Analysis: MISO weighs impacts from retiring coal

OREANDA-NEWS. Midcontinent Independent System Operator (MISO) planners see few immediate effects on energy markets from the projected retirement of gigawatts of coal-fired capacity in compliance with federal environmental rules but are more concerned about the long-term implications of the shifting generation mix.

The Environmental Protection Agency's mercury and air toxics standard will force 12GW of coal-fired capacity off line in MISO by April 2016. There should be no significant immediate impacts on wholesale power prices but resource adequacy margins will decline sharply, executive vice president of transmission and technology Clair Moeller said today at a briefing in Washington, DC. The coal capacity that is shutting down is old, infrequently used and inefficient and "gas commodity prices will be driving [energy] markets," he said.

The share of gas in MISO's installed capacity will increase as 2GW of new gas-fired generation enters service while 12GW of coal retires. The share of gas in MISO's installed capacity is 41pc and coal is 40pc at present. But coal accounts for 60pc of generation and most gas-fired capacity in MISO is used for peaking needs. MISO has less than 20GW of combined cycle capacity capable of adequately replacing baseload coal units, Moeller said. That amounts to about a quarter of all gas-fired capacity on that grid.

The change in generation mix will make planners' work even more complex, he said. "The industry for a 100 years has relied on history to tell the future. ... Is future performance going to be the same as past performance?"

The proposed federal limits on CO2 emissions from the power sector could force 10-14GW more off line in MISO. But investors will be reluctant to even consider adding more capacity until the rule is finalized, according to Moeller.