Coal Power and Changing Industry

Editor's Note: This article marks the official launch of John Miller's new column exclusively at TheEnergyCollective.com: "Energy and Policy Developments with John Miller" will feature critical analysis of past and developing energy technologies, policies and markets.

The EPA has initiated developing new regulations to substantially reduce new and possibly existing Coal Power Plants’ carbon emissions.  In a recent TEC Post the impacts of shutting down all U.S. Coal Power (Part 1) were analyzed based on displacing this critical generation capacity with state-of-art Natural Gas Power.  While displacing all Coal Power with lower carbon and cost Natural Gas could reduce total U.S. carbon emissions by almost1.2 Billion Metric Tons per year (MT/yr.) in 2040, such a strategy would substantially increase U.S. natural gas consumption well above domestic production levels within a few years.  This would increase U.S. natural gas imports to new historic highs, which would adversely impact natural gas related energy market prices and reduce U.S. energy security.

To avoid substantially increasing natural gas costs and reducing energy security, other more optimal alternatives to displacing baseload Coal Power generation capacity have been evaluated.  These include expanding Renewable Power such as Wind & Solar and expanding Nuclear Power.  Displacing fully dispatchable Coal Power with variable, non-dispatchable Wind & Solar Power will require ensuring adequate backup or operating reserves are continuously available to reliably maintain future Power Grids’ supply-demand balances.  Operating reserves are normally supplied by fully dispatchable Natural Gas Peaking Power or Hydropower-Pumped Storage.  This Part 2 TEC Post covers a new analysis developed to more optimally shutdown most existing U.S. Coal Power generation capacity and replaces this critical baseload power with cost effective lower-zero carbon power generation alternatives.

Coal Power Shutdown Analysis Basis – Numerous studies have been developed in recent years to expand Renewable Power capacity and possibly displace U.S. Coal Power.  Some of the more detailed and credible studies include the EIA AEO 2013 (17% total Renewable Power by 2040), DOE sponsored “Wind Power in America’s Future” (20% Wind Power by 2030), and the NREL “Renewable Electricity Futures Study” (30%-90% total Renewable Power by 2050).  Each of these studies develops different future Renewable Power penetration level projections, and are based on many different assumptions.  The AEO 2013 projections are based on detailed forecasts of population & GDP growth, energy markets performance, and existing energy related regulations.   The DOE ‘20% Wind Power by 2030’ study is based on past EIA AEO reports, with primary focus on expanding Renewable Wind Power.  And, the NREL study is also based on past AEO reports, but focuses on aggressively expanding all forms of Renewable Power up to 90% in 2050, which includes expanding Wind+Solar power up to a 50% penetration level.  These studies were completed prior to the developing new EPA Coal Power carbon emission regulations.

This new (Part 2) analysis is based on EIA AEO 2013 energy balances; the same basis used for Part 1 Post; shutdown of all Coal Power generation in order to comply with future EPA carbon reduction regulations.  Although shutting down all Coal Power is directionally the ultimate goal of the new EPA regulations, the feasibility of this strategy is highly unlikely from a cost and reasonable replacement power construction schedule perspective.  A more optimal, but still very aggressive strategy, would be to shutdown up to 80% of all existing Coal Power and modify or replace the 20% balance with state-of-art IGCC+CCS Clean Coal Power discussed in the Part 1 Post.  This target is fairly consistent with the NREL 80% RE (Renewable electricity) study case.  Refer to RNEL RE Futures Study Executive Summary, Figure ES-3, page 15.

Feasible Expansion of Future Renewable Power Generation – The AEO 2013 projects that coal, natural gas and renewable power will expand in future years to meet a growing demand for electric power within the U.S. (Re. Part 1 Post, Figure 1).  The following graph provides further detailed breakdown of the AEO 2013 Renewable Power mix.

Figure 1 – EIA AEO 2013 Electric Power Generation: 2005-2040

Billion KWh or TWh per year

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Data Source: EIA AEO 2013 Electric Power Sector Electricity Supply, Renewable Energy Generation by Fuel and EIA MER Table 7.2b 

The AEO 2013 projects that Wind+Solar power generation should increase from 34% up to 42% of total Renewable Power in 2040.  Geothermal and (wood) Biomass power generation is also projected to about double during the same period.  Due to ongoing environmental opposition to Hydropower (reservoir/downstream impacts), this largest source of renewable power is projected to grow at relatively insignificant rates in the future.

