By May 25, 2016 Read More →

Future power sector carbon dioxide emissions depend on status of Clean Power Plan

 Relatively inexpensive international coal supplies limit growth opportunities for US exports

power sector

Source: U.S. Energy Information Administration, Annual Energy Outlook 2016

According to the Energy Information Administration, trends in carbon dioxide (CO2) emissions from electricity generation through 2040 depend significantly on whether or not the Clean Power Plan (CPP) rule issued last August by the U.S. Environmental Protection Agency (EPA) is implemented.

Analysis in EIA’s Annual Energy Outlook 2016 (AEO2016) examines what the CPP could mean for the fuels used to generate electricity, especially coal.

Yesterday, EIA released an annotated summary of two AEO2016 cases.

The Reference case assumes implementation of EPA’s final CPP rule, while the No CPP case assumes the rule, enforcement of which is currently on hold pending judicial review, does not ever come into effect.

The Reference case assumes the CPP is implemented using the mass-based option (controlling the amount of CO2 emissions) rather than the rate-based option (limiting the rate of CO2 emissions per unit of electricity).

The mass-based standards are modeled using allowances, with cooperation across states at the regional level and all allowance revenues rebated to ratepayers.

Other CPP-related scenarios to be released over the coming weeks will examine different implementation alternatives. Some results, such as electricity prices and the mix of fuels used to generate electricity, are likely to depend significantly on compliance strategies.

In the Reference case, power-sector emissions are projected to be 28 per cent lower than the 2005 level in 2022, when the initial mass-based standards are scheduled to begin.

Final targets take effect in 2030 and remain constant thereafter, and the corresponding reduction in CO2 emissions compared with 2005 levels is about 35 per cent from 2030–40.

Currently, the power sector accounts for 36 per cent of total energy-related CO2 emissions, but its share falls to 31 per cent by 2030 in the Reference case when power sector emissions fall below those of the transportation sector.

In the No CPP case, the power sector emissions remain near 36 per cent of total energy-related CO2 emissions throughout the projection period.

power sector

Source: U.S. Energy Information Administration, Annual Energy Outlook 2016

In the Reference case, reductions in CO2 emissions to comply with the CPP are primarily achieved by switching from carbon-intensive fuels, especially coal, to less carbon-intensive natural gas and to zero-carbon renewable technologies such as solar and wind.

Energy efficiency in the residential, commercial, and industrial end-use sectors and in the power sector also contributes to lower fuel use and emissions as end-use equipment becomes more efficient and as the use of relatively energy-efficient generators increases.

In the near term, significant coal retirements are expected regardless of CPP implementation.

Coal plant retirements have been relatively high in recent years—nearly 14 gigawatts (GW) in 2015—because of an increase in competition from units burning low-priced natural gas and the implementation of environmental regulations.

About three times the amount of coal retirements in 2015 are expected to occur in 2016—40 GW to 45 GW—as the final deadline for the EPA’s Mercury and Air Toxics Standards (MATS) occurred in April of this year.

power sector

Source: U.S. Energy Information Administration, Annual Energy Outlook 2016

After 2016, another 55 GW of coal plants retire by 2040 in the Reference case as the Clean Power Plan is adopted.

Even in the No CPP case, about 20 GW of coal-fired capacity retires from 2017 through 2040.

In the Reference case, the remaining coal-fired generation capacity is also used less intensively over time as it is displaced by natural gas-fired and renewable-sourced generators.

As a result of both coal unit retirements and lower utilization of the capacity that remains, coal consumption in the electric power sector declines by 34 per cent from 2015 to 2040 in the Reference case.

With the electric power sector accounting for more than 90 per cent of total U.S. coal consumption and coal imports serving only a very small part of domestic coal demand, U.S. coal production largely reflects the trend in power-sector coal consumption.

Relatively inexpensive international coal supplies limit growth opportunities for U.S. exports.

U.S. coal consumption, which fell 26% from 2008 to 2015, is expected to continue declining from 873 million tons in 2015 to 664 million tons in 2030 and to 643 million tons in 2040 in the Reference case. Coal production remains relatively stable in the No CPP case through 2040.

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