US utilities postpone coal power closures in clean energy setback

US utilities are extending the lives of their coal-fired power plants, as delays in obtaining cleaner replacements and strong electricity demand drive fears of shortfalls on the grid.

Three coal generators this month joined a growing list of plants whose planned retirement date has been postponed, bringing to at least eight the number of deferrals this year. The delays are a setback, at least temporarily, to the country’s efforts to wean itself off the dirtiest fossil fuel.

“While this is a difficult decision, it is necessary to maintain the reliable electricity service our communities have come to expect,” Javier Fernandez, chief executive of the Omaha Public Power District, said this month as he deferred the conversion of two Nebraska coal-fired units to natural gas by three years. The public utility pinned the extension on delays bringing new gas and solar projects into service.

OPPD was joined by the investor-owned utility CenterPoint Energy, which announced it was extending the life of a coal unit in Indiana by two years to reduce the amount of power it has to purchase from the regional grid operator’s “high-priced capacity market”.

Missouri’s Ameren, another utility group, has been in a legal battle over the closure of its Rush Island coal plant. It now looks set to keep its two units operating until 2025 — having applied earlier this year to close them in September — after the grid operator said its closure would lead to a “risk of cascading outages and area voltage collapse”.

US coal-fired generating capacity has fallen by more than half over the past 15 years as falling costs for natural gas fuel and wind and solar technologies introduced brutal competition.

But the solar buildout has hit a wall this year, holding up projects that were to replace some of the lost coal generation. Consultancy Wood Mackenzie expects utility-scale solar installations will add 8.7 gigawatts of capacity in 2022, about half of last year’s levels.

Developers and utilities blame difficulty in procuring parts, including constraints related to an investigation into whether importers are dodging tariffs on solar panels from south-east Asia and the seizure of some parts under a law barring supplies linked to forced labour in China.

“Many of the operators are attributing the deferral of plant closures to delays in solar or solar [and battery] storage projects,” said Morris Greenberg, an analyst at S&P Global Commodity Insights.

Utility PNM Resources described a “perfect storm” of regulatory obstacles, supply chain problems and “lengthier periods of unseasonably hot weather driven by climate change” earlier this year when it delayed the closure of a New Mexico coal plant by three months to September.

US gas prices have also climbed to the highest level since 2008, making coal a more attractive alternative fuel during a year in which electricity consumption is expected to hit a record.

Most of the delayed retirements were announced in the middle of the country, where the Midcontinent Independent System Operator, which manages the grid, warned of the risk of power shortages.

It said the region could face a shortfall of 2.6GW next year, rising to 10.9GW in five years. It has called for plant retirements to be deferred to help counter what chief executive John Bear described as “the uncertainty and volatility of the resource transition”.

But despite the near-term delays, analysts said the US’s shift away from coal would continue. The Institute for Energy Economics and Financial Analysis estimates coal-fired capacity will more than halve from current levels to less than 100GW by the end of the decade.

“They are delays. They are not a turnabout,” said Dennis Wamsted, an analyst at the institute. “I am 100 per cent convinced that this is a short-term disruption, not a long-term transition away from the retirement of coal plants.”

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here