Source: U.S. Energy Information Administration, Generating Unit Annual Capital and Life Extension Costs Analysis: Final Report on Modeling Aging-Related Capital and O&M Costs; Sargent & Lundy
Note: FERC is the Federal Energy Regulatory Commission.
Since peaking at nearly 318 gigawatts (GW) in 2011, U.S. coal-fired electric generating capacity declined to 257 GW in 2017 after several coal power plants retired. The U.S. Energy Information Administration (EIA) undertook a study with Sargent & Lundy to improve modeling for the Annual Energy Outlook (AEO). The results show the relationship between plant retirements and a plant’s operating and maintenance costs. According to the report, a larger share of plants with higher operating and maintenance costs retired by 2018 than those with relatively low operating and maintenance costs.
Source: U.S. Energy Information Administration, Monthly Energy Review
Sustained relatively low natural gas prices has allowed natural gas-fired generators to become more competitive with coal-fired units, leading to a general decline in using coal-fired capacity. A decline in use leads to a decline in revenues at a plant, which generally translates to lower operating margins, less ability to cover costs, and in many cases, retiring that capacity.
EIA’s analysis did not cover the entire fleet of coal power plants in the United States because not all plants report their variable operating and maintenance costs to the Federal Energy Regulatory Commission (FERC) on FERC's Form 1, Electric Utility Annual Report, which was used as a basis of the study. In 2008, about 55% of the U.S. coal fleet reported Form 1 data.
EIA sorted these coal plants into three groups based on their average operating and maintenance costs. The highest cost group operated at costs ranging from $28 per megawatthour (MWh) to $40/MWh, and the lowest cost group operated at $20/MWh to $26/MWh. A middle group operated near the fleet average, ranging from $26/MWh to $28/MWh from 2008 through 2017.
In general, the group with the lowest variable operating and maintenance costs tended to run more often, which resulted in higher capacity factors. Capacity factors reflect a power plant’s electricity output as a percentage of its generating capacity. As natural gas prices fell and coal use decreased, capacity factors at coal-fired power plants fell from 75% in 2008 to 54% in 2017. The number of operating coal plants in the highest operating cost group fell by more than the fleet average, from 75% in 2008 to 47% in 2017.
Source: U.S. Energy Information Administration, Generating Unit Annual Capital and Life Extension Costs Analysis: Final Report on Modeling Aging-Related Capital and O&M Costs; Sargent & Lundy
Because of more competitive natural gas prices, more advanced natural gas combined-cycle generators, and the increasing efficiency of the natural gas generator fleet, EIA expects more coal-fired generators to retire, especially within the next decade. According to AEO Reference case projections, almost 90 GW of coal-fired capacity will retire between 2019 and 2030.
Coal units with higher operating and maintenance costs are more likely to retire: 66% of the units in the highest operating cost group will retire between 2019 and 2030, compared with 36% in the lowest cost group.
Principal contributor: Kenneth Dubin