Surprisingly the AEO 2013 projects a significant slowing in the current rates of Wind & Solar Power growth within the next few years.  This temporary reduction in Wind & Solar growth rate is due to the apparent uncertainty in State and Federal Government’s future support for these Renewables.  The EIA generally projects that current ‘Renewable Power Standards’ and financial subsidies, and low cost natural gas will slow Wind/Solar growth within the next few years; up to about 2030.  The combination of further expected technology performance improvements, possible decreased costs and expected increasing retirements of existing fossil fuels power capacity are projected cause a renewed, rapid expansion of Wind & Solar power during the 2030’s.  

To minimize future U.S. power generation carbon emissions, shutdown Coal Power capacity should ideally be displaced by zero/low carbon Renewable or Nuclear Power.  Since Nuclear is politically unpopular due to safety concerns, Coal Power should be initially displaced by the recently most successful and cost effective Renewables, Wind & Solar Power; followed by a much smaller expansion of Natural Gas Power and possibly Nuclear Power.

Projected Impacts of Reducing Coal Power and Expanding Renewable Power – Displacing up to 80% of Coal Power with Wind/Solar Power faces two major hurdles: 1) feasible new-annual generation construction rates, and 2) maintaining adequate baseload and reserve power to enable substantially increasing these variable, non-dispatchable power generation sources.  Based on analysis of past and future projected Renewable Power studies an aggressive, but still feasible expansion of Wind+Solar Power would be to increase these Renewable Power sources up to a total penetration level of 30% (annual net generation).  To achieve a 30% penetration level by 2040 requires expanding Wind+Solar Power capacity by an annual average of 8% or adding about 17 GW per year (average) 2015-2040; well over double recent year’s historic expansion rates.  This total Wind+Solar Renewable Power expansion rate is very similar to the RNEL 80% RE projection case.  Also based on analysis of total Electric Power mixes, limiting variable Wind+Solar Power generation to a 30% penetration level appears to be reasonable based on current and future projected power grid baseloads/reserves, and, feasible power grid performance upgrades.  Required Power Grid performance upgrades largely include locating new Wind and Solar Power capacity in the most ideal locations around the country, which could increase average Wind+Solar capacity factors up to about 35%.  Maximizing Wind & Solar generation capacity factors, also requires a huge expansion of future power transmission lines and associated infrastructures in order to optimize integrating variable power supplies into existing Power Grids.

Based on the above analysis summary and assumptions a new projected U.S. Electric Power consumption and mix balance was developed.  This initial power generation balance and mix assumes that all Conventional Coal Power is retired linearly 2015-2040 and partially replaced (20%) by IGCC+CCS Clean Coal Power capacity.  Most of the retired Coal Power can be displaced by increasing Wind+Solar Power capacity by 8% per year.  Despite this very aggressive expansion of Renewable Wind+Solar a significant shortage or power ‘baseload gap’ is projected to develop.  Refer to the following graph.

Figure 2 – Alternative Energy Analysis (AEA) and Net Generation Projection: 2015-2040

Billion KWh or TWh per year

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Data Source: EIA AEO 2013 and EIA MER original data basis.  Beginning 2015 Coal Power net generation is reduced linearly to 20% of the AEO 2013 level in 2040 and Renewable Wind+Solar Power is increased 8% per year.  The ‘Baseload Gap’ is equivalent to the retired Coal Power not displaced by the increased of Wind+Solar.  All other power generation sources are unchanged from the original AEO 2013 projections.  Note: In 2040 Wind+Solar makes up 30% of total U.S. net generation and the balance of Renewable power makes up 10%; for a total Renewable power generation of 40% in 2040. 

Increasing Wind+Solar Power net generation by 8% annually 2015-2040 increases total Renewable Power up to almost 2100 TWh in 2040; a 1200 TWh increase over the original AEO 2013 projection.  Unfortunately this level of increased Wind+Solar Power does not keep pace or replaces all the assumed annual Coal Power retirements 2015-2040.  This results in a net power generation ‘Baseload Gap’ following 2015, which peaks at 700 TWh in 2030 and declines to 300 TWh by 2040. 

