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U.S. study sees 59,000 MW of coal output too costly to run

HOUSTON (Reuters) - A new report on the economic viability of U.S. coal-fired power plants shows as much as 59,000 megawatts may be ripe to retire in the next few years, the Union of Concerned Scientists said on Tuesday.

That's in addition to an estimated 40,000 MW of coal generation scheduled to shut or be converted to another fuel in the next few years, said UCS, a science-based nonprofit organization based in Washington DC.

The combined closure of 99,000 MW of coal capacity would represent nearly one third of U.S. coal generation output.

Plentiful and affordable natural gas will make it harder for power companies to justify the investment needed to keep smaller, older coal plants in compliance with stricter federal environmental standards which are being finalized.

Retirement of these aging coal plants "would create an opportunity to accelerate our nation's transition to a cleaner energy future," the UCS report said. It would shift investment from coal toward renewable energy resources - such as wind and solar - energy-saving technology, a modernized grid and more reliance on natural gas-fired power plants, the report added.

"Regulators should require utility companies to carefully consider whether ratepayers would be better off by retiring old coal plants and boosting electricity generation from natural gas and renewable energy sources like wind," said Steve Frenkel, co-author of the report. "Spending billions to upgrade old coal plants may simply be throwing good money after bad."

UCS issued its report during a national conference of state utility regulators being held in Baltimore.

Looking at age, size, efficiency and emission controls on the country's coal fleet, UCS evaluated the competitiveness of remaining coal plants after adding the cost of needed pollution controls compared to operating costs of typical gas-fired plants.

The study considered the operating cost of coal plants after controlling four major air pollutants - sulfur dioxide, nitrogen oxides, particulate matter and mercury.

Using comparisons to existing and new gas plants and several future gas price scenarios, UCS said between 153 coal units, totaling 16,400 MW, and 353 coal units in 31 states, totaling 59,000 MW, would no longer be economical and therefore, candidates to be shut.

UCS' "ripe for retirement" estimates range from a low of 1.7 percent of U.S. annual output to a high of 6.3 percent.

"Our analysis shows that many of these ripe-for-retirement units may already be uneconomic even before considering the cost of pollution controls," UCS said, estimating that even without new pollution controls, "23,400 MW are already more expensive to operate than existing natural gas plants."

The U.S. has 316,000 MW of coal-fired generation, accounting for 30 percent of the nation's total generation fleet, but coal-plant output has been declining for several years as new pollution standards were formulated and gas prices plunged to the lowest level in a decade with expanded production from new fields.

Coal-fired generators were expected to produce about 37 percent of the nation's power supply in 2012, down from 42 percent last year, according to federal data. In 2013, the Energy Information Administration (EIA) expects coal to produce 40 percent of the nation's electricity.

Coal produced more than half of the nation's power as recently as 2003.

Meanwhile, natural gas' share of total generation is projected to reach 31 percent this year from 25 percent in 2011, then slip back to 27 percent in 2013 as gas costs rise, EIA said.

Not surprisingly, the U.S. Southeast, Midwest and Mid-Atlantic regions, areas most dependent on coal plants for electricity, will see the most retirements.

Georgia, Alabama, Tennessee, Florida and Michigan may see the most coal-plant retirements, the study said.

Wisconsin, Indiana and Ohio also have uneconomic coal generation, UCS said.

Atlanta-based Southern Co, owns the most coal-fired generating capacity ready for retirement, the UCS study found, followed by government-owned Tennessee Valley Authority, Duke Energy, American Electric Power Co Inc and FirstEnergy Corp.

(Reporting by Eileen O'Grady; editing by Andrew Hay)

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