The percent of US electricity generated by coal in 2020 would likely drop to 22%, with a decline in coal prices to follow as a result, according to a study of the cumulative impact of the US Environmental Protection Agency's Clean Power Plan and its other environmental programs.
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The study, released late last week by Arlington, Virginia-based Energy Ventures Analysis, also assumes a total of 101 GW of coal-fired capacity will face retirement by 2020 due to federal emissions regulations.
The amount includes 46 GW of coal-fired capacity due to the CPP in addition to 55 GW of plant closures already announced due to existing EPA programs, including the Mercury and Air Toxics Standards rule.
In 2012, the base year for both the CPP and EVA's study, coal-fired capacity in the US totaled 315 GW, and made up 39% of US electricity generation.
While the study largely focused on the consumer impact of the EPA's existing and proposed emissions regulations, it's not hard to see that coal producers would also see dramatic impacts, with roughly a quarter of the US thermal coal market likely to go up in smoke, said Seth Schwartz, EVA's president, in an interview Monday.
"Assuming this plan goes into effect, it will result in a sharp reduction in production and rationalization from a producer standpoint," said Schwartz, who believes annual US coal production would like drop by 200 million st by 2020.
"This cuts the size of the market by a quarter, and it's going to affect all regions," said Schwartz. "You can't say you are the low-cost producer in this region, or that the Powder River Basin producers will fare better; this will be across the board."
EPA spokeswoman Enesta Jones said in an email Monday the agency "has not reviewed the report, but we are confident in the methods and results of our analysis of the proposed Clean Power Plan."
The CPP, per the EPA's website, "will maintain an affordable, reliable energy system while cutting pollution."
The EVA study, which was commissioned by Peabody Energy, projects US electricity costs will increase by $98 billion in real dollars by 2020 from 2012, and that US natural gas costs will increase by $178 billion in real dollars over the same time frame, based on the CPP and existing federal emissions regulations.
The primary reason for the increases is greater demand for natural gas, not just for power generation, but also for industrial use and exports. The study estimates that total natural gas demand in the US will rise from 71.4 Bcf/d in 2012 to 102.2 Bcf/d in 2020 under the CPP and the EPA's existing emissions regulations.
As a result, the Henry Hub price for natural gas will likely increase from its average cost of $2.82/MMBtu in 2012 to $6.62/MMBtu (in nominal dollars) by 2020. In real dollars, the estimated 2020 price would equal $5.65/MMBtu, according to the study.
Schwartz said the EPA's CPP is "piling on, at an inopportune time, and for the EPA to say it doesn't cost anything doesn't make sense."
The agency's CPP uses 2012 as its base year, due to that year's mild winter -- which dropped CO2 emissions below 2005 levels due to low electricity demand -- as well as the increase in natural gas production, which resulted in low natural gas prices.