2012. About 13 percent of coal-fueled generating capacity—42,192 megawatts (MW)—has either been retired since 2012 or is planned for retirement by 2025, which exceeds the estimates of 2 to 12 percent of capacity that GAO reported in 2012 (see fig.). The units that power companies have retired or plan to retire are generally older, smaller, more polluting and not used extensively, with some exceptions. For example, some larger generating units are also planned for retirement. In addition, the capacity is geographically concentrated in four states: Ohio (14 percent), Pennsylvania (11 percent), Kentucky (7 percent), and West Virginia (6 percent). GAO's analysis identified about 70,000 MW of generating capacity that has either completed some type of retrofit to reduce sulfur dioxide, nitrogen oxides, or particulate matter since 2012 or plan to complete one by 2025, which is less than the estimate of 102,000 MW GAO reported in 2012.
section_title: What GAO Recommends
paragraphs: GAO is not making new recommendations but believes it is important that these agencies jointly monitor industry progress and fully document these steps as GAO recommended in 2012. The agencies concurred with GAO's findings.

section_title: Letter
paragraphs: Coal is a key domestic fuel source, producing about 37 percent of the  nation’s electricity supply in 2012. Burning coal for electricity production  results in the emission of pollutants such as sulfur dioxide (SO), nitrogen  oxides (NO), and mercury and other metals. Coal-fueled electricity  generating units are among the largest emitters of these pollutants. Using  coal to generate electricity has been associated with human health and  environmental concerns by the Environmental Protection Agency (EPA),  the primary federal agency responsible for implementing many of the  nation’s environmental laws. For example, according to EPA data, SO have been linked to respiratory illnesses and acid rain. In  addition, coal-fueled generating units emit large quantities of carbon  dioxide, the primary greenhouse gas contributing to climate change, and  can use significant quantities of water and create large amounts of waste  products that require disposal. and NO emissions contribute to the formation of fine particulate matter, and NO  contributes to the formation of ozone. Fine particulate matter may aggravate respiratory  and cardiovascular diseases and is associated with asthma attacks and premature death.  Ozone can inflame lung tissue and increase susceptibility to bronchitis and pneumonia. these actions. At that time, EPA had recently proposed or finalized four  regulations, as required or authorized, that aimed to address certain  health or environmental impacts associated with coal-fueled electricity  generating units. These regulations included the: (1) Cross-State Air  Pollution Rule (CSAPR); (2) Mercury and Air Toxics Standards (MATS);  (3) Cooling Water Intake Structures regulation, which we refer to as  316(b); and (4) Disposal of Coal Combustion Residuals from Electric  Utilities regulation (CCR). Currently, MATS is the only one of the four  regulations that has been in effect; the other regulations have been either  in active litigation or have undetermined regulatory compliance periods. In  July 2012, we reported that it was uncertain how power companies  would respond to these regulations, but that available information  suggested they would retrofit some units with controls to reduce  pollutants or take other steps to reduce adverse impacts. We also  reported that when it was not economic to take these actions—whether  due to the cost of undertaking these retrofits or because of other changes  that have occurred in the electric power sector, such as lower prices for  natural gas—power companies may retire some units. We reported  estimates that 2 to 12 percent of coal-fueled capacity could be retired,  and that some regions, particularly the Midwest, could see more  significant levels of retirements. These retirements could affect the  amount of coal-fueled generating capacity and the amount of electricity  actually generated from coal. Available information also suggested that,  while these actions may not cause widespread concerns about  reliability—the ability to meet the needs of consumers even when  generating equipment fails unexpectedly, or other factors affect the  electricity system, they may contribute to reliability challenges in some  regions and these actions would likely increase electricity prices in some  regions. In October 2012, we also reported that two broad trends were  affecting power companies’ decisions related to coal-fueled generating  units—recent environmental regulations and changing market conditions,  such as the recent decrease in the price of natural gas. We found that  power companies may build new generating units, upgrade transmission  systems to maintain reliability, and increasingly use natural gas to  produce electricity as coal units are retired, and remaining coal units  become somewhat more expensive to operate.
