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Corrected: Clean Power Plan would reduce coal's share of US generation to 18% by 2040: EIA

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Corrected: Clean Power Plan would reduce coal's share of US generation to 18% by 2040: EIA

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Houston — Implementation of the Clean Power Plan would drive coal's share of US electricity generation to 21% by 2030 and 18% by 2040, the Energy Information Administration said Tuesday.

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Coal's share of total electricity generation, which peaked at 50% in 2005, was 33% in 2015.

Natural gas, which is expected to decline in generation over the next five years as solar and wind energy increase market share, would increase by more than 67% from 2021 to 2040 to become "by far the largest generation source," the EIA said in an early release of its 2016 Annual Energy Outlook.

The legality of the CPP is still under question since the Supreme Court stayed implementation of the plan, which seeks to cut carbon emissions from existing power plants by 32% from 2005 levels by 2030. The US Court of Appeals for the DC Circuit said Monday it will conduct an en banc review the case in September.

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The report looked at two scenarios -- one with the implementation of the CPP and the other without through 2040.

Coal use declines throughout the period under the CPP, but retains a larger market share without implementation.

Natural gas and renewables would surpass coal generation by the mid-to-late 2020s under the CPP. Without the CPP, fewer coal-fired plants would be retired, leaving coal ahead of renewables in the energy mix through 2040.

Coal generation would decline by 32% from 2015 to 2040 under the CPP, largely a result of retirements and lower utilization levels to meet carbon dioxide emission caps, the EIA said.

Without the CPP, coal-fired generation would remain flat as virtually no new capacity is added. Fewer units would be retired, however, and plants would operate at higher levels as gas prices are expected to rise.

The CPP is expected to have the largest impact on regions of the country that have the greatest demand for coal-fired electricity, including the Southwest/Rockies, Midwest/Mid-Atlantic and Northern Plains, the EIA said.

"These regions will require the largest shifts in generation mix for Clean Power Plan compliance," the EIA said.

The Midwest/Mid-Atlantic would rely more on natural gas generation under the CPP while the Northern Plains and Southwest/Rockies would utilize low-cost renewables.

The most impacted coal-producing region would be the Western US, which is largely production coming out of the Powder River Basin. The West accounts for 58% and 53% of the total decline in production in 2030 and 2040, respectively, under the CPP.

States that consume Western coal -- Texas, Indiana, Illinois, Michigan and Wisconsin -- would also be required to retire "significant amounts of coal capacity," the EIA said.

Interior coal production, largely driven by the Illinois Basin, also would decline under the CPP, but would increase without implementation of the law.

Under the no-implementation scenario, coal power plants would still be required to retrofit with emission-control equipment to meet MATS standards. That would benefit higher sulfur ILB coal producers.

The impact of the CPP on Appalachian coal would be relatively small as plant retirements and competition from other fuels will likely reduce the role of Appalachian coal in the power sector, the EIA said.

"Appalachian coal production is increasingly dependent on exports, which account for about 67% of Appalachian production in 2040," the EIA said.

(This version of the story has been corrected by removing the previous 8thparagraph on EIA projections for coal retirements.)

--Jeffrey McDonald, jeffrey.mcdonald@spglobal.com

--Edited by Jason Lindquist, jason.lindquist@spglobal.com