Washington (Platts)--14Nov2012/547 am EST/1047 GMT

As much as 59 GW of aging US coal-fired generation -- on top of the 41.2 GW already scheduled for closure -- could cost-effectively be replaced with natural gas-fired, renewable energy or efficiency options rather than being retrofitted with pollution controls without impacting the grid, according to a Union of Concerned Scientist study released Tuesday.

The report, "Ripe for Retirement," identifies 153 to 353 coal-fired generating units that could be shuttered as "economically uncompetitive" when compared with other low-emission energy resources. These coal units generate between 16 to 59 GW and represent 1.7% to 6.3% of the total US electricity consumed in 2009, according to the study.

Powering up more natural gas-fired units, improving energy efficiency and using more renewable energy would be cost-effective options to strapping on expensive air pollution control equipment onto aging plants that are seen as the largest single source of greenhouse gases in the US, the report said.

UCS lists the top five states with coal units "ripe for retirement" as Georgia, Florida, Alabama, Tennessee and Michigan and the top five generators operating these units as Southern Company, the Tennessee Valley Authority, Duke Energy, American Electric Power and FirstEnergy.

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All these energy companies have made significant progress in scheduling the shuttering of many coal units they have found to be no longer economically viable, said Jeff Deyette, a UCS energy analyst and report co-author.

Southern Company has also shifted some generation from coal to natural gas in recent years and run some gas units more and coal less, he said.

"Every region in the country has the potential to more than replace retiring coal generation by ramping up underutilized natural gas plants, increasing renewable energy through existing state policies, and reducing demand through current energy efficiency programs," Deyette said.

Deyette said the retirement of the aging plants would not be required all at once and proper planning to remove a total of 100 GW would not impact grid reliability as there is already "an abundance" of generation given projections by the North American Electric Reliability Corp. of 145 GW of excess capacity in 2014. Today's gas-fired fleet of about 220,000 MW is only operating at 39% of capacity, according to UCS.

The cost of replacing the coal units ranges widely, according to UCS. Existing gas-fired plants can provide electricity at $50 to $55/MWh while estimates indicate new gas-fired units would generate at $60 to $80/MWh. The study projected new wind power at $50 to $70/MWh, with the low-end reflecting the advantages of a federal production tax credit.

The UCS study did not include a composite price for retrofitted coal units, noting capacity factors, operations, size, fuel types, heat rates and other factors varied greatly and were specific to individual plants.

However, a 2011 report by the group showed construction costs for control equipment to reduce sulfur dioxide and nitrogen oxides -- scrubbers and SCRs -- ranging from $282 to $508/kW for a 500 MW coal plant or $432 to $790/kW for a 100 MW coal plant.

Costs for mercury and particulate matter control technology, both baghouses and activated carbon injection construction, could range from $150/kW to $161/kW, according to that report.

UCS said it used data submitted by industry to the US Energy Information Administration and the Environmental Protection Agency to determine its estimates. UCS' analysis assumed a base case price of $4.88/MMBtu for gas going forward for both existing and new gas-fired combined cycle plants in its 59 GW projections. Higher gas prices, closer to $6.10, would reduce coal capacity retirements to about 35 GW.

The New York Mercantile Exchange's 12-month strip for calendar was about $3.80/MMBtu for 2013 and $4.10/MMBtu for 2014 on Monday.

UCS researchers said they chose to unveil their study in Baltimore during the annual meeting of the National Association of Regulatory Utility Commissioners to underscore the need they see for state regulators to work with utilities toward decisions to retire coal-fired units rather than spending money retrofitting the plants at significant costs to ratepayers and shareholders.

"Regulators should require utility companies to carefully consider whether ratepayers would be better off by retiring old coal plants and boosting electricity generation from natural gas and renewable energy sources like wind," said Steve Frenkel, report co-author and director of UCS' Midwest office. "Spending billions to upgrade old coal plants may simply be throwing good money after bad."

Frenkel added that "we're not calling for outright closure for all generation identified in study," but the group recommends that unit owners fully analyze the economics of their coal plants and such an analysis likely will lead to retirement decisions over retrofits.

--Cathy Cash, cathy_cash@platts.com
--Edited by Keiron Greenhalgh, keiron_greenhalgh@platts.com

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