Two federal agencies have responsibilities for overseeing actions power  companies take in response to federal regulations and mitigating some  potential adverse implications. The Federal Energy Regulatory  Commission (FERC) is generally responsible for ensuring that certain  electricity and transmission prices are “just and reasonable,” as well as  approving and enforcing standards for reliability. The Department of  Energy (DOE) works to modernize the electricity system, enhance the  security and reliability of the nation’s energy infrastructure, and facilitate  recovery from any disruptions. DOE also has authority to compel  generating units to produce electricity in certain emergency situations. In  our July 2012 report, we recommended that DOE, FERC, and EPA  develop and document a formal, joint process consistent with each  agency’s respective statutory authorities to monitor industry’s progress in  responding to the EPA regulations until at least 2017 and that each  agency, to the extent practical, leverage resources and share the results  of its efforts with the other agencies. DOE and EPA agreed with this  recommendation, and FERC disagreed, stating that the agencies were  working to establish a more formal approach to coordination to the extent  that FERC’s authority allows.
You asked us to examine actions these agencies’ have taken in response  to our recommendation in our July 2012 report and provide updated  information on planned coal-fueled generating unit retirements and  retrofits. The objectives of our review were to examine: (1) DOE’s,  FERC’s, and EPA’s efforts to respond to our recommendation that the  agencies develop and document a formal, joint process to monitor  industry’s progress in responding to EPA regulations and (2) what is  known about power companies’ current plans to retire or retrofit affected  coal–fueled generating units.
To address these objectives, we reviewed relevant documents and  interviewed knowledgeable officials from EPA, FERC, and DOE, and  other key stakeholders. We interviewed and obtained information from a  sample of stakeholders who were identified and interviewed as part of our  July 2012 review. Stakeholders we interviewed and obtained information  from included six Regional Transmission Organizations (RTO), the North  American Electric Reliability Corporation (NERC), and two industry  groups that represent power companies. We used data from SNL  Financial (SNL) to provide information on historic and planned retrofits  and retirements of coal-fueled generating units. Information regarding  planned retrofits and retirements reflect publicly reported plans as  identified by SNL. To assess the reliability of these data, we interviewed  and corresponded via e-mail with knowledgeable SNL staff, analyzed the  data to identify any problems with completeness and accuracy, and,  where possible, corroborated the data with other available information.  We determined the data were sufficiently reliable for our purposes. We  also analyzed information on retirements and retrofits provided by RTOs.  To assess the reliability of these data, we interviewed and corresponded  via e-mail with knowledgeable officials, analyzed the data to identify any  problems with completeness and accuracy, and, where possible,  corroborated the data with other available information. We determined the  data we used were sufficiently reliable for our purposes.
We conducted this performance audit from May 2014 to August 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Because of the abundance of coal and its historically low cost, coal-fueled  electricity generating units provide a large share of the electricity  produced in the United States. In 2012, according to Energy Information  Administration (EIA) data, there were 1,309 coal-fueled generating units  in the United States, with a total of 309,680 megawatts (MW) of net  summer generating capacity—about 29 percent of the total net summer  generating capacity in the United States.produced by using other fossil fuels, particularly natural gas and oil;  nuclear power; and renewable sources, including hydropower, wind,  geothermal, and solar. Historically, coal-fueled generating units have  provided about half of the electricity produced in the United States—an  amount that has declined in recent years, falling to 37 percent in 2012.
In addition to coal, electricity is  To address concerns over air pollution, water resources, and solid waste,  several environmental laws, including the Clean Air Act, Clean Water Act,  and Resource Conservation and Recovery Act, were enacted. As  required or authorized by these laws, EPA recently proposed or finalized  four key regulations that will affect coal-fueled units. As outlined in table  1, these regulations are at different stages of development and have  different compliance deadlines.
These four regulations have potentially significant implications for public  health and the environment. In particular, EPA projected that, among  other benefits, CSAPR would reduce SO emissions by over half in covered states, reducing asthma and  related human health impacts. In addition, EPA projected that MATS  would reduce mercury emissions by 75 percent from coal-fueled  electricity generating units, reducing the impacts of mercury on adults and  children.
In addition to these four regulations, on June 2, 2014, EPA proposed new  regulations to reduce carbon dioxide emissions from existing fossil-fueled  generating units that, if finalized, will impact the electricity industry,  including coal-fueled generating units, aiming for overall reductions  equivalent to 30 percent from 2005 emissions levels by 2030. The  proposed regulations include state-specific goals for carbon dioxide  emissions and guidelines for states to follow in developing, submitting,  and implementing plans to achieve these goals, which would be due in  June 2016, although, under some circumstances, a state may submit an  initial plan by June 2016 and a completed plan up to 2 years later.
