The report predicts 37,800 megawatts of coal retirements by 2022, tapering off to another 4,400 megawatts of retirements by 2030. With almost 20,000 megawatts of additional natural gas capacity coming online by 2020 to replace retiring coal-fired generation, we don’t expect a material and rapid change that would reverse coal’s fortunes.
With respect to concrete policy recommendations and solutions, the report falls short of recommending anything specific and does not promote coal-fired generation as irreplaceable for grid reliability. Instead, the report suggests pricing mechanisms for grid-reliability services that are fuel and technology neutral, and urges research and developments efforts focused on new-generation technologies and improved VRE integration, among other things. The report does call for reduced regulatory compliance costs across the grid infrastructure, including the coal-fired capacity. While this might extend the life of some coal plants, we expect the benefit to the coal industry to be marginal, if any.
Although biomass generation is not specifically addressed in the report, we note that biomass (specifically wood pellets) is a renewable resource that has been extensively incentivized by policy makers in Europe to ensure grid reliability while transitioning to VRE power sources. Biomass can be co-fired with coal in conventional coal plants, or alternatively, coal plants can be converted to biomass use, in order to retain baseload generation and simultaneously reduce coal consumption in favor of renewables.
Although US policy to ensure grid reliability remains uncertain, we do not view coal as the likely candidate to resolve the complex energy challenges of the future. Technology enhancements and alternative energy sources appear to be the keys to reliable power generation that is also cost-effective and environmentally friendly. Advancements in carbon capture and storage (CCS) technologies could change that, but so far, CCS has not been economically viable on a large scale.