CES would nearly triple projected coal retirements — EIA

Source: Nick Juliano, E&E reporter • Posted: Thursday, May 3, 2012

Senate legislation aimed at expanding use of low-emitting sources of electricity would nearly triple the projected retirements of coal-fired power plants by 2035 while providing a substantial boost to nuclear, natural gas and renewable energy, according to an analysis released today from the Energy Information Administration.

At the request of Sen. Jeff Bingaman (D-N.M.), the sponsor of the “Clean Energy Standard Act,” the agency modeled the likely outcome of the legislation’s requirement that more than 80 percent of electricity by 2035 come from sources that reduce or eliminate greenhouse gas emissions.

Coal generation would be 54 percent lower in 2035 than if no legislation was enacted, while 97 gigawatts worth of coal plants would be retired, compared with 33 GW in EIA’s reference case.

The analysis projects virtually no generation from coal plants fitted with carbon capture and sequestration systems, despite the fact that Bingaman’s bill awards such plants nearly the same credit as nuclear or renewable sources.

Carbon dioxide emissions from the power sector would be about 20 percent lower by 2025 with a clean energy standard (CES) in place and 44 percent lower by 2035, according to the EIA analysis.

Electricity prices would remain relatively stable through 2020 under a CES, although they are projected to increase by nearly 20 percent in the program’s later years, as compliance “becomes less a matter of using natural gas and biomass at existing facilities, and more a matter of requiring investment in new combined cycle, renewable and nuclear capacity,” according to EIA, the Department of Energy’s statistical arm.

Average end-use electricity prices would be less than 4 percent above the reference case in 2025 but 18 percent higher than they otherwise would be in 2035 under a CES, the agency said.

However, those averages do not capture the full range of “what may be a considerable divergence” that will hit customers of different utilities, because small generators are exempt from the bill’s requirements, the report notes. State-level regulations also play a key role in determining how much more customers would pay for electricity.

By 2030, the report says, customers of utilities that would be required to comply with the CES “may pay from 3 percent to almost 30 percent more than providers exempt from” the law.

Bingaman, who chairs the Senate Energy and Natural Resources Committee, has scheduled a hearing on the bill for May 17. While the bill is unlikely to be enacted this year in the sharply divided Congress, Bingaman, who is retiring at the end of this term, has said he sees it as a vehicle to spark discussion among lawmakers over how to promote clean sources of energy and reduce greenhouse gas emissions that can inform future legislative efforts.

The CES bill would require utilities to obtain credits to account for emission reductions among their generation fleet. The measure requires 24 percent of electricity be generated from clean facilities in 2015, a target that rises to 84 percent in 2035.

The bill also allows utilities to make “alternative compliance payments” that start at 3 cents per kilowatt-hour rather than install cleaner sources, but EIA projects that utilities will primarily meet the targets by altering their own generation mixes. The use of such payments would increase if utilities were unable to add as much new nuclear capacity as EIA projects.

Full credits are given for generation from existing and new wind, solar, geothermal, biomass, municipal solid waste and landfill gas generation, as well as hydro and nuclear capacity installed after 1991. Partial credits based on carbon intensity are awarded to natural gas, low-emissions coal and combined heat and power facilities. Older hydro and nuclear facilities receive no credit, but generation from those sources is subtracted from the baseline that utilities must measure their reductions against.

In the early years of a CES regime, utilities are expected to rely heavily on increased natural gas use to meet their targets, although that reliance tapers out as the targets grow stricter. Gas use would grow to 13 percent above reference levels in 2020, although it would be 8 percent higher by 2035, the report says.

EIA also projects an additional 80 GW of nuclear capacity to be added by 2035, compared with 10 GW in the reference case. Total nuclear generation would be 62 percent higher in 2035 compared with the agency’s reference case.

Nonhydroelectric renewable facilities would be 34 percent above reference levels by 2035 if a CES were enacted, according to EIA, with wind and biomass leading the pack in adding new capacity.