In addition to DOE, FERC, and EPA, other key stakeholders have certain  responsibilities for overseeing actions power companies take in response  to the regulations and have a role in mitigating some potential adverse  implications. These other stakeholders include state environmental and  electricity regulators and system planners that coordinate planning  decisions regarding transmission and generation infrastructure to  maintain the reliable supply of electricity to consumers. System planners  and operators attempt to avoid reliability problems through advance  planning of transmission and, in some cases, generation resources, and  coordinating or determining operational decisions such as which  generating resources are operated to meet demand throughout the day.  The role of a system planner can be carried out by individual power  companies or RTOs. System planners’ responsibilities include analyzing  expected future changes in generation and transmission assets, such as  the retirement of a generating unit; customer demand; and emerging  reliability issues. For example, once a power company notifies the system  planner that it is considering retiring a generating unit, the system planner  generally studies the electricity system to assess whether the retirement  would cause reliability challenges and identify long- or short-term  solutions to mitigate any impacts. The solutions could include building  new generating units, reducing demand in specific areas, building new  transmission lines or adding other equipment.
section_title: DOE, EPA, and FERC Are Coordinating Efforts to Monitor Industry’s Response to Key EPA Regulations in Response to GAO’s Recommendation
paragraphs: DOE, EPA, and FERC have taken initial steps to implement the  recommendation we made in our July 2012 report that these agencies  develop and document a formal, joint process to monitor industry  progress in responding to the four EPA regulations. Since that time, DOE,  EPA, and FERC have taken initial steps collectively and individually to  monitor industry progress responding to EPA regulations including jointly  conducting regular meetings with key industry stakeholders. However,  recent and pending actions on the four existing regulations, as well as  EPA’s recently proposed regulations to reduce carbon dioxide emissions  from existing generating units may require additional monitoring efforts,  according to DOE, EPA, and FERC officials.
subsections: section_title: DOE, EPA, and FERC Have Taken Initial Steps to Coordinate Efforts to Monitor Industry Progress
paragraphs: DOE, EPA, and FERC have taken initial steps to implement the  recommendation we made in our July 2012 report. In that report we found  the agencies had undertaken individual monitoring efforts of varied scale  and scope and engaged in informal coordination, but lacked a formal  documented process for routinely monitoring industry progress toward  compliance with the regulations. As such, we recommended that these  agencies develop and document a formal, joint process to monitor  industry progress in responding to EPA regulations. We concluded that  such a process was needed until at least 2017 to monitor the complexity  of implementation and extent of potential effects on price and reliability.  Since that time, DOE, EPA, and FERC have taken initial steps collectively  to monitor industry progress responding to EPA regulations including  jointly conducting regular meetings with key industry stakeholders.  Currently, these monitoring efforts are primarily focused on industry  implementation in regions with a large amount of capacity that must  comply with the MATS regulation—the only one of the four regulations  that has taken effect.
According to EPA officials, DOE, EPA, and FERC officials have met three  times since our July 2012 report to coordinate the efforts under way at  each agency to monitor industry’s progress implementing the MATS  regulation and other related issues, including EPA’s development of  recently proposed regulations to reduce carbon dioxide emissions from  existing generating units. In addition, in May 2013, staff from DOE, EPA,  and FERC jointly developed a coordination memorandum that was  intended to identify how the agencies would work together to address the  potential effects of EPA’s regulations on reliability. According to one  EPA official, the memorandum was intended to be an evolving document  that the agencies would revisit as appropriate, for example, as additional  EPA regulations are finalized.
These four RTOs include PJM Interconnection, which serves all or parts of Delaware,  Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio,  Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia;  Midcontinent ISO, which serves parts of Arkansas, Illinois, Indiana, Iowa, Kentucky,  Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, North Dakota, South  Dakota, Texas, and Wisconsin, as well as the Canadian province of Manitoba; the  Southwest Power Pool, which serves parts of Arkansas, Kansas, Louisiana, Mississippi,  Missouri, Nebraska, New Mexico, Oklahoma, and Texas; and the Electric Reliability  Council of Texas, which serves parts of Texas. control equipment in use and retrofit plans, and other information such as  reliability assessments under way in the region. As part of these  meetings, officials told us that the RTOs provided information of varying  levels of detail to the agencies, including information on retirement  notifications and associated impacts as determined by the reliability  studies completed by the RTOs; the status and findings of reliability  assessments they conduct; data on the generating capacity of units with  planned, announced, or completed retirements and retrofits; and data on  planned outages. RTO officials told us they each gathered information  about the plans for generating units in the areas they oversee. Officials  from several RTOs told us that they gathered this information by  surveying owners of generating units to identify, among other things,  information on decisions related to retiring or retrofitting specific  generating units.
