In the United States, coal is primarily used to generate electricity—over  90 percent of coal was used to generate about 42 percent of electricity in  2011. Two broad trends—recent environmental regulations and changing  market conditions—are affecting power companies’ decisions related to  coal-fueled electricity generating units. The majority of coal produced in the United States is used domestically,  though exports represent a small but recently growing fraction of U.S.  coal production. Some of these scenarios are  especially relevant to the question of coal’s future, because they address  factors currently affecting the industry, such as the prices of coal and  natural gas—a fuel that competes with coal—and possible future policies  to address climate change. Retirements, Retrofits, and New Construction May Result in a Smaller but Cleaner Coal- Fueled Electricity Generating Fleet

The nation’s fleet of coal-fueled electricity generating units may have less  total generating capacity in the future, and the fleet may be capable of  emitting lower levels of pollutants, according to available information. Power Companies Are Planning to Retire a Significant Number of Older, Smaller, More Polluting Units

According to forecasts we reviewed, power companies may retire a  significant number of coal-fueled units in the future. To assess the types of units  that may be retired, we analyzed data on current power company plans to  retire coal-fueled units. Based on our statistical analysis of these  plans, power companies are more likely to plan to retire units that are  older, smaller, and more polluting. Many Units May Be Retrofitted with Pollution Control Equipment

As we reported in July 2012, power companies may retrofit many coal- fueled electricity generating units with new or upgraded pollution control equipment in response to new environmental regulatory requirements.Though the requirements and deadlines these regulations may establish  for generating units are somewhat uncertain at this time, EPA’s analyses  and two other studies we reviewed in our prior report suggest that one- third to three-quarters of all coal-fueled capacity could be retrofitted or  upgraded with some combination of pollution control equipment, including  scrubbers and other technologies to reduce SO, mercury, and other  emissions. The total capacity of coal-fueled electricity generating units in the United  States may decline in the future as less capacity is expected to be built  than is expected to retire. Coal's share of total electricity  generating capacity was about 30 percent in 2011. Coal Likely to Remain a Key Fuel Source, but Future Use May Be Affected by Fuel Prices, Environmental Regulations, and Other Factors

Coal is likely to continue to be a key fuel source for electricity generation  in the United States, but its share as a source of electricity is expected to  decline, and the future use of coal to generate electricity in the United  States may be affected by several key factors that include the price of  natural gas and other competing fuels, environmental regulations, and the  demand for electricity, among others. Coal Likely to Continue to Be a Key Source of Electricity in the Future, though Its Share Is Generally Expected to Decline in the United States

According to stakeholders we interviewed and projections by EIA, IEA,  and IHS Global Insight, coal is likely to continue to be a key fuel source  for U.S. electricity generation, but its share as a source of electricity is  generally expected to decline in the future. Furthermore, in its reference scenario, EIA estimates that coal will  represent 38 percent of U.S. electricity generation in 2035 under current  policies––down from 42 percent in 2011.amount of electricity generated using coal is expected to remain relatively  constant over this same period under EIA’s reference scenario, growing  by 0.1 percent annually. However, the amount of electricity generated  using some other fuel sources, for example, natural gas and renewables,  will increase at higher annual rates—1.4 percent and 2.3 percent  respectively—diminishing coal’s total share of electricity generation. EPA's Office  of Air and Radiation did provide technical comments and stated that the  report contained a very good description of many of the changes going on  in coal and electricity markets that are affecting the use of coal to  generate electricity. Appendix I: Analysis of Characteristics of Coal-Fueled Generating Units That Power Companies Plan to Retire

This appendix describes our statistical analysis of characteristics of coal- fueled electricity generating units, such as age and size, that are likely to  affect power companies’ plans to retire certain units. Analysis Indicates Units Power Companies Likely to Consider Retiring

The next step in our analysis was to use the resulting logit regression  equation to estimate the number and generating capacity of other coal- fueled units that companies are likely to consider retiring among units  belonging to companies that have not, as of yet, announced plans to  retire coal-fueled units. If we add  these units to those that power companies have announced for  retirement, the total of coal-fueled retirements could range from 264 to  312 units by 2020, amounting to from 46,100 to 55,600 MW of capacity  and average annual generation of 241 to 301 million MWh.percentage terms, this would be 15 to 18 percent of the capacity and 13  to 16 percent of the generation of the current coal-fueled fleet of  generating units. Coal Power Plants: Opportunities Exist for DOE to Provide Better  Information on the Maturity of Key Technologies to Reduce Carbon  Dioxide Emissions.
Why GAO Did This Study

