2005 to 2020, an American power industry odyssey

Driven by a combination of technological improvements and government policy, the power generation industry in the United States has gotten a lot cleaner fast. According to data compiled by the Hitachi ABB Power Grids’ Velocity Suite research team, since 2005, CO2 emissions from the nation’s power plants have declined by a phenomenal 37%. The primary drivers for the drop have been the steady decline in coal power production and the strong growth in natural gas and renewables. Except for a small upward trend in 2010, carbon emissions from the power generation sector have been steadily declining since peaking in 2007. The decline was driven most by coal plant closures and the expansion of natural gas as a utility fuel. Renewable energy, particularly wind, has also shown strong growth through the 15-year period. 

U.S. electricity production (MWh) and CO2 emissions (metric tons) by fossil fuel resource

Spurred by the recently announced federal mandate to achieve 100% carbon-free power by 2035, the next fifteen years look to be even more ambitious and adventurous. The new Nationally Determined Contribution (NDC) sets an economy-wide target to reduce greenhouse gases (GHG) 50% to 52% below 2005 levels by 2030, and for the nation’s power industry, to achieve 100% carbon-free electricity by 2035. 

U.S. power industry CO2 emissions, tons

Meeting this plan depends on the rapid expansion of wind, solar and energy storage resources, as well as tapping into existing and new nuclear and ‘carbon capture’ technologies. 

Natural gas and renewables dominate sector growth

The combination of plant retirements and significantly reduced capacity factors at coal plants, in favor of natural gas and renewables, has driven CO2 emissions reductions most. Since 2005, 107 GW of coal capacity has shuttered, and the average annual capacity factor* of operating coal plants has declined from 67% to only 40% in 2020. The beneficiaries of the decline in coal have been natural gas, wind, and solar resources. Since 2005, natural gas power production increased by 112%, and renewable energy, mostly from wind and utility-scale solar additions, increased by 120%. During the 15-year period, natural gas as an electricity fuel increased from 24% of the total U.S. fuel mix in 2005 to an astounding 40% in 2020. During the period, power production from wind and solar increased by more than twenty-three times. In 2005 the two fuels represented less than half of 1% of total energy supply – in 2020, the two resources account for 10.7% of total energy supply – most of that growth has been from wind (79%), but solar is on a fast growth track and is certain to play a significant role in meeting the zero-carbon goal in the next fifteen years.

U.S. electricity generation by fuel source, TWh

The shift from coal to natural gas has been a game-changer

The steady supply of low-priced natural gas since the advent of the ‘Shale Revolution,’ midway through the last decade, has led to the dramatic displacement of coal in favor of natural gas. Since early 2009, Henry Hub natural gas prices have remained relatively stable, averaging monthly between $3 and $4/mmBtu. During the previous eight years, running from 2000 through 2008, a much more volatile period, prices averaged more than $8/mmBtu with some monthly averages topping $15/mmBtu. Meanwhile, dry shale gas production grew from around 10 billion cubic feet per day (Bcf/d) in 2008 to more than 70 Bcf/d in 2021. The result of this decade-long stable supply of low-priced natural gas is lower electricity prices and happy customers.  

The study highlights phenomenal growth relative to forecast

A recent report prepared by Ryan Wiser and colleagues at the Lawrence Berkeley National Laboratory (LBNL) compared 2005 fundamentals to 2005 forecasts for 2020, with 2020 actual statistics. The report, titled “Halfway to Zero: Progress towards a Carbon-Free Power Sector,” was published in April 2021. Highlighted in the report, was the actual gains in CO2 reductions compared to what was forecast for 2020. Based on the 2005 Department of Energy’s Annual Energy Outlook (AEO), projected CO2 emissions from the power sector were forecast to top 3,000 million metric tons (MMT) by 2020 – actual emissions turned out to be 52% less than forecast. The infographic below articulates some of the key findings of the study.

Progress towards a carbon-free power sector

Source: Lawrence Berkeley National Laboratory (LBNL)

The study cites the combination of economic, technological, and policy drivers as the reasons behind the 2020 outcome and the forecasts from 2005. Topping the list of drivers is the large fuel-switching effort to generate more electricity from natural gas and less from coal. Looking back over the 15 years, natural gas as a utility fuel increased by 112%, nuclear remained about the same, and coal fell by 61.5%. Wind and solar increased from a relatively small power supply contribution of around 20 million megawatt-hours (MWh) in 2005 to 428 in 2020 – wind power accounted for most of the two resources growth. According to the report, renewables overall, including wind, solar, conventional hydro, and other resources, grew the most of any resource group, from 358 million MWh in 2005 to 834 in 2020. The 2005 forecast for 2020, for all renewables, was to reach 465 – the largest projected increase of all resources analyzed.

Change in electricity production since 2005 in millions of MWh: 

• Coal: -1,239
• Natural gas: +856
• Renewables: +477
• Petroleum: -106

Top electric holding companies have made big strides

The chart below highlights the top 10 electric holding companies in terms of quantitative change in CO2 emissions over the fifteen-year period. The companies were selected based on total emissions over the period. The Hitachi ABB Power Grids’ Velocity Suite research team complied the data from individual plant/unit CO2 emission statistics aggregated by ownership to the holding company level. 

U.S. electric holding companies annual CO2 emissions in 2005 and 2020, tons

As a group, the ten companies have reduced CO2 emission by a whopping 52.8% (down 620 MMT) over the fifteen years – nationally, CO2 emissions reductions declined by 37.1% (down 941.9 MMT). Topping the list is American Electric Power which has reduced CO2 emissions by 67.5% – down 123.1 MMT since 2005. Duke Energy (-51.5%) and NRG Energy (-74.3%) rank 2nd and 3rd in overall CO2 emission reductions with declines of 86.3 MMT and 83.3 MMT, respectively. Other top CO2 emission-reducing companies include Tennessee Valley Authority (down 66.5%/70.7 MMT), FirstEnergy Corp. (down 71.9%/68.7 MMT), and Southern Company (down 43.6%/61.2 MMT). 

The road ahead will be more challenging

Despite the significant CO2 emission reductions over the past 15 years, the next 15 years pose a challenge. The decade run of abundant cheap natural gas may have run its course. The next wave of emission reduction gains is expected to come from solar, wind, and energy storage. According to planning statistics compiled by Hitachi ABB Power Grid’s Velocity Suite, there is roughly 60 GW of currently operating coal capacity scheduled for closure between now and 2030 – 58% (35 GW) of that between now and 2025, and 27% (16 GW) before the end of 2022. Meanwhile, a closer look at power projects currently under construction reveals that 95.4% are solar, wind, and natural gas facilities. Solar leads the pack with 19.9 GW under construction or testing, while wind (17.1 GW) and natural gas (14.9 GW) follow close behind. 

With more and more variable resources added to the grid and more and more dispatchable resources retired, having adequate ‘inertia’ supporting spinning reserves becomes a grid challenge. The need for power quality-enhancing technology like static compensators and condensers increases with the growing demand for modern battery and long-duration storage technologies. Over the past 15 years, the power industry has done a phenomenal job reducing carbon and other emissions, including nitrous oxides and particulates. The next 15 years, though challenging, will follow that trajectory by deploying innovative new grid technology and through the expanded digitalization of operations. Electricity is center stage as companies pursue the electrification of nearly everything from electric vehicles to new clean energy systems for buildings.

* Capacity factor is the ratio of the electrical energy produced by a generating unit during a period compared to the electrical energy that could have been produced at continuous full-power during that period.