According to EPA officials, the agencies’ monitoring and technical  assistance efforts are primarily focused on implementation of the MATS  requirements because it has taken effect and includes requirements that  must be achieved within well-defined time frames. The MATS regulation  was finalized in February 2012 and calls for a 3-year compliance period  for existing generating units with the deadline of April 16, 2015, but  permitting authorities may provide an extra year for certain generating  units that request additional time to comply. Agency officials and  stakeholders told us that state agencies are generally providing the 1- year extension for generating units—providing these units a total of 4  years to comply. In addition, according to the National Association of  Clean Air Agencies (NACAA), as of May 2014, all but 9 of over 100  requests for extensions were granted by the state permitting agencies.  In addition to the MATS extension, EPA also provided a mechanism to  allow certain units—generating units that are needed to address specific  and documented reliability concerns—to request an additional year to  come into compliance through the use of Clean Air Act administrative  orders—which, if granted, would provide a total of 5 years to comply.  According to EPA officials, compliance with the MATS requirements has  been less challenging for industry than anticipated, and operators have  generally been able to undertake retrofits as part of scheduled  maintenance outages; however, certain retrofits, such as the installation  of a fabric filter will require additional or longer outages to be completed.  According to EPA officials, whether a plant will need to schedule outages  for retrofits will depend on a number of factors including the type of  controls required for compliance. EPA officials told us they anticipate few  administrative orders to be requested. However, if EPA receives a  request for an administrative order, EPA has stated in its policy that it will  rely on the advice and counsel of reliability experts, including FERC, to  identify and analyze reliability risks, but EPA officials will make the final  decision on these requests. In May 2012, FERC issued a policy  statement detailing how it intends to provide advice to EPA on such  requests.
section_title: Agencies Have Taken Individual Steps to Monitor Progress and Provide Assistance
paragraphs: In addition to participating in the EPA-facilitated meetings with industry  and reviewing information provided from the RTOs through those  meetings, DOE, FERC, and EPA have taken other steps to individually  monitor or support industry progress implementing EPA regulations.
DOE. DOE is offering technical assistance to state public utility  commissioners, generating unit owners and operators, and utilities on  implementing the new and pending EPA regulations affecting the electric  utility industry. Specifically, according to DOE officials and documents,  DOE may provide technical information on cost and performance of the  various retrofit control technologies; technical information on generation  or transmission alternatives for any replacement power needed for retiring  generating units; and assistance to public utility commissions regarding  any regulatory evaluations or approvals they may have to make on utility  compliance strategies. According to agency officials, while DOE offers  technical assistance on implementing new and pending EPA rules, DOE  has received limited requests for such assistance.
EPA. According to EPA officials, EPA has conducted outreach to ensure  state agencies understand their ability to provide MATS extensions and  EPA officials also review information from NACAA on the status of MATS  extension requests. In addition, EPA has updated its power sector  modeling tool—a model EPA uses to analyze the impact of policies,  regulations, and legislative proposals on the power sector—to reflect  MATS requirements along with changes in other market conditions.
FERC. FERC officials told us that they monitor information from several  sources including the NERC reliability assessments,capacity additions, and information from NACAA on the status of MATS  extension requests. In addition, FERC obtained industry information on   EIA data on  reliability challenges through a technical conference that it convened to  obtain information on the effect of recent cold weather events on the  RTOs.
