KBRA Releases Research – Electric Utilities Slash Coal Usage

KBRA releases research on the use of coal to generate electricity in the U.S., which has declined significantly over the past 10 years.

The number of coal-fired electricity generation plants in the U.S. declined to 284 in 2020 from 580 in 2010, or 51%. The total amount of coal consumed for electricity generation also declined by approximately 55% over the same period. There are several reasons for this trend, including (1) the global regulatory push to decarbonize certain industries; (2) the favorable economic trade-off presented by the increased availability of low-cost, lower emission natural gas; and (3) the technological advancement that led to the declining costs and increased production from renewable energy sources. For this trend to continue, many factors will need to be managed, in addition to the regulatory thrust, such as ensuring reliability given the intermittency of solar and wind power and maintaining affordable electric rates.

This report also examines the coal reduction plans of two utilities, Atlantic City Electric (ACE) and Duke Energy (Duke), to assess the interplay of these factors. ACE has eliminated all coal-fired generation with a recent transaction exiting two power purchase agreements (PPA). Duke, starting from a larger base of coal-fired generation, has made substantial progress reducing coal and has proposed plans to cut it further and faster. Regulatory concerns regarding costs may slow the transition but the longer-term momentum seems clear toward net zero carbon emissions.

Key Takeaways:

• The decline in the U.S. electric utility industry’s coal use has been significant.
• A deeper dive into the coal reduction plans of two utilities, ACE and Duke, suggests continued momentum in the electric utility industry for coal reduction efforts.
• Higher costs can slow the transition away from coal, but the ultimate direction seems clear if system reliability and affordability goals can be achieved.
• Nuclear power is an important fuel source for these two utilities going forward based on its reliability and zero carbon attributes.

Click here to view the report.

Related Publications

• KBRA Has a Clear Focus on Credit Ratings, Not ESG Scores
• Municipal Utilities Carbon-Free Goals and Countervailing Forces

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220627005747/en/