A new study reveals that regulated coal and gas units in the U.S. are less likely to retire compared to their unregulated counterparts, influencing market dynamics.
Recent research highlights a significant trend in the exit decisions of coal and gas power plants in the United States, emphasizing the impact of regulatory frameworks on these choices.
Since 2010, the U.S. has witnessed the closure of over 130 gigawatts of coal and 50 gigawatts of natural gas generation capacity. This wave of plant retirements has critical implications for electricity markets, grid stability, and environmental outcomes. A recent working paper published by the Energy Institute at UC Berkeley probes into whether regulatory status affects these exit decisions. Co-authored by Paige Weber and Lucas Davis, the study analyzes generator-level data spanning 14 years to elucidate the differences in exit behaviors among various types of power producers.
Ownership Structures and Retirement Trends
The analysis encompasses all coal and gas units that operated in the U.S. as of 2010, revealing a diverse ownership landscape that includes investor-owned utilities (IOU), publicly-owned utilities (POU), and independent power producers (IPP). As illustrated in the study, this mix plays a pivotal role in determining the longevity of these units.
The study reports a notable disparity in retirement ages between regulated and unregulated entities. For instance, regulated coal units experienced an average retirement age of 55 years, while their unregulated peers retired at an average age of 49. Similarly, regulated natural gas units exited the market at an average age of 47 years, compared to 39 years for unregulated units. This translates into unregulated coal and gas units retiring six and eight years earlier, respectively.
Detailed Analysis Using Hazard Models
The research employs a hazard model to examine the likelihood of exit among regulated versus unregulated power producers while controlling for various influencing factors, including unit capacity, technology type, and broader economic trends by region (NERC region). The findings indicate that even after controlling for these variables, regulated units exhibited a 45% lower likelihood of exiting the market compared to unregulated units. This trend is consistent across both coal and gas sectors as well as among IOUs and POUs.
The results visually represent accumulated probabilities of retirement, revealing that by the time these plants have been in operation for 60 years, around 39% of regulated units retire, compared to 64% of unregulated units — a significant differentiation hinting at an exit age differential of about 8.4 years.
Understanding the Mechanism Behind These Trends
According to the research, the observed differences can be attributed to the varying incentives faced by regulated and unregulated entities. Independent power producers, which operate in competitive markets, make exit decisions influenced by wholesale electricity prices and operational costs. Conversely, regulated companies, insulated from market volatility, are swayed more by local regulatory priorities, resulting in a prolonged operational life for their facilities. Furthermore, IOUs have the added advantage of a guaranteed rate of return, which can compel them to maintain capital-intensive assets longer than might be economically sensible from a market perspective.
The study also explored whether regulated plants are more likely to remain operational in states with significant coal or natural gas production, theorizing that local political influences might lead to preferences that favor keeping coal plants running. However, the research found no substantial evidence to support this form of regulatory capture, leaving room for further exploration into how local dynamics might intersect with exit decisions.
Shifts in Market Demand and Future Considerations
A key development since 2024 has been the surge in electricity demand driven by data centers, dramatically transitioning the market from a surplus of capacity to a shortage. This shift complicates the exit landscape, making it more probable that plants previously slated for retirement will remain in operation due to heightened demand. As a result, a reversal in exit trends may emerge, with unregulated units potentially being less likely to retire than regulated units amidst market pressures.
Going forward, the regulatory environment and the associated incentives will play a critical role in shaping the operational landscape for power producers. While regulation can shield companies from immediate market shifts, the interplay of demand dynamics will undoubtedly shape their long-term viability. Understanding these trends and their implications on the market will be vital for stakeholders as they navigate the evolving energy landscape.
For further insights, follow the Energy Institute on Bluesky, LinkedIn, and Instagram. Subscription to their email list is also encouraged for updates on future research and announcements.
Suggested citation: Davis, Lucas and Weber, Paige. “Does Regulation Distort Exit Decisions?” Energy Institute Blog, November 3, 2025, https://energyathaas.wordpress.com/2025/11/03/does-regulation-distort-exit-decisions/