section_title: Recent and Pending Actions on Regulations May Require Additional Efforts to Monitor Industry’s Progress
paragraphs: Recent and pending actions on the four existing regulations, as well as  EPA’s recently proposed regulations to reduce carbon dioxide emissions  from existing generating units, may require additional agency effort to  monitor industry’s progress in responding to the regulations and any  potential impacts on reliability. DOE, EPA, and FERC officials told us that,  in light of these changes, their coordination efforts may need to be  revisited. Specifically, one EPA official noted that the agencies may need  to reexamine their coordination efforts, as appropriate, in light of changing  conditions, including newly proposed EPA regulations. In addition,  according to FERC officials, since not all the regulations have been  finalized, conditions will continue to change, making continued monitoring  of potential reliability or resource adequacy challenges important.  Furthermore, in April 2014, a FERC Commissioner testified before  Congress about concerns and uncertainty related to potential reliability  and price impacts associated with environmental regulations.Specifically, the Commissioner expressed concerns about the reliability of  data on which generating units are retiring and the resources to replace  those retiring generating units and called for a more formal review  process including FERC, EPA, and others to analyze the specific details  of retiring units, as well as the new units and new transmission that will be  needed to manage the transition and ensure reliability of the nation’s  electricity sector.
RTO officials and other industry stakeholders also told us that recent and  pending actions on regulations could have impacts on the industry’s  ability to reliably deliver electricity. Officials from several RTOs told us  that, while widespread reliability concerns are not anticipated, some  regions may face reliability challenges including challenges associated  with increasing reliance on natural gas. Officials from several RTOs said  that their efforts to monitor reliability impacts will include evaluating the  recently proposed regulations to reduce carbon dioxide emissions, which  may present challenges in the future. In addition, officials from one RTO  told us that compliance with new and proposed EPA regulations and an  evolving generation portfolio will have significant effects on the industry’s  ability to reliably deliver electricity. Officials from this RTO reported that  their region is forecasting shortfalls in its reserve margin—additional  capacity that exceeds the maximum expected demand to provide for  potential backup—in some areas. In addition, these RTO officials and  industry stakeholders noted that retirement of coal-fueled generating units  may lead to increasing reliance on natural gas, as these generating units  are replaced with natural gas fueled generating units, which will require  construction of new pipeline and storage infrastructure. As a result,  according to officials from one RTO, their region has increased  coordination with the natural gas industry through a stakeholder forum  and a series of gas infrastructure studies. These officials said that, while  relying on natural gas to generate electricity has not historically negatively  affected reliability, greater reliance on natural gas may require more  consideration of potential fuel-related future reliability challenges.
RTO officials and other industry stakeholders also told us recent and  pending actions on regulations could have impacts on electricity prices.  For example, industry stakeholders told us that the retirements that are  occurring or planned are significant and could lead to increased electricity  rates in some regions. In addition, as we reported in July 2012, the  studies we reviewed estimated that increases in electricity prices could  vary across the country, with one study projecting a range of increases  from 0.1 percent in the Northwest to an increase of 13.5 percent in parts  of the South more dependent on electricity generated from coal. Officials  from several RTOs told us that, while they analyze the potential reliability  impacts of specific generating units that power companies are  considering retiring, they do not analyze the potential market impacts of  these retirements on electricity prices or other market factors. In addition,  several RTO officials told us they cannot estimate the impacts of these  potential retirements on the markets due to the number of factors involved  in determining market prices and affecting markets. Based on our  discussions with agency officials, FERC, DOE, and EPA are not  evaluating the potential impacts of planned retirements or retrofits on  electricity prices as part of their monitoring efforts. However, EPA officials  told us it uses its power sector modeling tool to analyze the potential  impact of new regulations on economic factors including electricity prices  and has used the tool to examine the potential impact of the new carbon  rule that reflected publicly announced retirements and retrofits at the time  of its analysis. According to EPA’s analysis for the recently proposed  regulations to reduce carbon dioxide emissions from existing generating  units, it projected an increase in the national average retail electricity  price between 5.9% and 6.5% in 2020 compared with its base case  estimate.
section_title: Power Companies Plan to Retire More Generating Capacity and Retrofit Less Generating Capacity Than Initial Estimates
paragraphs: According to our analysis, power companies plan to retire a greater  percentage of coal-fueled net summer generating capacity and retrofit  less capacity with environmental controls than the estimates we reported  in July 2012. Specifically, our analysis indicates that power companies  retired or plan to retire about 13 percent of coal-fueled net summer  generating capacity (42,192 MW) from 2012 through 2025, which  exceeds the estimates of 2 to 12 percent of capacity we reported in 2012.  In addition, power companies have planned or completed some type of  retrofit on about 70,000 MW of net summer generating capacity to reduce  SO, NO, or particulate matter from 2012 through 2025, which is less  than estimates we reported in 2012. In addition to our analysis of publicly  announced retirements and retrofits, RTO officials told us that power  companies may take additional steps and provided information on  generating units that owners may take steps to retire or retrofit;  specifically, about 7,000 MW of additional capacity from 46 generating  units may be retired from 2012 through 2025, beyond what we identified  in our analysis of SNL data.
