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Public Policy and Coal-Fired Power Plants

March 8, 2018

Why would anyone scrap perfectly good high-quality computers, smartphones, or cars for more costly, lower quality, and less reliable products? Yet, that is exactly what policymakers do when they push coal-fired power plants into early retirement.

Coal Power Station

More than 250 coal-fired plants in the United States have been retired since 2010, taking more than 34,000 megawatts of power generation capacity offline. Coal’s share of the electricity generation market fell from 50 percent in 2008 to around 31 percent in 2017.

Most of the retired plants, 88 percent, were older, smaller units with a generating capacity of less than 250 megawatts3 Recently, however, younger, more efficient plants with larger generation capacities have been slated for retirement before the end of their useful generating lives.

The average service life of a coal-fired power plant is between 35 and 50 years. Larger, more modern plants can be retrofitted to generate low-cost power with fewer emissions for decades beyond this lifespan. The average age of the coal power plant fleet is currently 38 years, and these facilities have the potential to generate affordable electricity for decades to come.

The premature retirements of many of the nation’s coal-fired power plants were the result of increasing competition for electricity generation from natural gas power plants and Obama-era regulations, particularly rules limiting carbon dioxide emissions from power plants, the Mercury and Air Toxics Standards, and New Source Review rules. Those regulations made operating coal-fired power plants more expensive.

Other Obama-era policies also have contributed to the premature closure of coal-fired power plants. For example, federal subsidies for wind- and solar-powered electricity generation have distorted wholesale power markets and made it difficult for baseload power generators, such as coal and nuclear power plants, to remain competitive, even though they can produce the lowest-cost electricity when consistently generating large, steady quantities of electricity.

Part 1 of this Policy Study discusses how the premature retirement of coal-fired power plants increases electricity prices for consumers because on average, these plants generate electricity at lower cost than the electricity generators that would replace them. Premature retirement of coal-fired power plants will cost consumers billions of dollars in the form of higher electricity prices, high regulatory compliance costs, subsidies for renewable generation technologies, construction of unneeded electricity generation capacity and transmission lines, and lost economic opportunities, especially in energy-intensive industries like manufacturing.

Part 2 discusses how state renewable energy mandates (REMs) and federal subsidies to renewable energy sources, primarily wind and solar, distort wholesale power markets to the detriment of coal-fired power plants. These policies have played a significant role in the closure of these plants. In addition to distorting wholesale power markets, subsidies for renewables impose a substantial burden on taxpayers.

Part 3 discusses the real-life impact these policies have on families, businesses, manufacturers, and coal mining communities. Part 4 offers concluding observations.

NOTE: This Policy Study is the third in a four-part series. Read the first, second, and fourth parts.

Author
Frederick D. Palmer is a policy advisor for energy and climate at The Heartland Institute.
fpalmer@heartland.org
Author
Isaac Orr is a policy fellow at the Center of the American Experiment on mining and energy issues and a policy advisor for The Heartland Institute.
isaac.orr@americanexperiment.org @thefrackingguy