What will replace retiring coal and gas power plants?

Since 2010, about 67 GW of coal, 38 GW of gas, and more than 5 GW of nuclear power generation capacity closed in the United States. There are many reasons including cheap natural gas and subsidized, low-cost resources lowering prices in electricity markets. In addition, stakeholders have been addressing several market design inadequacies such as scarcity pricing in energy markets and separate treatment of subsidized resources in capacity markets. All of these conditions contributed to the "missing money" problem.

Nevertheless, many retired units were older, inefficient units that would have been shut down under most circumstances. The cost of compliance with environmental regulations such as the Mercury and Air Toxics Standards (MATS) was probably too high for retired coal plants, many of which was built before 1970. Most gas units were steam turbines installed before the 1980s. Another 60 GW of coal capacity may be retired over the next decade, a third of it within the next few years given the current economics.

Often not fully appreciated are the prospects for the nuclear fleet. The 60-year operating license of about 24 GW of nuclear capacity will expire by 2030. More nuclear capacity would have retired already or would retire soon but they were saved by state zero emission credits (ZECs) or other incentives. More states are developing schemes to save nuclear plants. Nuclear facilities generate electricity at almost 90-percent capacity factor with no greenhouse gas (GHG) emissions. As such, they are critical for state climate goals. Despite the incentive programs, can they be kept operating beyond their 60-year licenses? There are no advanced applications to the Nuclear Regulatory Commission to pursue an extension to 80 years.

Early nuclear retirements cannot be replaced by other non-GHG emissions quickly and reliably enough. If they occur, natural gas-fired generation will be the immediate substitute as it has been for most coal retirements. The net GHG effect of gas plants replacing both coal and nuclear generation will depend on actual GWs of coal and nuclear retiring, their timing and location, penetration of wind and solar (perhaps with battery storage), and demand-side developments such as time-of-use pricing and distributed generation. There are many uncertainties in this list. In contrast, gas-fired generation is ready to step in today.

The gas fleet went through a significant transformation since the early 2000s with more efficient combined cycle gas turbine and combustion turbine plants replacing older steam or combustion turbines. Close to 60 GW new gas-fired capacity is expected between 2018 and 2025. Another 20 GW have obtained or are expecting their regulatory approvals. At the same time, about 10 GW of mostly steam turbines built before 1973 will retire by the early 2020s. Just within a few years, the gas fleet will be younger with more than 70 percent of the fleet built after 2000.

Still, there are no guarantees that all of these gas plants, mostly built by merchant developers, will be in the money every year going forward. The prices in energy and capacity markets will depend on the price of natural gas, the share of subsidized resources, and the details of market design fixes currently under development. The existing and likely legal and regulatory battles surrounding some of the out-of-market support policies such as ZECs and new initiatives from states create an uncertain environment. The risk of overbuilding, at least in some locations of any grid, cannot be ruled out. A plant with low capacity factor, selling its generation at consistently low prices may not yield sufficient return on investment. Fixing the organized electricity markets in a way to ensure sufficient, transparent cost recovery and return to all participants is paramount. If that is not politically feasible, perhaps it is time to consider alternatives more seriously.