subsections: section_title: Power Companies Plan to Retire More Coal-Fueled Generating Capacity Than Estimated in 2012
paragraphs: According to our analysis of SNL data, planned retirements of coal-fueled  generating units appear to have increased and are above the high end of  the estimates we reported in July 2012. Specifically, power companies  retired or plan to retire about 13 percent of coal-fueled net summer  generating capacity (42,192 MW from 238 units) from 2012 through  2025. When we reported in July 2012, projections suggested that 2 to  12 percent of coal-fueled capacity may be retired. Based on our  analysis of SNL data, power companies retired 100 coal-fueled units from  January 2012 to May 2014 with a total of 14,887 MW net summer  generating capacity. In addition, based on our analysis of SNL data,  power companies have reported plans to retire an additional 138 coal- fueled units with a total of 27,306 MW of net summer generating capacity  from June 2014 through 2025. Another recent review also identified  higher projected retirements of coal-fueled capacity than estimates we  reported in July 2012. Specifically, in April 2014, EIA projected that  retirements from 2012 through 2020 could reach approximately 50,000  MW or about 16 percent of net summer generating capacity available at  the end of 2012.
Consistent with the reasons we had reported for retirements in 2012,  some stakeholders we interviewed said that some of these projected  retirements may have occurred without the environmental regulations.  Specifically, these stakeholders noted that several industry trends may be  contributing to the retirement of coal-fueled generating units, including  relatively low natural gas prices, increasing prices for coal, and low  expected growth in demand for electricity. In addition, in June 2012, we  reported that operators of some coal-fueled generating units had entered  into agreements with EPA to retire or retrofit units to settle EPA  enforcement actions. However, we also reported in July 2012 that,  according to some stakeholders, the new environmental regulations may  accelerate retirements because power companies may not want to invest  in retrofitting units with environmental controls for those units they expect  to retire soon for other reasons.
About three-quarters of the retirements we identified in our analysis of  SNL data are expected to occur by the end of 2015, corresponding to the  initial April 2015 MATS compliance deadline (see fig. 1). This level of  retirements is significantly more retirements than have occurred in the  past; for example, according to our analysis, between 2000 and 2011,  150 coal-fueled units with a total net summer generating capacity of  13,786 MW have been retired.
According to our analysis of SNL data, the units that power companies  have retired or plan to retire are generally older, smaller, and more  polluting, and this is generally consistent with what we reported in  October 2012. In addition, we found that many of the units that  companies have retired or plan to retire are those that are not used  extensively and are geographically concentrated, with some exceptions.  Specifically, we found the following:
Older. Generating units that power companies have retired or plan to  retire are generally older. The fleet of operating coal-fueled units was  built over many decades, with most of the capacity currently in service  built in the 1970s and 1980s. In particular, from 2012 through 2025,  power companies retired or plan to retire about 80 percent of net  summer generating capacity from units that were placed in service  prior to 1970 (33,419 MW from 213 of the 238 units). However, SNL  data indicate that power companies retired or plan to retire some  newer generating units, including one generating unit placed into  service in 2008.
Smaller. Generating units that power companies have retired or plan  to retire are generally smaller. Smaller generating units are generally  less fuel efficient than larger units and can be more expensive to  retrofit, maintain, and operate on a per-MW basis. In particular,  smaller units—those less that 300 MW—comprise about 63 percent of  the net summer generating capacity that power companies retired or  plan to retire from 2012 through 2025 (26,659 MW from 208 of the  238 units). However, some larger generating units are also planned  for retirement. In particular, according to our analysis, power  companies retired 4 generating units with a net summer generating  capacity of over 300 MW from 1990 to 2012, and they retired or plan  to retire about 30 such generating units from 2012 through 2025.
More polluting. Generating units that power companies retired or  plan to retire over the next 3 years emit air pollutants such as SO at generally higher rates than the remaining fleet. According to  our analysis, units that were retired or are planned for retirement from  2014 through 2017 emitted on average almost three times as much  SO per unit of fuel used at the generating unit in 2013 as units that  are not planned for retirement. Similarly, units that were retired or  are planned for retirement from 2014 through 2017 emitted on  average about 41 percent more NO per unit of fuel used at the  generating unit in 2013 than units not planned for retirement.
