Coal Baseload Asset Aging, Evaluating Impacts on Capacity Factors

Workshop on Coal Fleet Aging and Performance, EIA Post-Conference Meeting, Renaissance Hotel, Washington D.C. Ken Kern Strategic Energy Analysis and Planning Division National Energy Technology Lab, Pittsburgh, PA National Energy Technology Laboratory June 16, 2015 AEO’13 - Issues in Focus (page 42) (Coal Capacity Factor Assumption)

Generation by fuel

“As natural gas prices increase in the AEO2013 Reference case, the utilization rate of coal-fired generators returns to previous historical levels and continues to rise, to an average of around 74 percent in 2025 and 78 percent in 2040.” Baseload Generation (1998-2014) A Dominant Factor in Power Generation… Critical to the Economy

Total Generation (56,182 BkWh) Baseload Generation (40,190 BkWh)

Coal (59%) Baseload Non-Baseload (72%) (28%) Nuclear NG (33%) Other (8%) (<1%)

From 1998-2014, coal and nuclear generation accounted for 91% of baseload generation

Source: Ventyx, Velocity Suite; Baseload is assumed to be generation with >65% capacity factor Annual Energy Outlook 2015 Capacity Factors

AEO’15 Reference case Coal c.f. at 75%

Source: AEO’15 page 25, based on a November 2014 NEMS run Coal Units Capacity Factors in Age Bands (1998-2014 Based on Age of Unit in Year of Data)

90 Age Bands 80 2014 0 to 10 70 11 to 20 60 21 to 30 31 to 40 50 41 to 50 51 to 60 40 61 to 70 71 and older 30

20 Average Capacity Factor % Factor Capacity Average

0 0 10 20 30 40 50 60 70 80 Unit Age in Year of Data Coal unit capacity factors drop off as they age

Average capacity factor by unit age for coal operations, 1998-2014 100 Approximation of actual industry capacity 90 factor experience based on unit age 80% 80

70 60% 60

40 T o 30 d

Average capacity factor (%) factor capacity Average 20 a 14% 10 y

0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Unit age in years

Data source and notes: Data from Ventyx's Energy Velocity. Unit age in each year was calculated then averaged Coal Capacity and Unit Ages in 2040 Capacity Factor Capacity-weighted average age 62 (%) Historic Age-based (average unit age 66) 16 Capacity Factor Trend 90 (1998-2014) 80% AEO’15 AVERAGE Capacity Factor 2040 80 14 75% 12 70 Historic AVERAGE Capacity Factor 64% 60% 60 10 Existing Units (1998-2014) 50 8 40 6 AVERAGE Capacity Factor of coal 30

Capacity (GW) Capacity 30% units in 2040 based on ages and 4 16 year past performance data 20

2 14% 10 0 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Age Overestimation of coal unit capacity factors can result in reliably issues and underestimation of replacement baseload capacity need

References – Ventyx Velocity Suite (existing units and announced retirements, accessed 6/10/2015) - EIA AEO 2015 (Reference case forecasted additions); assume units retire that would be older than 100 years of age in 2040. Age Distribution of Existing Coal Units by 2040 (AEO 2015 Reference Case)

140 80 75% Capacity Factor 75% average 70 capacity factor 120 goal in 2040

224 GW 60 Capacity factor(%) 100 88% of Will they serve capacity 50 baseload needs? 80 > 50 years 40 60 30 40 Total Capacity (GW) Capacity Total 20

20 10 Announced Retirement 0 0 Projected Retirement Continued Operation Average capacity factor in 2012 Age groupings in 2040

Identity of Projected Retirement units using NETL methodology Average capacity factor by unit age for coal operations, 1998-2014 100

80 80%

60 60%

40 (%) 20 14%

Average Average capacity factor 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Unit age in years Potential Baseload Coal GW Equivalence Needed 1,800 EIA AEO’14 Generation 1,600

31 BkWh 1,007 1,400 GW 56 79 GW GW 1,200 109 144 GW GW 1,000

800 BkWh 600 400 200

2016 2032 2014 2015 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2033 2034 2035 2036 2037 2038 2039 2040

Missing generation estimate 144 GW @80% average C.F. for new units to meet 2040 demand Electricity Generation by Fuel, 1980-2040 billion kilowatthours History 2012 Projections 2500

Coal Capacity Factor Effect on kWh 2000 Expectations? Coal

-1,000 1500 BkWh Natural Gas of ~5,000 1000 BkWh Nuclear total (-20%) Renewables 500

Petroleum 0 1980 1990 2000 2010 2020 2030 2040

Note: Includes generation from plants in both the electric power and end-use sectors. Source: History: U.S. Energy Information Administration (EIA), Annual Energy Review; Projections: AEO 2015 Reference case

Overview of AEO2014 Accelerated Power Plant Retirement Side Cases May 20, 2014 Historic Coal-Fired Capacity Additions Segmented by Subcritical and Supercritical (1950-2013) Will the Units of the ‘70s and ‘80s Age, Maintain and Operate Like those of the ‘50s and ‘60s?

