As the largest power grid in North America, the Eastern Interconnection encompasses 39 U.S. states, eight Canadian provinces and the District of Columbia. Some 84 percent of all U.S. coal-fired capacity falls within its jurisdiction.
Given the Eastern Interconnection's lion-sized role in hosting the flow of coal-fired electrons in the United States, the findings of a recent report by the consultancy ICF International are unlikely to bring much comfort to the nation's faltering coal industry. The report, commissioned by the Eastern Interconnection States' Planning Council (EISPC) and the National Association of Regulatory Utility Commissioners (NARUC), finds few challenges to natural gas's current price advantage within current market or regulatory conditions.
Natural gas has increased its share of the U.S. power mix dramatically over the past two decades, taking a steadily larger toll on coal's own share as U.S. energy consumption flatlined during the past six years. Coal dropped from 46 percent of the power mix in 2007 to 35 percent in 2012, according to data from the Energy Information Association (EIA).
In the Eastern Interconnection region, home to some of North America's most coal-reliant jurisdictions, the drop is even more dramatic -- down from its average of 60 percent over the last 30 years, coal accounts for about 41 percent of all electricity generation today.
Low natural gas prices remain the single largest barrier to new coal-fired generation, with existing clean-air standards posing a threat to older, smaller units already threatened by cheap energy prices. The prospect of a carbon tax or similar market-based mechanism "remains a wild card for existing plants," the report notes.
"Any requirement to add [carbon capture and storage technology or CCS] to existing plants can result in significant retirements, especially since the technology remains expensive and is not yet fully commercialized," it notes.
One possible silver lining in coal's otherwise bleak landscape has been a gradual rise in gas prices over the past year, which has allowed coal to regain some of its lost dispatch. The report also notes recent heavy federal investment made into research and development of CCS technology that may help bring down costs and cushion the effects of future climate regulation on more modern coal-fired capacity.
"At the current state of development of CCS, the incremental cost of adding the technology to new power plants makes coal less economically competitive than gas in most cases," said Ananth Chikkatur, a manager at ICF. "Our analysis looked at only currently available technologies -- as prices come down over time, the picture could change."
A market mechanism mandating a more diverse mix of fuels could benefit coal in regions where gas is currently dominant, but such a mechanism is unlikely in the current regulatory environment, Chikkatur said.
As an example, he said, "If power markets were to say that, for purposes of security or to hedge against price volatility in natural gas, that a percentage of coal needs to be in the capacity, then that would benefit the industry. But at the moment, no such mechanism exists."
Further environmental regulation, such as a carbon tax, would likely disadvantage coal more, given its large carbon footprint relative to other fossil fuels, he said.
Clinging to a smaller slice of the pie
Despite coal's decline in recent years, the ICF report notes that more modern plants, particularly those equipped with sulfur dioxide "scrubbers," will likely remain online for the foreseeable future. Stable gas prices and environmental retrofits have allowed some coal-producing regions, like the Illinois Basin, to stage a comeback.
While new thermal generating units have primarily leaned toward natural gas, many of the coal-fired power plants built over the last 10 years will be around for decades more to come. This existing base of plants, which operate more efficiently than their predecessors, could continue to support a domestic, if reduced, coal extraction industry for some time.
Already, though, older sections of the coal power plant fleet are looking toward closure. The average age of coal plants in the Eastern Interconnection's top five coal-burning states -- Indiana, Illinois, Ohio, Pennsylvania and West Virginia, which collectively consume a third of the region's coal -- will be half a century as of 2015.
Utilities and other power generation owners have announced planned cuts in coal-fired generation of up to 47 gigawatts in 2012 and beyond, according to the report. Internal projections by the ICF indicate that nearly 85 percent of total retired coal capacity will be within three regional transmission operators -- the Midcontinent Independent System Operator, PJM Interconnection and SERC -- all of which fall within the Eastern Interconnection.
The EISPC, which commissioned the ICF's report, was established by the Department of Energy using stimulus funding to coordinate government officials operating in the Eastern Interconnection. It was established to facilitate regional interconnection planning and provide informational resources to regional grid operators.