Not used extensively. Most generating units that power companies  have retired or plan to retire have not been extensively used in recent  years, but other units were used more often. Specifically, according  to our analysis, from 2012 through 2025, power companies retired or  plan to retire units that comprise about 70 percent of the net summer  generating capacity (30,000 MW from 186 of the 238 units) that  operated the equivalent of less than half of the hours they were  available over the past few years. However, data also indicate that  about 13 of the 238 units that companies retired or plan to retire— which represent about 4,200 MW of net summer generating  capacity—operated the equivalent of 70 percent or more of the hours  they were available over the past few years.
Geographically concentrated. Generating units that power  companies have retired or plan to retire are concentrated in certain  states (see fig. 2). Specifically, about 38 percent of the net summer  generating capacity that power companies retired or plan to retire  from 2012 through 2025 is located in four states—Ohio (14 percent),  Pennsylvania (11 percent), Kentucky (7 percent), and West Virginia (6  percent). In particular, figure 2 shows how completed or planned  retirements from 2012 through 2025 are distributed nationwide and  how these are concentrated in certain areas.
section_title: Power Companies Plan to Retrofit Less Coal-fueled Generating Capacity Than Estimated in 2012
paragraphs: According to our analysis of SNL data, completed or planned retrofits of  coal-fueled generating units include less capacity than estimates we  reported in July 2012. These retrofits include the use of a wide range of  the technologies we reported at that time. As noted in our July 2012  report, operators of generating units were expected to rely on the  combined installation of several technologies to comply with the  regulations. These technologies include: (1) fabric filters or electrostatic  precipitators to control particulate matter; (2) flue gas desulfurization  units—also known as scrubbers—or dry sorbent injection units to control  SO and acid gas emissions; (3) selective catalytic reduction or selective  noncatalytic reduction units to control NO; and (4) activated carbon  injection units to reduce mercury emissions. Appendix I includes a  description of these controls, how they operate, and their potential  capacity to remove pollutants. that power companies have either installed or expect to install a  scrubber—generally intended to reduce SO—on about 34,000 MW of net  summer generating capacity from 2012 through 2025, an effort that we  reported in July 2012 has typically been costly and can take some time to  complete. In addition, about 20,000 MW have completed or planned to  complete a retrofit to reduce particulates, including about 17,000 MW with  completed or planned installations of fabric filters known as “baghouses.”
By comparison, in July 2012, we reported that several studies forecasted  the steps generating unit owners would take to retrofit units. In  particular, EPA estimated that, in response to MATS, companies would  retrofit 102,000 MW of generating capacity with fabric filters and 83,000  MW with new scrubbers or scrubber upgrades. In addition, a study by  NERC, which collectively examined early versions of all four regulations  in 2011, estimated that 576 units that account for about 234,371 MW of  capacity would be retrofitted by the end of 2015.
We identified two key characteristics of the units that power companies  have retrofitted or plan to retrofit as follows:
Larger. Most of the net summer generating capacity that have  completed or plan to complete a retrofit—about 68 percent—is at  larger units with capacity greater than 500 MW.
Geographically concentrated. A large share of the net summer  generating capacity that has completed or plan to complete a  retrofit—about 36 percent—is composed of generating units located in  four states: Illinois, Indiana, Kansas, and Texas. In addition, some  states have completed or plan to complete more retrofits than others.  In particular, seven states (Kansas, Louisiana, New Hampshire, New  Mexico, Oregon, South Dakota, and Washington) have completed or  plan to retrofit more than half of the net summer generating capacity  located in that state.
section_title: Additional Generating Units May Take Steps to Retire or Retrofit Units According to Information Provided by RTOs
paragraphs: Based on information provided by RTOs, power companies may be  considering retiring or retrofitting some additional generating units. In  particular, RTO officials provided information on additional generating  capacity that power companies have either announced plans to retire or  retrofit, or are in the process of considering for a retirement or retrofit. In  particular, RTOs identified about 46 coal-fueled generating units that  account for about 7,000 MW of additional generating capacity that may be  retired from 2012 through 2025, beyond what we identified in our analysis  of SNL data. In addition, RTOs identified a total of 260 units that account  for about 108,000 MW of generating capacity that have completed or may  undertake a retrofit from 2012 through 2025, which may include the  capacity identified in our analysis.
