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Research & Commentary: Study Shows Premature Retirement of Coal Plants May Pose Threat to Affordability, Reliability of U.S. Energy Supply

February 8, 2018

Burdensome Federal Regulations, Renewable Mandates, Subsidies Artificially Disrupting Energy Market To Disadvantage Coal

A new Policy Study authored by Isaac Orr, a research fellow in energy and environment policy at The Heartland Institute, and Frederick D. Palmer, Heartland senior fellow for energy and climate, argues the premature retirement of coal-fired power plants may pose a threat to the affordability and reliability of the U.S. energy supply. 

In “How the Premature Retirement of Coal-Fired Power Plants Affects Energy Reliability, Affordability,” the first in a series of four policy papers, Orr and Palmer note more than 250 coal-fired plants have been closed in the United States since 2010, taking offline 34,000 megawatts (MW) of power generation capacity. Another 18,400 MW are scheduled to go offline by 2028. This 52,400 MW of retired capacity is enough to power 42.5 million homes, “equivalent to every household in California, Florida, New York, Pennsylvania, and Texas combined.”

While some of these closings resulted from the increased competition created by the hydraulic fracturing revolution, which has provided Americans with an abundance of natural gas, many were caused by burdensome federal regulations, renewable mandates, and subsidies that artificially disrupt the energy market and disadvantage coal.

The authors point to Australia as a cautionary tale for the United States. Despite having the world’s fourth-largest coal reserves and being the fifth-largest producer of coal, both national and regional governments in Australia have enacted energy and climate policies designed to reduce the use of coal, such as renewable energy mandates. The result of these policies has been a steady decline in coal’s share of Australia’s electricity generation mix; a steady increase in renewable, intermittent energy sources such as wind and solar; rolling blackouts; repeated power outages; and rising costs, with residential power prices doubling on the continent between 2008 and 2014. In the state of South Australia, residential electricity prices are now the highest in the world, and triple those enjoyed in the United States.

“The intermittent nature of wind and solar power have resulted in a situation where utility companies in South Australia must procure electricity from non-renewable sources on the spot market, which is often an expensive practice,” the authors wrote. “Electricity prices in the spot market are sometimes very high when wind generation is low, driving up prices for consumers. For example, average spot power prices across Australia were between 98 percent and 360 percent higher in February 2017 than in February 2016.”

The authors note although the United States still has a more competitive and affordable energy market compared to Australia, many policies implemented under the Obama administration were similar to the anti-energy, anti-consumer model used in Australia. For instance, the Obama-era Environmental Protection Agency handed down a slew of regulations, such as the Clean Power Plan and the Coal Combustion Residuals Rule, designed to make coal-fired plants unprofitable.

Orr and Palmer also point readers to the failures of California’s energy policies. California has a costly cap-and-trade program and a renewables mandate requiring utility companies to produce half their energy from “clean” sources by 2030. Because of these and other policies, more than 34,000 MW of coal capacity was removed from the Golden State’s resource portfolio in the decade from 2006­ to 2016.

“The harm caused by California’s anti-coal, pro-wind, and pro-solar policies already is apparent,” Orr and Palmer wrote. “Electricity prices in the state have risen dramatically since 2010 and far exceed the national average. … Industry especially suffers from California’s policies, with electricity rates rocketing from 48 percent above the national average in 2010 to 79 percent above in 2015. These high prices will only exacerbate business flight from the state.”

The authors conclude, “Renewable sources of electricity are costly and less reliable than fossil fuels, especially coal. Moreover, the growth of U.S. natural gas supplies, as beneficial as this is, does not obviate the need for coal, America’s most abundant energy resource. The damage is being done and will only grow in the future if the war on coal continues. … Policymakers who truly have the well-being of the citizens in mind must systematically identify and eliminate the federal as well and state and local regulations, subsidies, and mandates that stand in the way of a bright energy future.”

The following documents provide more information about premature coal plant closures.

