EPA’s Clean Power Plan Proposal Could Accelerate Renewable Energy Additions & Coal Plant Retirements
Originally published on EIA.
EIA’s analysis of the Environmental Protection Agency’s proposed Clean Power Plan (CPP) shows that renewables play a critical role under a range of different market conditions and policy assumptions. The key difference across the various scenarios analyzed involves the timing and the extent that wind and solar electric generating capacity additions occur, as well as retirements of some generation capacity, mainly coal-fired units and relatively inefficient power plants that use natural gas or oil-fired boilers to run steam turbines.
In all policy cases analyzed, natural gas-fired generation increases substantially in the early 2020s as an initial compliance strategy. Later, renewable generation, particularly wind and solar photovoltaic generators, are added. The preference for renewable capacity additions as a compliance option under the proposed rule reflects the treatment renewables receive in EPA’s intensity-standard formula, as they both reduce CO2 emissions (in the numerator of the formula) and count as affected sources whose generation is added to generation from existing sources in the denominator of the formula. In the Base Policy case with the proposed rule, 283 gigawatts (GW) of cumulative additions of renewable electricity generation capacity are added through 2040, compared to only 109 GW of renewable generating capacity additions projected in the baseline, the Annual Energy Outlook 2015 (AEO2015) Reference case.
Most of the wind capacity is added by 2025 to help meet the interim targets, while the solar capacity is added steadily throughout 2040 as it becomes more cost competitive after the best wind resources have been built out. Continued growth in renewable generation helps maintain the emission rate targets.
Under the Policy Extension case, where the intensity standard is further tightened after 2030 (as opposed to remaining constant after 2030) 362 GW of renewable electricity generation capacity is added by 2040. The most significant expansion of renewable electricity capacity additions occurs under the Policy with High Economic Growth case (393 GW), which implements the proposed Clean Power Plan rule in a scenario with higher economic growth. In the High Economic Growth case, without the proposed Clean Power Plan rule, 194 GW of renewable capacity is added by 2040.
The least amount of renewable electricity generation capacity additions occur in the Policy with the High Oil and Gas Resource case. The significantly lower natural gas prices with high resource assumptions shift the economics of regional compliance strategies away from building new zero-carbon generating capacity and toward the use of redispatch and the construction of new natural gas combined cycle capacity. The 138 GW of renewable electricity generation capacity additions in the High Oil and Gas Resource CPP case through 2040 are more than double the level in the High Oil and Gas Resource base case (66 GW).
Even in the absence of the proposed Clean Power Plan rule, 40 GW of existing coal-fired capacity and 46 GW of existing natural gas/oil-fired capacity are expected to retire through 2040 in the Reference case. Cases that implement the proposed Clean Power Plan rule accelerate and amplify these retirements, especially for coal. In the Base Policy case, 90 GW of coal-fired capacity and 62 GW of natural gas/oil-fired capacity retire by 2040. In the Policy Extension case, as emission rates continue declining after 2030, 101 GW of coal-fired generating capacity and 74 GW of natural gas/oil-fired generating capacity retire by 2040.
The timing of the coal retirements is heavily influenced by implementation of environmental rules that may require power plant operators to either incur costs to retrofit power plants or receive less revenue because of lower levels of operation. As a result, coal retirements occur during the implementation of the Mercury and Air Toxics rule (in both the Reference case and Base Policy case), and in the initial year of the Clean Policy Plan implementation.
Nuclear capacity is relatively unchanged under several scenarios that implement the proposed Clean Power Plan rule. The case with the most new nuclear capacity growth shows 25 GW of nuclear additions, under the assumption that nuclear receives the same favorable treatment (in terms of emissions compliance) as renewables. In the Base Policy case, 6 GW of nuclear capacity is added; this compares with 9 GW added in the Reference case.
Principal contributor: EIA staff
Reprinted with permission.
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