White Paper: Reports Of King Coal’s Death Have Been Greatly Exaggerated - The Outlook for Coal-Fired Generation after EPA MATS

1. Summary -

The authors, using the PROMOD IV2 model, forecasted coal- and gas-fired generation in 2018 for the Eastern Interconnection. Our analysis suggests that, in the absence of federal carbon policy and with natural gas prices in the range of $5.50 to $6.00 per MMBtu, eastern coal-fired output (MWh) will likely rebound to within 10 percent to 15 percent of the levels seen in 2008, which is a year indicative of the generation mix during the middle of the previous decade (before the shale gas revolution). This prediction is, of course, critically dependent on the natural gas price. We have therefore also evaluated a lower, but also plausible, natural gas price of $4.00 per MMBtu.

While the implementation of the U.S. Environmental Protection Agency’s (“EPA”) Mercury and Air Toxics Standards (“MATS”) is modeled as leading to the retirement of approximately 45 gigawatts (“GW”) of eastern coalfired capacity in the 2010 to 20174 time frame, we expect that the coal-fired generators that survive MATS will exhibit a rebound in performance. We forecast a recovery in coal-fired generator capacity factors and energy margins. In the natural gas price range of $5.50 to $6.00 per MMBtu, coal capacity factors return to the 67 to 70 percent level and energy margins jump by $55 to $70 per kW-yr above 2011 levels.

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