How the Premature Retirement of Coal-Fired Power Plants Affects Energy Reliability, Affordability
https://www.heartland.org/publications-resources/publications/how-the-premature-retirement-of-coal-fired-power-plants-affects-energy-reliability-affordability
In this Policy Study—the first in a series of four—Heartland Institute Research Fellow Isaac Orr and Senior Fellow Fred Palmer discuss Australia’s experience with policies that forced coal-fired power plants into premature retirement, making large parts of the country dependent on unreliable and high-priced renewable energy, particularly wind power, examine the parallels between the United States and Australia and discuss problems faced by states that have aggressively promoted renewable energy, examine the importance of “prudence” and diversified energy portfolios, and evaluate a U.S. Department of Energy study that correctly identifies natural gas-fired power generators as a reason for coal plant retirements but fails to describe accurately the role played by renewable energy subsidies in those retirement decisions.

Navajo Generating Station Southwest Regional Reliability Study Report
https://www.heartland.org/publications-resources/publications/navajo-generating-station-southwest-regional-reliability-study-report
This study from Quanta Technology shows the premature closure of the 2,250-megawatt Navajo Generating Station, a coal-fired power plant, could destabilize the grid in the Southwest. According to the study, shuttering the Navajo Generating Station would result in power deficiencies that could evolve into potential voltage collapse and outages, load shedding triggers, potential rotating brownouts, failing transformers, or transmission lines and equipment damage.

Video: Tenth International Conference on Climate Change, Panel 10, ‘The Impact of Coal Restrictions on the Navajo Nation,’ Featuring Carlyle Begay
http://climateconferences.heartland.org/carlyle-begay-iccc10-panel-10/
State Sen. Carlyle Begay of Arizona presents “The Impact of Coal Restrictions on the Navajo Nation” at the Tenth International Conference on Climate Change in Washington, DC on July 12, 2015.

Video: America First Energy Conference, Panel 4A, ‘The Future of Coal,’ Featuring Heath Lovell
https://www.heartland.org/multimedia/videos/heath-lovell-afec-panel-4a-the-future-of-coal
Heath Lovell, vice president for public affairs at Alliance Coal, delivers a presentation titled “Where Does Coal Go From Here?” at the America First Energy Conference in Houston, Texas on November 9, 2017.

Video: America First Energy Conference, Panel 4A, ‘The Future of Coal,’ Featuring Fred Palmer
https://www.heartland.org/multimedia/videos/fred-palmer-afec-panel-4a-the-future-of-coal
Fred Palmer, senior fellow for energy and climate policy at The Heartland Institute, delivers a presentation titled “Coal Is Life” at the America First Energy Conference in Houston, Texas on November 9, 2017.

Podcast: Dr. Alan Moran: Australia, From Coal Power to Blackouts
https://www.heartland.org/multimedia/podcasts/dr-alan-moran-australia-from-coal-power-to-blackouts
In this edition of the Heartland Daily Podcast, Alan Moran of the Australian think tank Regulation Economics discusses how shuttering coal-fired power plants in Australia and attempting to replace them with wind has caused electricity prices to spike and has made the grid more vulnerable to blackouts. After a severe blackout plunged much of Australia into darkness, Elon Musk made headlines when he announced he would install a 100-megawatt battery system in Australia within 100 days, or the system would be free. Moran discusses the battery bet and more.

Podcast: Fred Palmer: Australia, a Cautionary Tale
https://www.heartland.org/multimedia/podcasts/fred-palmer-australia-a-cautionary-tale
Fred Palmer, senior fellow for energy and climate at The Heartland Institute, joins Jim Lakely, director of communications, to discuss his new paper Australia, A Cautionary Tale. Palmer co-wrote the paper with Heartland Research Fellow Isaac Orr. Palmer speaks about how Australia has caused electricity prices to rise by instituting a carbon tax and mandating a shift away from coal. In the summer of 2017, the City of Adelaide had a brownout because its renewable system failed to deliver enough energy to power its citizens’ needs.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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