Wave of closures set to hit US coal stations

Closures of US coal-fired power plants are set to accelerate sharply during the coming decade as a wave of environmental regulations hits the industry, analysts and executives believe.

Ageing plants are threatened by the cost of investment needed to cut pollution, as well as by competition from cheap gas supplies created by the boom in US production from previously uneconomic shale rocks.

Moves by the US government’s Environmental Protection Agency to regulate emissions of carbon dioxide and other gases thought to contribute to global warming, supposed to start next January, would hit coal the hardest.

Coal plants also face growing pressure from tighter regulations of pollutants such as nitrogen and sulphur oxides – the gases responsible for acid rain – and mercury, as well as new rules for ash disposal and water use.

A fifth of US coal-fired generation capacity could close in the coming decade, according to Wood Mackenzie, the consultancy, given even moderate federal controls on greenhouse gas emissions.

Although waning political support has made those controls seem less likely, Hind Farag, of Wood Mackenzie, said there was still a chance that they could be introduced by the second half of the decade.

A policy that set a price on carbon dioxide emissions, starting at about $14 per tonne in 2016 and rising to $35 by 2035, could stabilise US emissions at about their present level, compared with a rise if no controls were imposed, she said.

“An actual cut in US emissions would require more dramatic measures that would mean an even more significant retirement of coal plants,” she said.

Old coal plants, many of them built in the 1950s and 1960s, will require replacement even without new regulations.

EPB, the energy supplier in Chattanooga, Tennessee, which is a pioneer of “smart grid” technology using information technology to manage the electricity system, said a new wave of investment in power generation would be needed as demand picked up with the recovery in the economy.

Harold DePriest, EPB’s chief executive, said: “The cost of power will be going up in this country. The average coal plant in the Tennessee Valley area is 48 years old, and eventually they will have to be replaced.”

Several utilities, including Xcel Energy in Colorado, Chicago-based Exelon and Charlotte-based Duke Energy have announced plans to shut or sell coal-fired plants, and talked about investment instead in renewables such as wind, nuclear power, or – most often – gas-fired power.

Xcel plans to convert coal plants to use natural gas, which causes little local pollution and has about half the greenhouse gas emissions of coal.

Wood Mackenzie estimates that the shift from coal to gas for power generation could mean a 20 per cent rise in US gas consumption by 2030.

The politically powerful coal industry lobby has been fighting to resist the shift towards gas, and is contesting the controls proposed by the EPA.“If the US has greenhouse gas controls, as part of a global system, then coal and gas-fired plants will need carbopn capture.”

Branko Terzic of Deloitte, the consultancy, said that in 15-20 years time, coal-fired plants that captured and stored their carbon dioxide emissions, which would also control other pollutants, could drive a renaissance in the industry.