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AEO2014: GHG policy risks and coal

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World Coal,

The US Energy Information Administration (EIA) has raised the cost of capital for new coal-fired power and coal-to-liquids plants without carbon capture and storage (CCS) in its latest Annual Energy Outlook 2014 (AEO2014), reflecting the increased risk of future greenhouse gas (GHG) emissions restrictions in the US.

The higher cost of capital also applies to projects at existing plants (excluding CCS), such as retrofits to control mercury, acid gases and particulate matter for compliance with MATS regulation.

Under AEO2014’s Reference Case, the cost of capital increases by 3% – roughly equivalent to a CO2 price of US$15/t. As a result, the EIA forecasts less than 3 GW of new coal-fired power capacity will be added to in the US to 2040 – 10 GW less than the administration predicts under its No GHG Concern Case.

In comparison, the costs of building new coal-fired power under the No GHG Concern Case remain competitive at between 9% under to 11% above the national average, depending on region and excluding New England where costs are 22% above the national average. Under this scenario, new building of coal-fired power plants would be economical in a number of regions from the mid- to late 2020s.

The AEO2014 assumes that all current laws and regulations remain in effect until 2040. 

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