Coal industry groups have asked NERC to update its 2018 generation retirement scenario, saying declining power demand and low natural gas prices will likely force the shuttering of more than 30 GW of coal capacity in the next three years.

NERC’s December 2018 special reliability assessment report warned that “significant reliability problems could occur” if retirements occurred faster than the grid could respond to with replacement generation and needed transmission.
The report, which NERC called a “stress test,” used data from NERC’s 2017 Long-Term Reliability Assessment (LTRA), which identified 18 GW of confirmed coal retirements from 2017 through 2022. (See NERC Releases ‘Stress Test’ Analysis of Gen Retirements.)

The National Mining Association, Lignite Energy Council and ACCCE (formerly the American Coalition for Clean Coal Electricity) told NERC in a letter June 2 that a study by Energy Ventures Analysis (EVA) indicates that 38.5 to 83 GW of coal-fired generation is at risk of retirement by January 2023 because of falling coal capacity factors resulting from low gas prices, increasing renewable penetration and reduced power demand from the coronavirus pandemic.

The Sierra Club’s Beyond Coal campaign told ERO Insider it agrees that coal retirements are likely to accelerate due to the pressures cited by EVA. “However, we have not modeled these effects on our targets — nor do we have enough data over the past three months to assess a solid trend,” said Beyond Coal spokeswoman Marta Stoepker.

The coal groups told NERC that coal-fired generation in PJM, MISO and SPP — which represents 60% of the remaining coal fleet — fell by 45% in March and April, compared to the same two-month period in prior years. “Low capacity factors mean the fixed costs of operating coal-fueled units are spread over fewer megawatt-hours, making it even more challenging for coal units to recover their costs in the electricity markets and continue operating,” they said.

The groups cited Energy Information Administration data that show coal’s share of electricity generation dropped to 24% in 2019 from 31% in 2017, while natural gas’ share increased from 31% to 37% and wind and solar grew from 8% to almost 9.5%.

“The share of electricity supplied by coal is likely to fall even more during 2020, to be replaced primarily by natural gas,” the groups said. “This trend has left the grid even more vulnerable to problems associated with natural gas than it was during the 2014 polar vortex and the 2017/18 bomb cyclone, when coal was called on to meet increased load and replace power from natural gas units that experienced fuel shortages. (Coal provided more than 60% of the increased demand for power during the Bomb Cyclone.) The natural gas system is unlikely to be significantly more reliable now than it was when the SRA expressed concerns about electric sector dependence on natural gas.”

NERC Assessments

Asked whether NERC had plans to update the 2018 Special Reliability Assessment or if the data provided by the coal groups was causing it to consider an update, spokeswoman Kimberly Mielcarek told ERO Insider that NERC’s 2018 assessment was based on information available at the time, including projected retirements.

“As we do other assessments, we take any new information into account,” she said. ” … Our 2020 Long-Term Reliability Assessment, done annually and expected to be released in December, will have a ten-year outlook on expected generation retirements.”

NERC’s 2019 LTRA projected the elimination of 19 GW of coal by 2029 — just half the 38 GW forecast by EVA by 2023 in its “low retirement” scenario — dropping coal’s generation market share from 20% to 16%. The NERC report noted, however, that its projections “are based on committed retirements known to date and [are] expected to increase as the time horizon progresses.”

EVA’s April 2020 study noted that while coal plant retirements have averaged more than 14 GW annually from 2014 to 2019, only about 14.7 GW of retirements have been announced for the three years ending in January 2023.

But it said retirements are likely to increase because of “intensified … pressure” on coal plants. “In the first quarter of 2020, coal generation across the lower 48 states fell by about 31% from the prior year,” EVA said.

Two Scenarios

EVA looked at two scenarios, a low retirement case that could more than double announced retirements to almost 38.5 GW and a high retirement case that would more than quintuple retirements to 83 GW. “The acceleration of coal retirements is more likely in the merchant power markets of PJM and ERCOT where coal capacity could fall by 50% or more,” EVA said.

The low retirement case assumed the following plants to be at risk for early retirement:

• Utility plants with announced retirement dates from 2023 to 2026, which EVA said are likely to be accelerated due worsening conditions in 2020;
• Utility plants listed for retirement under the “final scenarios” of the most recent integrated resource plans (IRP) but for which no final decision has been reached; and
• Merchant and utility plants with capacity factors below 20% in 2019.

The high retirement case assumed the following plants at risk:

• Utility plants with announced retirement dates in the period from 2026 to 2028, which EVA said could be accelerated due worsening conditions;
• Utility and merchant plants with capacity factors below 40% in 2019;
• Merchant plants in Pennsylvania, which have an increased risk of early retirement after PJM’s 2022 capacity auction because the state may join the Regional Greenhouse Gas Initiative (RGGI), increasing coal plants’ dispatch costs; and
• Merchant plants in ERCOT with capacity factors below 60%, which are at an increased risk due to the lack of a capacity market and high fixed costs.

‘Aggressive, but not Impossible’

The Sierra Club’s Beyond Coal campaign is projecting 21 GW of retirements between January 2020 and January 2023 based on announced retirements, with an additional 30 GW expected to retire by January 2031.

Stoepker said EVA’s retirement projections are “an aggressive, but not impossible, outcome.”

“2015 is when we saw the greatest drop in coal energy generation (21 GW). If we matched that rate in 2020/22, we’d have 63 GW retire (i.e., 42 GW beyond currently announced retirements).”

EVA projects PJM’s coal fleet would be reduced from the current 52.7 GW to 37 GW in its low retirement scenario (–30%) and to 19 GW (–64%) in its high retirement scenario.

PJM offered no comment in response to EVA’s estimates but pointed to its 2018 Fuel Security Study, which found that under two “escalated” retirement scenarios, combined with extreme winter load, “the system may be at risk for emergency procedures and load loss.”

One of the scenarios modeled retirements of 32.2 GW by 2023, with 16.8 GW of replacement capacity added to meet the installed reserve margin requirement of 15.8%. A second one assumed 15.6 GW of retirements, with no replacements.

Combining the extreme load, escalated retirements and pipeline outages resulted in numerous scenarios with voltage reductions, reserve shortages and load sheds of as much as 83 hours — about 3.5 days.

PJM described the analysis as a “stress test … intended to discover the tipping point when the PJM system begins to be impacted.” Some critics said the escalated retirement scenarios were unrealistic because they assumed no more than half of such retired capacity would be replaced. (See PJM Begins Campaign for ‘Fuel Security’ Payments.)

EVA sees ERCOT’s fleet dropping from the current 14.2 GW to 11.2 GW under the low retirement scenario (–21%) and 7.5 GW in the high retirement model (–47%).

Asked to comment on the projections, ERCOT spokeswoman Lindsey Hughes said the latest Capacity, Demand and Reserves report issued in May listed only one planned coal retirement, the 650-MW Oklaunion Unit 1 plant, which is expected to be shuttered by Oct. 1. The report said a “reliability analysis study determined the unit is not required to support ERCOT system reliability.” (See PSO Officially Retires Oklaunion Coal Plant.)