This 300-700 TWh power baseload gap in U.S. net generation capacity must be ideally replaced by fully dispatchable power generation options.  Feasible options include non-variable Renewables (Hydro, Biomass and Geothermal), Natural Gas and Nuclear Power.  Hydropower expansion faces large environmental constraints, which makes further expansion of this currently largest Renewable Power source highly unlikely.  The EIA AEO 2013 projects that Biomass (primarily wood) and Geothermal will increase by about 200% each 2015-2040.  This represents an average annual increase over 8% per year, which is very consistent with the assumed feasible expansion of Wind+Solar Power in the Alternative Energy Analysis (AEA) per Figure 2 above.  Further increased expansion of Biomass & Geothermal is feasible, but much more costly than Natural Gas and almost as costly as Advanced Nuclear Power.  These data indicate the more optimal options to supplying the needed ‘baseload gap’ net generation 2015-2040 would be some combination of expanding Nuclear and Natural Gas Power.

More Optimal Power Generation Mix Required to Shutdown 80% of Coal Power – Displacing most existing Coal Power by expanding Wind+Solar Power to 30% of total U.S. net generation in 2040 will also require expanding Natural Gas and Nuclear Power capacity above the AEO 2013 projections.  Assuming that Nuclear Power net generation capacity is expanded by a feasible 300 TWh by 2040 and Natural Gas Power is expanded as needed to supply the balance of the ‘baseload gap’ 2015-2039, a final AEA 2015-2040 Power capacity mix projection was completed.  Refer to the following graph.

Figure 3 – ‘AEA 40% RE’ Final U.S. Power Capacity Projection: 2015-2040

GW’s

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Data Source: EIA AEO 2013 Electricity Generating Capacity and NREL Figure 3-2, ‘Capacity and generation expansion in the 80% RE-ITI scenario for CY2040.    AEA 2020 20% RE, 2030 25% RE and 2040 40% RE based on 80% Coal Power shutdown by 2040, 30% Wind+Solar penetration in 2040, 40 GW Nuclear expansion by 2040, up to a 70 GW Natural gas expansion in 2029 (which declines to zero in 2040); all other power capacities unchanged from AEO 2013 data.

The final AEA (40% RE) projection shows that total U.S. power generation capacity based on the above described assumptions and targets will increase up to 1410 GW in 2040.  This AEA projection is 200 GW higher than the AEO (2013) projection for 2040 and only 40 GW greater than the NREL (80% RE) projection for 2040.  While the 2040 power capacities for the AEO and AEA projections are identical for Natural Gas, Other Renewables and Storage, the NREL-AEA power capacity differences are substantially greater.  The largest NREL-AEA differences are due to the strategies and assumptions used for Coal, Natural Gas, Nuclear, Other Renewables, and Storage.  The NREL does not shutdown Coal Power as aggressively as the AEA, but does displace about 1/3rd of Natural Gas with Other Renewables and Power Storage.  And, rather than increasing Nuclear by 1/3rd (AEO vs. AEA) the NREL projection actually decreases Nuclear Power by 1/2 (AEO vs. RNEL).

Impacts of Shutting Down Most U.S. Coal Power – This Part 2 analysis shows that reducing Coal Power by 80% and increasing Wind+Solar Power up to 30% of total net generation in 2040 is definitely feasible.  The added capital costs (above AEO 2013 projections) are estimated to be about $2.9 Trillion (2012 dollars).  Even though these costs will be spread over a 25 year period, fully amortizing these added capital costs and the associated operating expenses will cause U.S. average power prices up to almost double EIA AEO 2013 estimates in future years.  The obvious benefit will be reducing U.S. Power Generation carbon emissions by 1.6 Billion MT/yr. or a 28% reduction in total U.S. projected carbon emissions by 2040.

There are many other feasible options to this AEA 40% RE such as the NREL 80% RE study briefly covered in this analysis.  But as usual the level of feasibility is in the detail and assumptions.  The NREL study more aggressively expands Renewable Power with substantially greater penetration levels of Biomass, Hydropower, more distributed Solar PV, and a large increase in Industrial Power Storage.  Even though these different expanded Renewable Power options are technologically feasible, the costs are substantially greater than this AEA 40% RE strategy.  The net result of pursuing the NREL 80% RE strategy would be to significantly increase new Power generation capital costs above  the AEA 40% RE strategy, which could lead to directionally tripling future average U.S. power prices.  As far as the benefits of the NREL 80% RE study, the carbon emission reductions in 2040 fall 300 Million MT/yr. short of the AEA 40% RE projection.

Despite the likely more cost effective power supply strategy and greater carbon benefits of the AEA 40% RE (vs. other existing studies), this more optimal alternative to shutting down most Coal Power still faces many major challenges, including regulatory, power supply performance and environmental.  These factors will be covered in a final TEC Post: Impacts of Shutting Down Most U.S. Coal Power: Part 3.