PJM©2012
Coal Plant Retirements:
Potential Impacts of Reduced Energy Demand, Low Natural Gas Prices and the Mercury & Air Toxics Standards Rule
M. Gary Helm Senior Market Strategist PJM Interconnection CERF - November 08, 2012
PJM©2012 2
PJM as Part of the Eastern Interconnection
KEY STATISTICS PJM member companies 750+ millions of people served 60 peak load in megawatts 163,848 MWs of generating capacity 185,600 miles of transmission lines 59,750 GWh of annual energy 832,331 generation sources 1,365 square miles of territory 214,000 area served 13 states + DC externally facing tie lines 142
• 26% of generation in Eastern Interconnection
• 28% of load in Eastern Interconnection • 19% of transmission assets in
Eastern Interconnection
21% of U.S. GDP produced in PJM
As of 9/7/2012
PJM©2012 3
2012 2013 2014 2015 2016 2017 2018 2019 2020
Hazardous Air Pollutants
Criteria Pollutants
Greenhouse Gases
Coal Combustion By-Products
Cooling Water
Compliance with GHG NSPS
PSD/BACT and Title V Applies to GHG Emissions from New and Modified Sources
Compliance with MATS MATS Pre-Compliance
CSAPR Vacated Compliance with CSAPR II?
SIP provisions developed in response to revised NAAQS (e.g., Ozone, PM2.5, SO2, NO2)
Develop Revised NAAQS
Pre-Compliance Compliance with Coal Ash Rule Develop Coal Combustion By-Products Rule
Pre-Compliance
Phase-in of 316(b) Regulations Develop 316(b) Regulations
Compliance with ICI Boiler MACT ICI MACT Pre-Compliance
Adapted from M. J. Bradley & Associates LLC
Safety Valve Extension
Environmental Regulation Timeframe
Develop CSAPR II?
Dev. GHG NSPS
Compliance with CAIR
PJM©2012 4
Reliability Implications of CSAPR and MATS
• Retrofit, Retire or Repower • Resource adequacy
– Will there be sufficient resources to meet peak loads plus the installed reserve margin?
• Local transmission reliability – Will transmission upgrades be necessary to allow units to retire? – Can retrofit outages be managed reliably?
PJM©2012 5
Capacity Revenue Needed PJM RTO MAAC Rest of PJM < ½ Net CONE 38,334 12,634 25,700
½ Net CONE – Net CONE 14,147 2,908 11,239 > Net CONE 11,051 3,194 7,857
Source: PJM Report, Coal Capacity At-Risk for Retirement in PJM: Potential Impacts of the Finalized EPA Cross State Air Pollution Rule and Proposed National Emissions Standards for Hazardous Air Pollutants, August 2011
At-Risk Generation
Nearly 25 GW coal generation at risk based on economic analysis
Note: CONE is the Cost of New Entry (Simple Cycle Combustion Turbine)
PJM©2012 6
140,000
145,000
150,000
155,000
160,000
165,000
170,000
175,000
180,000
185,000
190,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
LOAD, MW
YEAR
PJM SUMMER PEAK DEMAND FORECASTS
2011
2012
Decreased Electricity Demand
PJM©2012 7
Natural Gas System & Resources in Eastern Interconnection
PJM©2012 8
Environmental Rules
• MATS finalized with “Reliability Safety Valve” – State permitting agency may grant 4th year (until April 2016) – EPA Administrative Orders for 5th year (until April 2017)
• CSAPR vacated • 316(b) delayed • Coal ash ruling delayed • Ozone NAAQS review delayed • GHG NSPS proposed
PJM©2012 9
0
4
8
12
16
1990 96 98 2000 02 04 06 08 10 12 14 16 18 20
SO2 Emissions Under CAIR, CSAPR, and MATS
Historic Projected
Electric Sector SO2 Emissions (million ton) million ton
CSAPR + MATS
CSAPR only CAIR only
Because the overall emission reduction requirements in CAIR and CSAPR are very similar, any additional decrease in overall emissions under CSAPR, all else remaining equal, can mostly be attributed to the restrictions on allowance trading under CSAPR.
Actual emissions are already trending well below all the projections under the
different regulatory programs.
Source: MJB&A Analysis based on EIA data (AEO 2012, 2012 ER, 2011)
Emissions data unavailable for the years between 1990 and 1995
Observation MATS drives SO2 emissions well below CSAPR and CAIR because SO2 scrubbers are used to comply with the MATS emissions standards for acid gases, mercury, and PM.
