NEW YORK — Electricity prices are probably on their way up across much of the U.S. as coal-fired plants, the dominant source of cheap power, shut down in response to environmental regulations and economic forces.
New and tighter pollution rules and tough competition from cleaner sources such as natural gas, wind and solar power will lead to the closings of dozens of coal-burning plants across 20 states over the next three years. And many of those that stay open will need expensive retrofits.
Because of these and other factors, the Energy Department predicts retail power prices will rise 4 percent on average this year, the biggest increase since 2008. By 2020, prices are expected to climb an additional 13 percent, a forecast that does not include the costs of coming environmental rules.
The Obama administration, state governments and industry are struggling to balance this push for a cleaner environment with the need to keep the grid reliable and prevent prices from rocketing too much higher.
In Texas, a string of coal-fired plants were built in the 1970s and ’80s, largely upon deposits of lignite. Now, the cost of upgrading the plants to meet new environmental standards is likely to be high, and their future is uncertain.
In 2011, Energy Future Holdings, the state’s largest power generator, threatened to shut down two of its power plants and three of its coal mines over cross-state air pollution rules. The company backed off those plans when the rules were modified, a company spokesman said.
“We’re facing a set of questions that are new to the industry,” says Clair Moeller, who oversees transmission and technology for the Midcontinent Independent System Operator, which coordinates much of the electric grid between Minnesota and Louisiana.
Coal is the workhorse of the U.S. power system. It is used to produce 40 percent of the nation’s electricity, more than any other fuel. Because it is cheap and abundant and can be stored on power plant grounds, it helps keep prices stable and power flowing even when demand spikes.
But Texas is not as reliant on coal power as other states. Close to half its electricity is generated by natural gas.
Natural gas, which accounts for 26 percent of the nation’s electricity, has dropped in price and become more plentiful because of the boom in hydraulic fracturing. But its price is on the rise again, and it is still generally more expensive to produce electricity with gas than with coal. Also, gas isn’t stored at power plants because the cost is prohibitive. That means it is subject to shortages and soaring prices.
During the brutally cold and snowy winter that just ended, utilities in several states struggled to secure natural gas because so much was also needed to heat homes. Some utilities couldn’t run gas-fired plants at all, and power prices soared 1,000 percent in some regions.
EPA Administrator Gina McCarthy, responding to critics, notes that pollution also imposes costs on the economy because it harms human health and the environment. And she has also forcefully promised that the coming carbon dioxide rule will keep costs in check and power flowing.
“EPA is not going to threaten electric reliability,” she told a gathering of executives in Houston in March. “That is our No. 1 priority.”
Richard Sedano of the Regulatory Assistance Project, which advises officials on regulatory policy, says the transition to cleaner sources can be smooth with proper planning.
States, utilities and the federal government have helped reduce the need for more power plants through efficiency programs and standards for energy-conserving lights and appliances. Utilities are building new transmission lines and updating grids. And customers are generating more of their own power with solar panels and managing their consumption through digital meters and other technology.
Also, power prices across the U.S. are relatively low compared with those in the rest of the developed world. Adjusted for inflation, the national average residential price is nearly 30 percent lower than in 1984.
The Associated Press,
staff writer James Osborne
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