Coal plant owners seek to shut 3.2 GW in PJM in face of economic, regulatory and market pressures

Dive Brief:

Power plant owners started the process of potentially retiring 3,228 MW of coal-fired generation in the PJM Interconnection's footprint this month, according to the grid operator's generator deactivation list. Another 1,024 MW of coal shut down last year.
A majority of that capacity belongs to Energy Harbor, which last week said it plans to shutter or sell its 1,278-MW coal-fired Pleasants units in West Virginia as well as its 1,491-MW coal-fired Sammis units, and 13-MW Sammis diesel unit, which are in Ohio, by mid-2023.
Based on public information, PJM's coal-fired capacity is expected to fall from about 50,000 MW to 25,000 MW by 2030 and to about 22,000 MW by 2036, according to analysts with ESAI Power. The consulting firm deems another 12,000 MW to be at risk of retiring by 2040, which would bring coal-fired generation in PJM to 10,000 MW.

Dive Insight:

PJM runs the grid and wholesale power markets in 13 Mid-Atlantic and Midwestern states and the District of Columbia. Coal-fired power plants in PJM are retiring, as they are in other parts of the U.S., in the face of less expensive renewable energy, tougher environmental rules and higher operating costs, according to ESAI Power and the Institute for Energy Economics and Financial Analysis, a nonprofit that supports moving away from fossil fuels.

Announced coal capacity retirements in PJM

Permission granted by ESAI Power

Looking at the explanations for the planned retirements, Julia Criscuolo, ESAI Power manager of renewables and emissions, said about a third are driven by environmental regulations, a quarter by unfavorable economics and roughly 20% by "end of life" plant issues.

Some of the latest pressure on coal-fired generation is coming from the Environmental Protection Agency's proposed coal ash and water discharge rules, Criscuolo said. The agency in January proposed denying requests from three Midwest coal-fired power plants to continue dumping coal ash in unlined surface impoundments, a move that could lead to the plants' early retirements. More proposed decisions on individual power plants are expected in the coming months.

"Looking at history, I think these [EPA] rules have driven retirements in the past," Criscuolo said, pointing to the agency's mercury and air toxics standards, which contributed to a wave of coal plant retirements starting around 2015.

The pressure on coal-fired generation is expected to grow. The EPA earlier this month proposed a federal plan for limiting nitrogen oxides emissions, an ozone precursor, from power plants and industrial facilities that drifts into downwind states. The agency estimated its proposal could lead to the shutdown of 18,000 MW of coal and 4,000 MW of oil- and gas-fired generation across the U.S.

In addition to approving the Energy Harbor deactivation requests, PJM approved requests filed this month to shutter two coal-fired plants in New Jersey owned by private equity firms. The 285-MW Chambers plant is owned by affiliates of Starwood Energy Group Global, which have a 60% ownership share, and by Atlantic Power. Starwood affiliates also own the 225-MW Logan plant. The plants are set to retire May 31.

Power from the plants, which is under contract to Atlantic City Electric Co., a subsidiary of Exelon, is more expensive than wholesale electricity, and ACE has been trying to exit the contracts for "many years," according to a filing at the New Jersey Bureau of Public Utilities.

The plans by the private equity firms to retire the plants in New Jersey are a signal that they aren't competitive, according to Seth Feaster, IEEFA energy data analyst. Energy Harbor's coal plants were also likely uneconomic, he said.

Even so, Energy Harbor's decision to exit coal and brand itself as a provider of emissions-free electricity is part of a trend, Feaster said.

"It's pressure from consumers and businesses as much as it is from state regulators," Feaster said, noting The AES Corp. in February said it planned to sell or retire its 7,100 MW of coal-fired generation fleet by 2025.

Marginal power plants in PJM rely heavily on payments from the grid operator's capacity auctions, according to Feaster. When coal-fired power plants fail to clear the auction, they tend to retire, he said, citing NRG Energy's decision last year to retire three coal-fired power plants.

Coal-fired generation in Pennsylvania could face additional cost pressure, according to Feaster, if the state joins the Regional Greenhouse Gas Initiative, a cap-and-trade program for power plants.

Also, New Jersey is preparing to add 7,500 MW of offshore wind by 2035, which will likely displace marginal power plants, Feaster said.

The pressure on coal generation is "coming from all directions," Feaster said. "All of these things are pushing coal plants to the brink, as well as the build-out of renewables. Solar's unbelievably cheap, and it's pretty tough for coal plants, no matter where you are in the country at this point, to compete against those cheaper kinds of fuel."

Looking ahead, proposed solar energy projects are 58% of PJM's interconnection queue, with energy storage accounting for the second-largest slice of the resources aiming to connect to the grid, according to a report released early this month by the grid operator.