Low gas prices and impending environmental regulations both played a role in a wave of announced coal plant retirements last year. And retirements are expected to continue as new Environmental Protection Agency rules kick in in 2015.
"The Northeast is the next major market to see material capacity retirements in this country," said UBS analyst Julien Dumoulin-Smith at the Platts Northeast Energy Markets conference in New York on Wednesday. "We're talking about a big purge," he said. UBS is estimating that the region will lose about 6 gigawatts of capacity.
Dumoulin-Smith predicted that nuclear plants would be next in line for closure. "If coal retirements and MATS [Mercury and Air Toxics Standards] was the story of 2012, this year and next year, nuclear will be the focal point," he said, highlighting Dominion's 556-megawatt Kewaunee plant in Wisconsin, scheduled for closure this quarter.
And he warned of the potential consequences of a series of plant closures that could leave the Northeast too reliant on a single fuel. "In a low-gas-price environment, the question is, do you want to have a policy that will uphold fuel diversity?" he said.
Most new builds in the Northeast are combined-cycle plants, said Craig Hart, Chief Financial Officer of USPowerGen, which owns three power generation facilities in New York City. Combined-cycle plants most commonly run on natural gas.
But the Northeast will also need additionalsolarand wind plants to meet requirements under renewable portfolio standards (RPS), according to Jonathan Stark, Managing Director of GE Financial Services.
"If you look at Pennsylvania, Massachusetts, New York and Connecticut, if they were to fulfill their renewable portfolio standards with wind and solar, which are the only two in-state renewables that could be done on a large scale, they need 8 gigawatts to 10 gigawatts to be built," Stark said. "Actually, these [states] are not the ones that need the most renewables to meet the RPS," he said.