Built Currently Not Retired (what is shown on the graph) (as of 3/2014) Additions 20 Boiler Type Capacity # of Units Capacity # of Units Supercritical (GW) (GW) 18 Supercritical 94 138 (large units) 88 125 (large units) Subcritical Subcritical 241 1,490 217 (71%) 1,054 16 Retirements 14 Supercritical Subcritical 12 Announced Retirements 10 Supercritical Subcritical 8 50 Years Old Basis for Today 50 6 Years Age-based Old 4 Operating in 2040 High C.F. Experience Expected Net Summer Summer Net Additions Capacity (GW) 2 ? Thru 2040 Concerns

2002 2010 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2004 2006 2008 2012

Ventyx Velocity Suite Supercritical contains one ultra supercritical plant Supercritical Unit Capacity Factors (by 10-year Age Band)

100

50 Age Band in 2014 Units 0 to 10 14 40 11 to 20 0 30 21 to 30 3 31 to 40

Average Capacity Factor % Factor Capacity Average 39 20 84% 41 to 50 65 52% 10 51 to 60 3 0 124 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Few supercritical units have surpassed 50 years old; majority of units are beyond 40 years, with average age 62 in 2040 Supercritical vs Subcritical Capacity Factors (41-50 Age Band) 100

40 41 to 50 - SubcriticalN 30 41 to 50 - SupercriticalY

Average Capacity Factor % Factor Capacity Average 20

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 No significant capacity factor advantage for supercritical units that have passed beyond 41 years of age (52% of all supercritical units) Coal & Nuclear Baseload Capacity Renewal (by 2040)

25 Forecasted new coal and Existing coal and nuclear fleet by 2040 Average coal unit age = 66 nuclear fleet to meet Average today’s nuclear unit age = 60 20 demand and replace aging fleet

15 AEO 2006 AEO 2015 adds AEO 2007 9 GW nuclear AEO 2008 1 GW coal AEO 2009 10 End of AEO’06-’09 AEO 2010 Capacity (GW) Capacity forecast AEO 2011 2030 AEO 2012 5 AEO 2013 AEO 2014

0 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 Age of units by 2040 AEO new Nuclear AEO new Coal

Reference – Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 2016-2015 (forecasted additions) Constraints of the NSR Regulation Affects Ability to Perform Major Maintenance

• The U.S. EPA says it will seek to ease permitting obligations that are expected to crop up for power plants required to make retrofits to meet the agency's climate rule for existing facilities, a top official with the agency said Feb. 9 at a conference in Washington, D.C. • At issue is the EPA's new source review program, which requires power plants to obtain permits prior to making modifications, such as boiler heat rate improvements to meet the climate rule. Industry groups say that it is an unduly onerous and "very complicated process" that causes "significant delays.“ • The EPA is "certainly comfortable acknowledging that we will need to address NSR [new source review]" • EPA faces an uphill battle, recalling that in a past case a federal appeals court ruled that an attempt to make changes to the new source review program was not in the agency's "statutory purview."

Result: “The state could also develop conditions for a source expected to trigger NSR that would limit the unit’s ability to move up in the dispatch enough to result in a significant net emissions increase that would trigger NSR.” Per June 18, 2014 Federal Register for ESPS Conclusions • Past coal plant operating performance reflects declining capacity factors after age 50; uncertainties for meeting generation forecast by assuming high coal capacity factors • Anticipation that supercritical coal plants will perform distinctly better with age, not supported by early evidence • Industry practice, under positive economic conditions, is to replace the baseload asset base before reaching age 60 • A significant portion of the generation forecast relies on infrastructure performing well at unprecedented average age • NSR recognized as a limiting regulatory issue for coal-plant major maintenance; resolvable by reducing capacity factor • QER emphasized concern for aging U.S. energy asset base