Yesterday, April 25th, the EPA unveiled their final carbon pollution standards for power plants. At a high level, the regulations will require existing coal-fired power plants that run more than 40% of the time and new natural gas-fired power plants that plan to operate beyond 2039 to cut 90% of their carbon dioxide emissions by 2032. These new rules have come just as the industry begins to grapple with how to meet growing demand driven by data center load. Today’s Energy Market Insight will look at the current landscape of thermal plant emissions around the country and how these new regulations will affect them.
In 2023, gas-fired generation made up 41% of the total generation within the U.S., compared to just 17% from coal-fired generation. However, since coal produces about two times the amount of CO2 that natural gas emits, coal-fired generation accounted for 48% of CO2 emissions from the power sector, while 51% came from natural gas.
Coal-fired generation continues to be most prevalent in the Appalachian region within the PJM and MISO ISOs, with 43% of the coal-fired generation in the U.S. having come from these two ISOs in 2023. Given this reliance on coal, it can be expected that these ISOs will need to find a way to replace the 47 GW of coal they have retiring by 2040.
Aging natural gas and coal facilities make up most of the retirements by 2040, with 120 GW of the 143.6 GW of planned thermal retirements having become operational prior to 1990. This leaves 23.6 GW of facilities planning to retire before they’ve reached 50 years of service, including Comanche’s Unit 3, which came online in Colorado in 2010. As the EPA regulations develop, it remains to be seen whether we will see more young facilities seeking to retire by 2040 to avoid the costs associated with having to reduce their emissions.
As for emissions, we looked at the 50 largest emitters from the U.S. power sector in 2023 to see whether the new regulations would apply to them.
Of these top 50 emitters, 14 are planning to be completely shuttered by 2040, six are planning to decommission a portion of their units, and 30 are coal plants with no announced retirement. Those with no plans to retire include the top nine CO2 emitters in 2023. The operators of these coal plants will have to decide whether it makes more economic sense to continue operating or replace this generation with a different fuel source instead. We have already seen Southern Company and the Tennessee Valley Authority announce their intentions to build new natural-gas facilities to replace their older coal-fired generation and meet their increasing load projections.
The EPA’s new regulations will force any new natural gas facilities to follow stricter guidelines to be built, and coal-fired generation will have to decide to either retire or heavily reduce their emissions. However, these regulations will most likely be challenged in the courts or, if one occurred, by a change in administration. As such, they may end up being drastically changed. Furthermore, the EPA has yet to release additional guidance on emissions standards they will have for existing natural gas-fired facilities.
Be sure to check back for additional Energy Market Insights, as BTU Analytics, a FactSet Company, will continue its coverage of the EPA’s regulatory developments.
