Only 2 New Coal Plants Needed in 2013-2025 – If That

Wind Power Over Coal

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It’s not news that the Sierra Club can envision a time when no new coal plants will be built. It is news when the Department of Energy agrees.

The DOE’s Energy Information Administration released its Annual Energy Outlook this week, and it anticipates only about two new coal plants being built between 2013 and 2025.

That projection may even overstate the need – the report did not account for the more than $70 billion in funding from the stimulus package for clean energy and transit and energy efficiency or new climate legislation that will significantly boost the renewable energy sector.

When you take future government action into account, there won’t be a need for even those two new coals plants, says Mark Kresowik of the Sierra Club’s Move Beyond Coal Campaign:

“Even by these very conservative estimates, it’s clear that there is no truth behind the coal industry’s claims that we must have new coal to have a secure energy future. This is more evidence for investors that the future for coal is weak."

The report projects that 47,000 megawatts of energy from coal-fired power plants will come online between 2008 and 2030. However, 17,000 MW of that growth comes from plants that are already under construction or are far along in the permitting process, and most of the remaining 30,000 MW will not come online until 2025, said Mike Mellish, an EIA coal industry analyst.

The Sierra Club looked specifically at whether EIA saw a need for approving future coal plants, which, considering permit and construction time frames, wouldn’t come online until 2013 at the earliest.

Between 2013 and 2025, the EIA study found the need to add only 1,000 MW of coal-fired capacity – roughly two power plants.

Instead, natural gas and renewable energy are expected to dominate power plant building during that period, Mellish said. So much so, that the EIA does not project replacing old coal plants that go offline, about 2,300 MW worth by the agency’s estimate.

If the nation sees stronger growth in renewable power than the EIA forecasts, they could obviate the need for any coal plants at all in those years, the EIA analyst said:

“You could certainly make that assumption if we have more investments in renewables from things put into the stimulus bill or if you had some kind of carbon legislation like Markey and Waxman’s bill.”

The EIA projects that energy from renewable sources (excluding hydropower) will quadruple – from 2% of electricity generation in 2007 to 8% in 2030. That could easily go higher, particularly if Congress approves President Obama’s call for a 25% national renewable electricity standard by 2025 – numbers that were included in Reps. Henry Waxman and Ed Markey’s draft climate legislation this week.

At the same time, the EIA projects that coal use will decrease slightly – from 49% of electricity generation in 2007 to 47% in 2030.

One development that greatly changed the EIA’s outlook for coal was the increasing “risk premium” for coal-fired generating capacity and coal-to-liquids plants, Mellish said.

“Generally, what that means is that the financing costs for those plants we assumed were higher than for other plants because of the carbon – because of the idea that getting financing for anything that will be a carbon-intensive technology will be difficult.”

The risk premium was inspired by the Carbon Principles, guidelines developed last year by JPMorgan Chase, Citibank and Morgan Stanley that take into account the risks of investing fossil-fuel-based energy. While these institutions did not specify what the increased cost would be, the energy outlook report assumed 3%.

Taking that into account, the EIA’s 2009 report anticipates only 40,000 MW of coal-fired capacity additions through 2030, far below the 2008 report’s expectation of adding 104,000 MW.

"The data clearly show that we don’t need to be investing billions in dirty new coal plants," said Bruce Nilles, director of the Move Beyond Coal Campaign. "In fact, the data indicate that if we invest in clean energy, we can begin the process of retiring the oldest and dirtiest coal plants that are the most harmful to our health."