Events highlight US coal plant exit complications

This year's extreme weather events in the US have highlighted the complications generators and grid operators could face ending coal use.

Utilities generally remain committed to closing coal-fired power plants rather than investing in extending the lifespan of aging units, amid pressure to decarbonize and lower power market prices. "But this year, grids have been struggling to get enough supply," said Daniel Cohan, associate professor of Civil and Environmental Engineering at Rice University. Even so, Cohan does not expect utilities to make large investments in coal plants.

Generators have announced plans to retire nearly 80,000MW of coal-fired nameplate capacity from 2021-2030, according to Argus data.

But plant operators have been running coal plants at increased rates this year. Coal-fired generation in the PJM Interconnection and the Midcontinent Independent System Operator in recent months has topped 2020 and 2019 levels, thanks to heat waves and higher natural gas prices.

At the end of July, the Tennessee Valley Authority (TVA) "met some of the highest peak power demand in a decade for our service area," TVA chief executive Jeffrey Lyash said. He noted the utility relied on a diverse mix of generating resources, including nuclear, renewables, natural gas and coal, to successfully meet increased demand.

But moments of even more extreme weather could challenge grid reliability.

"It will put pressure on utilities to keep the lights on, while still retiring some of their resources," said Joshua Rhodes, a researcher at the Webber Energy Group at the University of Texas.

But "if decarbonization targets are part of a binding policy, utilities probably cannot change their retirement plans," Rhodes said.

While President Joe Biden is setting a national goal for the US utility sector to have net-zero CO2 emissions by 2035, California, Washington state and Oregon already have individual mandates to phase out coal in coming years.

Some states in the midcontinent and eastern US, also have been working on plans to push utilities away from coal. For example, the North Carolina House of Representatives last month passed a bill that would require Duke Energy to retire about half of its coal capacity by 2030. The bill is supported by Duke and generally aligns with the company's previously stated plans.

Still, many decisions to close plants are market based.

Soon after PJM's 2022-23 base residual capacity auction, which resulted in prices for much of the grid's footprint being less than half of what previous auctions yielded, generators Vistra Energy, NRG and GenOn said they would accelerate some coal plant retirements.

"The auction price was very low compared to recent history and not high enough to keep many plants viable," said Chris Moser, executive vice president of operations at NRG. "Based on these results, the company carefully considered its options and future projections and made some difficult but necessary decisions."

PJM called the coal plant retirements "a natural part of the market system. PJM's markets reinforce reliability by attracting the most efficient, cost-effective and dependable resources."

An influx of natural gas resources will help ensure grid reliability "under a number of stressed scenarios involving extreme weather, pipeline outages and other conditions," PJM said.

Some are critical of plans to use more natural gas. Xcel Energy this year scrapped plans to build an 876MW natural gas facility on the site of the company's Sherco coal-fired plant in Becker, Minnesota, in the face of complaints from environmental and consumer advocacy groups. Xcel Energy then filed a revised proposal with state regulators to instead build two smaller gas plants, repower two others and increase wind and solar capacity.

Environmental groups have also criticized the North Carolina house bill that passed last month because of Duke's plan to increase gas use. Governor Roy Cooper's (D) office said the bill "falls short of clean energy goals."

But "it takes a diverse mix of energy sources like carbon-free nuclear, renewables and cleaner natural gas to keep the lights on 24/7 for our customers and economy," Duke said.

TVA's Lyash characterized gas generation "as an enabler to expand renewables and more rapidly retire our coal fleet."

Other industry leaders argue Biden's 2035 decarbonization target is too aggressive.

"There are just too many obstacles that stand in the way of removing coal and natural gas from the grid in the next 15 years," industry group America's Power chief executive Michelle Bloodworth said. She listed technology, transmission and time as the primary challenges. Unless these obstacles are overcome, consumers could be left with less reliable and more expensive electricity, she said.

Renewable "technologies are advancing, along with energy storage, but until then, they must be supported by other 24/7 generation resources that include natural gas, coal, and nuclear," American Electric Power said. MidAmerican Energy notes that even though renewable energy "is a larger piece of the pie than ever before and continues to grow," the utility currently still relies on more traditional fuel types to ensure reliability.

But "even if utilities extend the lives of their coal plants to have them available in cases of a multi-day cold spell, they will not run plants all the time," said Shannon Anderson, a staff attorney for environmental group the Powder River Basin Resource Council. She also questioned whether those coal plants will be available for extreme weather events, if not weatherized. Utilities would have to make those investments at some point, but Anderson supposes that most of them would choose to invest in natural gas rather than coal.

By Elena Vasilyeva and Jim Foster