EIA Outlook: U.S. Coal-Fired Fleet Will Shrink, Natural Gas, Renewables to Grow

An annual report released on Tuesday by the U.S. Energy Information Administration (EIA) that assesses energy and technology market trends forecasts that if current laws and regulations remain unchanged, natural gas and renewables will see strong growth in the electricity sector. The report also suggests that expected regulations from the Environmental Protection Agency (EPA) will have an impact on the U.S. power sector, most notably on its fleet of coal-fired power plants.

The Annual Energy Outlook 2011 does not fully analyze the impact of proposed EPA rules on the power sector, because the rules are not yet final, the EIA says. However, the report includes several alternative cases that examine the sensitivity of power generation markets to assumed requirements for environmental retrofits. According to these cases, coal-fired capacity cuts as a result of required retrofits could range as low as 9 GW (3% of the coal fleet) in the reference case to as high as 73 GW (more than 20% of the coal fleet).

The higher end of this range would be driven by “somewhat extreme assumptions that all plants must have scrubbers to remove sulfur dioxide and selective catalytic reduction to remove nitrogen oxides, that natural gas wellhead prices remain at or below about $5 through 2035, and that environmental retrofit decisions are based on an assumption that retrofits occur only if plant owners can recover their costs within 5 years,” the agency says.

The EIA says, however, that if no more rules are made to constrain carbon emissions, coal will remain the largest source of power generation. In the reference case, few new central-station coal-fired power plants—beyond those already under construction or supported by clean coal incentives—will be built. Under the reference case, generation from coal power is expected to increase by 25% from 2009 to 2035, largely as a result of increased use of existing capacity. But its share of the total generation mix will fall from 45% to 43% by 2025 as generation from natural gas and nonhydro renewables increases over the same period.

Natural gas use for power generation will grow, driven by lower prices and “relatively low capital construction costs that make it more attractive than coal,” the agency says. The share of natural gas generation is expected to increase from 23% in 2009 to 25% in 2035.

The report also says that natural gas production will increase with moderate prices. Shale gas production, specifically, is expected to grow almost fourfold from 2009 to 2035 (from 21.0 trillion cubic feet to 26.3 trillion cubic feet) when it makes up 47% of total U.S. natural gas production. In 2009, shale gas took up a 16% share. The EIA says that although more information on shale resources has become available as a result of increased drilling activity in developing shale gas plays, estimates of technically recoverable resources and well productivity “remain highly uncertain.”

Renewable use, too, will surge. Estimates by the EIA point to a growth of 72% by 2035, increasing the nonhydro renewables share of total generation from 11% in 2009 to 14% in 2035. Most growth is expected from wind and biomass, driven by state renewable portfolio standards and federal tax credits. The increase in biomass generation will come from both dedicated biomass plants and co-firing in coal plants.

In the reference case, which assumes no explicit regulations to limit greenhouse gas (GHG) emissions beyond vehicle GHG standards, energy-related carbon dioxide emissions do not return to 2005 levels (5,996 million metric tons) until 2027, growing by an average of 0.6% per year from 2009 to 2027, or a total of 10.6%. Carbon emissions then rise by an additional 5% from 2027 to 2035, to 6,311 million metric tons in 2035. “The projections for CO2 emissions are sensitive to many factors, including economic growth, policies aimed at stimulating renewable fuel use or low-carbon power sources, and any policies that may be enacted to reduce GHG emissions, all of which are explained in sensitivity cases,” the EIA says.

Sources: POWERnews, EIA