section_title: Concluding Observations
paragraphs: The electricity sector is in the midst of a significant transition as power  companies face decisions on the future of coal-fueled electricity  generating units in light of new regulations and changes in the market,  such as recent low prices for natural gas, and even though compliance  deadlines for three of the regulations remain uncertain, power companies  have already identified retirements beyond the range of estimates we  reported in 2012. Reliable electricity remains critically important to U.S.  homes and businesses and is itself reliant upon the availability of  sufficient generating capacity. DOE, EPA, and FERC have taken initial  steps to implement our recommendation to establish a joint process to  monitor industry’s progress in responding to the four EPA regulations and  other factors. However, stakeholders, including a FERC Commissioner,  continue to express concerns about reliability and electricity prices.  Furthermore, proposed regulations focused on reducing emissions of  carbon dioxide from the electricity sector, when finalized, may pose  additional challenges for coal-fueled generating units. The initial  coordination efforts now under way across the three agencies are an  important tool for understanding and monitoring the potential effects of  EPA regulations and other factors on the electricity sector. However,  consistent with our recommendation in 2012, careful monitoring and  coordination by the federal agencies incorporating the views of other  stakeholders such as RTOs will be even more important over the next  several years as key regulations are finalized and implemented.
section_title: Agency Comments and Our Evaluation
paragraphs: We are not making new recommendations in this report. We provided a  draft of this report to DOE, EPA, and FERC, for review and comment. In  written comments from DOE, EPA, and FERC, reproduced in appendixes  II, III, and IV respectively, the three agencies generally concurred with our  analysis. The agencies stated that they will continue to monitor the  progress of industry implementation of the regulations and coordinate  with one another to address potential reliability challenges. Specifically,  DOE stated that these coordination efforts have primarily focused on  MATS and may be revisited as they work with industry to monitor  compliance with other EPA regulations. EPA stated that it will monitor  compliance with all of the rules, as appropriate, to ensure that reliability is  not put at risk. FERC stated that it is working with industry to explore  reliability issues stemming from new and pending environmental rules for  the power sector, and that it will continue to monitor industry’s progress  implementing these rules and will coordinate with DOE, EPA, and  industry. We continue to believe it is important that these agencies jointly  monitor industry’s progress in responding to the EPA regulations and fully  document these steps as we recommended in 2012.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Energy, the Administrator of  the EPA, the Chairman of FERC, and other interested parties. In addition,  the report will be available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on   the last page of this report. GAO staff members who made major  contributions to this report are listed in appendix V.
section_title: Appendix I: Air Pollution Control Equipment Used at Coal-Fueled Electricity Generating Units
subsections: section_title: Primary pollutant targeted Particulate matter
paragraphs: How it works  An induced electrical charge removes particles  from flue gas.
Fabric filter (commonly referred  to as a “baghouse”)
Flue gas passes through tightly woven fabric  filter “bags” that filter out the particulates.
Flue gas desulfurization unit  (commonly referred to as a  “scrubber”)
Wet flue gas desulfurization units inject a  liquid sorbent slurry, such as a limestone  slurry, into the flue gas to form a wet solid that  can be disposed of or sold.  Dry flue gas desulfurization units inject a dry  sorbent, such as lime, into the flue gas to form  a solid byproduct that is collected.
Coal combustion conditions are adjusted so  less NO is formed.
For SCR, ammonia is injected into flue gas to  react with NO to form nitrogen (N) and water  and uses a catalyst to enhance the reaction.  For SNCR, ammonia or urea is injected into  flue gas to react with NO as well, but does not  use a catalyst.
Activated carbon injection units  Powdered activated carbon sorbent is injected  into flue gas, binds with mercury, and is  collected in particulate matter control device.
section_title: Appendix II: Comments from the Department of Energy
section_title: Appendix III: Comments from the Environmental Protection Agency
section_title: Appendix IV: Comments from the Federal Energy Regulatory Commission
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Jon Ludwigson (Assistant  Director), Janice Ceperich, Margaret Childs, Philip Farah, Quindi Franco,  Cindy Gilbert, Richard Johnson, Armetha Liles, and Alison O’Neill made  key contributions to this report.