PJM©2012 10
0
1
2
3
4
5
6
7
1990 96 98 2000 02 04 06 08 10 12 14 16 18 20
NOx Emissions Under CAIR, CSAPR, and MATS
Historic Projected
Electric Sector NOx Emissions (million ton) million ton
CSAPR + MATS
CSAPR only
CAIR only
Actual emissions are already trending well below all the projections under the
different regulatory programs.
Source: MJB&A Analysis based on EIA data (AEO 2012, 2012 ER, 2011)
Emissions data unavailable for the years between 1990 and 1995
Observation MATS provides limited benefits in terms of NOx reductions because the controls installed to comply with the MATS rule (e.g., scrubbers and fabric filters) will, generally, not impact NOx emissions.
PJM©2012 11
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
2007 2008 2009 2010 2011 2012 YTD
Perc
enta
ge S
hare
of T
otal
Ener
gy
Natio
nal A
vera
ge D
elive
red
Price
$/m
mBt
u National Average Delivered Prices, Spot Prices, and
Energy Shares of Coal and Natural Gas in PJM
Delivered Coal Price Delivered Gas Price Henry Hub Gas Central App Coal Prompt Month Coal Energy Share Gas Energy Share
PJM©2012 12
Increase in Natural Gas-Fired Generation
1.5
2
2.5
3
3.5
4
4.5
5
0
10
20
30
40
50
60
70
80
%
Capacity Factors
Combined Cycle
Combustion Turbine
Natural Gas Price
PJM©2012 13
Evolving Fuel Mix in the Energy Market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010 2011 2012
PJM Fuel Mix
Nuclear
Renewables
Oil
Gas
Coal
PJM©2012 14
Evolving Resource Mix in the Capacity Market
GAS
COAL
DEMAND RESPONSE
NUCLEAR
WIND 0
10,000
20,000
30,000
40,000
50,000
60,000
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
MW
Capacity Auction Delivery Year
PJM©2012 15
Maintaining Resource Adequacy
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Cleared Reserve MarginTarget Installed Reserve Margin
PJM©2012 16
Evolving Generation Queue
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2005 2006 2007 2008 2009 2010 2011 2012
MW
CC & CT Wind Steam Solar Nuclear
Wind derated to 13% UCAP
PJM©2012 17
Generation Resource Retirement Status
Nearly 18 GW of Actual & Announced Deactivations
PJM©2012 18
PJM Operational Assessments / Activities
Fall 2011 Initial Assessments
• At Risk Generation
• Capacity Adequacy
• Near Term Transmission
• Transmission Planning
• Ancillary Services
Generator Owner Response to PJM
• Retirements • Retrofit Outages • Derates • Regulatory
concerns
Continuing Assessments
• Announced vs. Potential Retirements
• Deactivation Analyses
• Retrofit Outages • Capacity
Adequacy • Ancillary
Services Impact • Communications
PJM©2012 19
Generation Retirement Timeline
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
MW
Year
PJM©2012 20
Retrofit Outages and Typical Maintenance Outages Retrofit Outages Typical Maint
Outages
2012
WP 0 18000 SM 1918 42500 PPM 0 500 FM 2370 35000 WP 0 18000
2013
WP 4705 18000 SM 4331 42500 PPM 728 500 FM 1751 35000 WP 555 18000
2014
WP 1752 18000 SM 4417 42500 PPM 0 500 FM 6433 35000 WP 3260 18000
2015
WP 769 18000 SM 6371 42500 PPM 530 500 FM 2281 35000 WP 1920 18000
2016
WP 2120 18000 SM 5088 42500 PPM 530 500 FM 2889 35000 WP 929 18000
2017
WP 846 18000 SM 2894 42500 PPM 0 500 FM 361 35000 WP 0 18000
2018
WP 1028 18000 SM 2635 42500 PPM 0 500 FM 361 35000 WP 0 18000
0
10000
20000
30000
40000
50000
60000
WP
SM
PPM
FM
W
P W
P SM
PP
M
FM
WP
WP
SM
PPM
FM
W
P W
P SM
PP
M
FM
WP
WP
SM
PPM
FM
W
P W
P SM
PP
M
FM
WP
WP
SM
PPM
FM
W
P
2012 2013 2014 2015 2016 2017 2018
Retrofit Outages
Typical Maint Outages