EIA Expects Coal Retirement and Electricity Price Increases with Clean Power Plan
On May 22, 2015, the Energy Information Administration (EIA) released a report analyzing the impact of the final draft Clean Power Plan that was submitted to the White House in May. Its findings predict a major increase in coal plant retirements.
- The Clean Power Plan, also known as 111d, is the EPA’s draft rule to regulate carbon emissions from existing power plants
- The EIA compared the Annual Energy Outlook 2015 (“base case”) to key features of the Clean Power Plan
- The analysis finds early compliance will be predominately achieved through coal-fired generation switching to natural gas-fired generation
- As a consequence, projected coal plant retirements are expected to jump from 40 GW in the base case scenario to 90 GW in the Clean Power Plan scenario; nearly all forecasted coal retirements are expected to occur by 2020
- Compliance from 2025 to 2040 will come from more significant deployment of renewable resources
- The analysis also finds retail electricity prices increase, with compliance costs (relative to the base case scenario) spiking in early year and tapering in later years:
- By 2020, average electricity prices are expected to be 4.9% higher relative to base case scenarios
- By 2040, average electricity prices are expected to be 2.6% higher relative to base case scenarios
- The report does not provide an assessment of reliability issues as the underlying model is not suitable for conducting such analysis
- Final Clean Power Plan regulations are expected from the Environmental Protection Agency (EPA) in August 2015
The EIA findings—an increase in coal retirements and electricity prices—are consistent with the impacts modeled by the EPA. The two federal agencies agree the proposed rule will shift the electric industry away from coal and toward more natural gas and renewable resources. The expected result is a 30% reduction in carbon emissions while paying 2.6% more for electricity than the base case in 2040.
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