The Impact of EPA's Power Plant Regulations


More than 72 gigawatts (GW) of electrical generating capacity have already, or are now set to retire because of the Environmental Protection Agency’s (EPA) regulations. The regulations causing these closures include the Mercury and Air Toxics Standards (colloquially called MATS, or Utility MACT), proposed Cross State Air Pollution Rule (CSAPR), and the proposed regulation of carbon dioxide emissions from existing power plants.

To put 72 GW in perspective, that is enough electrical generation capacity to reliably power 44.7 million homes — or every home in every state west of the Mississippi River, excluding Texas. In other words, EPA is shutting down enough generating capacity to power every home in Washington, Oregon, California, Idaho, Nevada, Arizona, Utah, Montana, Wyoming, Colorado, New Mexico, North and South Dakota, Nebraska, Kansas, Oklahoma, Minnesota, Iowa, Missouri, Arkansas, and Louisiana.

Over 94 percent of these retirements will come from generating units at coal-fired power plants, shuttering over one-fifth of the U.S.’s coal-fired generating capacity. While some of the effected units will be converted to use new fuels, American families and businesses will pay the price with higher utility bills and less reliability for their electricity.

Short-Term Energy Outlook for 2016

Highlights

  • This edition of the Short-Term Energy Outlook is the first to include forecasts for 2017.
  • North Sea Brent crude oil prices averaged $38/barrel (b) in December, a $6/b decrease from November, and the lowest monthly average price since June 2004. Brent crude oil prices averaged $52/b in 2015, down $47/b from the average in 2014, as growth in global liquids inventories put downward pressure on Brent prices throughout much of the year.
  • Forecast Brent crude oil prices average $40/b in 2016 and $50/b in 2017. Forecast West Texas Intermediate (WTI) crude oil prices average $2/b lower than Brent in 2016 and $3/b lower in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. For example, EIA's forecast for the average WTI price in April 2016 of $37/b should be considered in the context of recent contract values for April 2016 delivery (Market Prices and Uncertainty Report) suggesting that the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval).
  • The price of U.S. retail regular gasoline is forecast to average $2.03/gallon (gal) in 2016 and $2.21/gal in 2017, compared with $2.43/gal in 2015. In December, average retail regular gasoline prices were $2.04/gal, a decrease of 12 cents/gal from November and 51 cents/gal lower than in December 2014. EIA expects monthly retail prices of U.S. regular gasoline to reach a seven-year low of $1.90/gal in February 2016, before rising during the spring.
  • U.S. crude oil production averaged an estimated 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.5 million b/d in 2017. EIA estimates that crude oil production in December fell 80,000 b/d from the November level.
  • Natural gas working inventories were 3,643 billion cubic feet (Bcf) on January 1, which was 17% higher than during the same week last year and 15% higher than the previous five-year average (2011-15) for that week. EIA forecasts that inventories will end the winter heating season (March 31) at 2,043 Bcf, which would be 38% above the level at the same time last year. Forecast Henry Hub spot prices average $2.65/million British thermal units (MMBtu) in 2016 and $3.22/MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.
  • A decline in power generation from fossil fuels in the forecast period is offset by an increase from renewable sources. The share of generation from natural gas falls from 33% in 2015 to 31% in 2017, and coal falls from 34% to 33%. For renewables, the forecast share of total generation supplied by hydropower rises from 6% in 2015 to 7% in 2017, and the forecast share for other renewables increases from 7% in 2015 to 9% in 2017.