Coal is a key domestic fuel source and an important contributor to the U.S. economy. Most coal produced in the United States is used to generate electricity. In 2011, 1,387 coal-fueled electricity generating units produced about 42 percent of the nation's electricity. After decades of growth, U.S. coal production and consumption have fallen, primarily due to declines in the use of coal to generate electricity.
According to the Environmental Protection Agency (EPA), using coal to generate electricity is associated with health and environmental concerns such as emissions of sulfur dioxide, a pollutant linked to respiratory illnesses, and carbon dioxide, a greenhouse gas linked to climate change. In response to recent environmental regulations and changing market conditions, such as the recent decrease in the price of natural gas, power companies may retire some units, which could affect the coal fleet's generating capacity--the ability to generate electricity--and the amount of electricity generated from coal. Power companies may also retrofit some units by installing controls to reduce pollutants.
GAO was asked to examine (1) how the fleet of coal-fueled electricity generating units may change in the future in terms of its generating capacity and other aspects and (2) the future use of coal to generate electricity in the United States and key factors that could affect it. GAO conducted a statistical analysis of plans for retiring coal-fueled units, interviewed stakeholders, and reviewed information on industry plans and long-term forecasts by EIA and others. GAO is not making any recommendations in this report.

What GAO Found

Retirements of older units, retrofits of existing units with pollution controls, and the construction of some new coal-fueled units are expected to significantly change the coal-fueled electricity generating fleet, making it capable of emitting lower levels of pollutants than the current fleet but reducing its future electricity generating capacity. Two broad trends are affecting power companies' decisions related to coal-fueled generating units--recent environmental regulations and changing market conditions, such as the recent decrease in the price of natural gas. Regarding retirements, forecasts GAO reviewed based on current policies project that power companies may retire 15 to 24 percent of coal-fueled generating capacity by 2035--an amount consistent with GAO's analysis. GAO's statistical analysis, examining data on power companies that have announced plans to retire coal-fueled units, found that these power companies are more likely to retire units that are older, smaller, and more polluting. For example, the units companies plan to retire emitted an average of twice as much sulfur dioxide per unit of fuel used in 2011 as units that companies do not plan to retire. Based on the characteristics of the units companies plan to retire, GAO estimated additional capacity that may retire. In total, GAO identified 15 to 18 percent of coal-fueled capacity that power companies either plan to retire or that GAO estimated may retire--an amount consistent with the forecasts GAO reviewed. Regarding retrofits, the coal-fueled generating fleet may also become less polluting in the future as power companies install controls on many remaining units. Regarding new coal-fueled units, these are likely to be less polluting as they must incorporate advanced technologies to reduce emissions of regulated pollutants. Coal-fueled capacity may decline in the future as less capacity is expected to be built than is expected to retire.
According to stakeholders and three long-term forecasts GAO reviewed, coal is generally expected to remain a key fuel source for U.S. electricity generation in the future, but coal's share as a source of electricity may continue to decline. For example, in its forecast based on current policies, the Energy Information Administration (EIA) forecasts that the amount of electricity generated using coal is expected to remain relatively constant through 2035, but it forecasts that the share of coal-fueled electricity generation will decline from 42 percent in 2011 to 38 percent in 2035. Available information suggests that the future U.S. use of coal may be determined by several key factors, including the price of natural gas and environmental regulations. For example, available information suggests that the price of coal compared with other fuel sources will influence how economically attractive it is to use coal to generate electricity. EIA assessed several scenarios of future fuel prices and forecasts that coal's share of U.S. electricity generation will fall to 30 percent in 2035 if natural gas prices are low or 40 percent if natural gas prices are high. In addition, some stakeholders told GAO that the future use of coal could be significantly affected if existing environmental regulations become more stringent or if additional environmental regulations are issued. For example, EIA forecasts that two hypothetical future policies that reduce carbon dioxide emissions from the electricity sector by 46 percent and 76 percent would result in coal's share of U.S. electricity generation falling to 16 and 4 percent in 2035, respectively.
EPA provided technical comments that were incorporated as appropriate.