Navigating Coal Plant Retirements Amid Rising Power Demand Challenges

With load forecasts projecting a sizable increase in power demand from sources like AI data centers, grid operators need to ensure they can meet this future load. One way to mitigate these concerns surrounding rising load would be to delay or cancel the retirements of coal-fired power plants. In this Insight, we’ll explore what could be driving these plants to retire, how much coal generation is currently scheduled to retire, and what facilities are doing to stay online.

What’s going on with coal?

There are several factors that are contributing to the amount of coal plant retirements occurring over the next several years. However, two EPA standards scheduled to take effect over the next seven years may be causing some coal-fired facilities to retire earlier than they otherwise would. First, there are new wastewater standards that coal-fired plants must meet to continue operating in 2029 and beyond. Currently, there are 49 GW of coal-fired capacity scheduled to retire before this standard comes into effect, which represents 26.5% of the currently operational facilities. The second standard would force all coal plants operating in 2032 and beyond to either co-fire 40% with natural gas or reduce emissions by 90% by installing carbon capture technology. An additional 22.1 GW of coal capacity is scheduled to retire before this standard takes effect.

These standards may not be upheld, but any cancellation, delay, or relaxation of them may push out coal retirement dates. Doing this would keep much-needed generation for meeting growing load, especially when combined with new renewables, storage, and natural gas-fired generators. On average, coal provided 80.7 GW to the grid on an hourly basis in 2024. Based on currently scheduled retirements and 2024 generation levels, this drops to 52.3 GW in 2032 after both EPA standards would have taken effect.

These retirements would have an even larger impact during peak months. Compared to July 2024, hourly coal generation could drop by 38.8 GW by July 2032, potentially making it more difficult to keep up with peak demand forecasts.

The big generators

Of the largest and most utilized coal units in the U.S.’ fleet, five are set to retire prior to 2032.

The coal units in the graphic above are not only those with some of the highest capacity factors, but they also represent nearly a third of the U.S.’ coal capacity. This means the loss of any of these units would have an outsized impact on their given regions’ supply and demand balance. Balancing authorities appear to be recognizing this and acting accordingly. For example, Four Corners in New Mexico and Cumberland in Tennessee are exploring ways to continue operating, with the former exploring carbon-capture technology and the latter transitioning to natural gas. Also, J H Campbell, one of the most-run coal generators in 2024, was set to retire in May of this year, but a recent emergency order from the Department of Energy delayed its retirement through the summer due to MISO being at an elevated risk of reserve shortfalls.

Going forward

Questions are already being asked regarding who will pay to keep J H Campbell open for an additional three months, but these concerns tie into a broader issue. As we look ahead, the EPA standards may be both too expensive for coal plants to consider adopting and causing early retirements. However, if the EPA standards are relaxed to keep coal plants online to meet rising demand, the question remains whether coal plants currently scheduled to retire will be economic enough to keep open, regardless of circumstance.  Be sure to check back in for more Insights from BTU Analytics as we continue to explore ever-evolving energy markets. 

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