Dive Brief:

• A new analysis of coal plant closures and emissions concludes cheap gas and stagnant load growth are the primary reasons for a decline in plant profitability. 
• The research by Resources for the Future also concludes that strict emissions rules played a significant role in helping cut nitrogen oxide emissions by two-thirds between 2005 and 2015, but "had little effect on coal plant profitability and retirement."
• Researches for RFF utilized a new computational model that reproduces unit operation and emissions at 3,500 fossil fuel-fired generation units in the eastern United States to assess the the reasons for the decline of both emissions and coal profits.  

Dive Insight:

RFF's conclusions are familiar — a number of other studies peg cheap gas and flat demand for coal's decline — but the firm's methodology is unique, utilizing a new electricity sector model that the group says reproduces observed outcomes more accurately than a standard economic dispatch model.

RFF"s model consists of three phases: retirements and new construction; pollution abatement investment; and hourly operation.

"This type of model is particularly useful for comparing long-run steady states rather than transitional dynamics," the report explained.

The model matches 98% of observed retirements of coal-fired generation units, the researchers said.

The report considers three "market shocks: natural gas prices, renewables generation and electricity consumption

"We find that market shocks have larger effects than regulation on emissions, coal consumption, and coal-fired plant profits. The consumption shock is about as important as the fuel price shock, both of which are more important than the wind generation shock," researchers wrote. 

Combined, they say market shocks explain 82% of the decline in NOx emissions and 9% of the decline in coal-fired plant profits.

"The consumption shock explains a large share of the overall reduction in coal-fired plant profits, albeit a smaller share than the fuel price shock," the report found. 

Consumption shocks include stagnant electricity demand, competition from wind generation, and fuel prices, including cheap natural gas. The report found consumption shock reduces emissions 2.5 times more than does
the fuel price shock, "suggesting that both shocks played important roles in reducing NOx compliance costs and in causing coal plant retirements."

The pressure on merchant coal facilities has become part of a national conversation on energy. The U.S. Department of Energy, under the direction of Secretary Rick Perry, has proposed significant changes to wholesale market rules to provide cost recovery for coal and nuclear plants.

While President Trump has vowed to revitalize the coal industry, and DOE argues coal and nuclear plants are necessary for reliability, the pressure coal plants face is a result of competitive energy markets. Several estimates have emerged as to the potential costs of the changes.

IFC estimated the proposal could cost consumers nearly $4 billion annually; analysis by Energy Innovation estimates costs could run between $2.4 billion and $10.6 billion annually; Sierra Club says that the new costs would have added up to $14 billion last year, and the PJM Market Monitor estimates NOPR would cost between $18 billion and $288 billion in its market alone over a 10 year period.