Retirements of existing generation have slowed down dramatically in the first half of this year, which is on pace to be the slowest for existing generation retirements since 2011, according to new data from the Energy Information Administration.
In the first half of the year, some 5.1 gigawatts of generating capacity have been retired, and another 2.4 gigawatts are scheduled to be retired by year’s end, for a projected total of 7.5 retired gigawatts. From 2004 to 2023, by contrast, just over 12 gigawatts of capacity were retired each year on average, with almost 15 gigawatts retired per year this decade. Since 2022, according to EIA data, over 90% of retired capacity has been coal or natural gas.
What’s behind the slowdown? “Reliability is threatened because the grid conditions are tightening,” Douglas Giuffre, executive director of gas, power and renewables analysis at S&P Global Commodity Insights, explained in an email. “This is partly due to the recent pace of coal and natural gas retirements in the U.S., which worked off some of the excess capacity in power markets. Now we are seeing tighter reserve margins, and a relatively thin pipeline of new gas-fired projects that can come online quickly.” That’s especially concerning for utilities at a time when projected electricity demand is way, way up.
The wave of retirements was a national phenomenon, often having nothing to do with state-level plans to decarbonize. Coal and gas were being retired so steadily over the past 20 years not just because plants were aging, but also because power use was essentially flat from the early 2000s through, essentially, yesterday. This meant that older plants — especially dirty coal plants — became uneconomic to run, especially as natural gas prices began to fall.
Now, we are in a completely different world. Electricity use is forecast to start growing again, thanks to a buildout of new data centers and manufacturing, plus the ongoing electrification of automobiles and home heating and cooling.
The Southeast offers an example of how these trends have played out on the ground. In December 2020, the Mississippi Public Service Commission determined that the state had “excess reserves … largely due to decreases in projected load” and ordered a 950 megawatt reduction in generating capacity by Mississippi Power by 2027. A consulting firm hired by the commission determined that Plant Daniel, a coal plant, was “relatively inefficient compared to other available resources;” a few months later, the utility said it would decommission Plant Daniel by 2027.
Then Georgia Power, the utility that covers most of the state (and, like Mississippi Power, a subsidiary of Southern Company), rushed out a new three-year plan for its future power usage less than a year after finalizing its old one. Its demand forecast through the end of the decade had jumped from 400 megawatts to 6,600 megawatts, the result of a projected boom in data center construction.
“They came in with a preselected list of ways it wanted to meet that power need,” including buying power from Plant Daniel and new gas, Bob Sherrier, a staff attorney at the Southern Environmental Law Center, told me. Georgia Power told the state’s utility commission that to respond to growing demand it would need to extend contracts with its sister utility in Mississippi — which meant not only that Daniel would remain open for at least another year — and build new new plants that could run on gas or diesel, plans for which regulators approved on Tuesday. The utility also hinted that its existing plans to euthanize, for the most part, its coal-fired generation fleet by the end of 2028 were likely to be revised.
“To meet that projected need, the utilities are reverting to what they know, which is fossil fuels,” Sherrier said.
In vertically integrated markets, where utilities own generating assets and sell power to customers, environmentalists have seen delayed retirements and the building of new fossil plants as examples of utilities slipping into their comfort zone, building and operating expensive projects instead of developing or procuring renewables to handle rising demand.
But it's not just in vertically integrated markets where fossil retirements are being delayed. In Maryland, for instance, Brandon Shores, a coal-fired power plant that was scheduled to close in 2025, is staying open because PJM Interconnection, the regional electricity market, determined that a plan to replace it with battery storage was not a “realistic option at present” nor “technically viable to resolve the reliability violations or avoid the need for an RMR agreement at this time,” PJM president Manu Asthana said in a letter to Paul Pinsky, the director of the Maryland Energy Administration. The transmission investments required to make up the difference, meanwhile, would take several years.
Along with the neighboring Wagner plant, which burns a mix of coal, oil, and natural gas, Brandon Shores will likely stay open more than three years past its planned retirement date thanks to what’s known as a “reliability must run” contract, which “would put Maryland ratepayers on the hook for over $600 million dollars in out-of-market payments,” according to a letter written by several Maryland congressional representatives to PJM.
Environmental advocates have blamed PJM for not doing enough proactive transmission planning to account for predictable and scheduled plant retirements.
The slowing retirements mean that emissions from the electricity sector, which have been falling since the mid-2000s (with occasional bumps up as the economy has recovered from downturns), are expected to plateau over the next year or so. EIA forecasts show carbon dioxide emissions from electricity as essentially flat from 2023 to 2025, with increased natural gas emissions essentially offsetting falling coal emissions.
There is a bright side to the data, however. So far this year, the U.S. has installed just over 20 gigawatts of new generation, 80% of which has been solar and battery storage, including a 600-plus megawatt projects in Nevada and Texas. If added generation comes on in the second half of this year as planned, the EIA projects we’ll have 15 gigawatts of battery storage by year’s end. Along with the large and growing solar generation in states like California, Nevada, and Texas, the U.S. is getting closer to a grid that can, at least, run without carbon emissions day or night.
GMC
