Energize Weekly, August 5, 2020
The economic pressure on coal-fired power plants in the U.S. continues to grow with virtually the entire fleet out of the money compared to wind and solar generation by 2025, according to an analysis by Energy Innovation, a clean energy think tank.
The study, done in conjunction with Vibrant Clean Energy, found that by 2018, 211 gigawatts (GW) of coal-fired generation, three-quarters of the nation’s capacity, was already being challenged by cheaper wind and solar and that figure will grow to 246 GW in the next five years.
“America has officially entered the ‘coal cost crossover’ – where existing coal is increasingly more expensive than cleaner alternatives,” the report said.
The study looked at the marginal cost of energy (MCOE) for each coal-fired plant and compared that to the lowest levelized cost of energy (LCOE) for wind and solar located within 35 miles of the coal plant.
MCOE includes all the costs a plant incurs in generating electricity. LCOE takes the cost of building and operating a new plant and divides it by the amount of electricity it will generate over its lifetime.
The study considered only local renewable energy projects to limit the added expense of transmission and to keep the economic benefits of the new energy development in the same community where the coal plant would close.
Based on a coal plant dataset, the researchers calculated that the going-forward cost of the vast majority of plants were between $33 and $111 for each megawatt-hour (MWh) generated.
In 2018, costs for solar ranged from $28 to $52 a MWh. Wind costs varied more widely, based on the quality of the local wind source, falling between $13 and $88 a MWh.
In matching renewable resources to particular coal plants, the study found that in 2018, 91 megawatts of capacity could have been replaced by wind or solar at a cost saving of 25 percent or more.
“Much of the U.S. coal fleet is simply becoming uneconomic and analysts, utilities, other stakeholders, regulators, and policymakers need to take a critical look at each and every coal plant in their jurisdiction,” the report said.
The four states with the most coal-fired capacity at risk in 2018 were North Carolina, Florida, Georgia and Texas – accounting for a total of 38 GW of capacity.
Almost all the plants in the PJM Interconnection, the nation’s largest grid, which serves utilities in the mid-Atlantic and Midwest states, are at risk of replacement on straight energy value comparison by 2025.
The PJM coal plants, however, get a large part of their revenue from capacity market auctions – where generators are paid to ensure a fixed amount of generating capacity. The capacity markets are “unfriendly to solar,” the report said.
“Another strong regional trend is in the Southeast, where almost all coal plants are substantially at risk to replacement by local solar in 2025,” the report said.
“The trend is so strong that it is hard to imagine Southeastern utilities not relying heavily on solar and complementary load shifting resources to replace the coal and save customers money,” the report said.
The transition is already underway, sometimes through third-party energy marketers who arrange “swaps” of solar generation for retiring coal.
The Kit Carson Electric Cooperative, in Taos, N.M., paid $37 million to exit a contract with its heavily coal-dependent wholesale power supplier, Tri-State Generation and Transmission Association, with the financial help of Guzman Energy. Guzman then supplied Kit Carson with renewable power, including a locally sited solar plant.
Even with the exit fee, Kit Carson is now projecting $50 million to $70 million in savings in switching to all renewable generation.
One financial element for which the Energy Innovation study said it did not account for was the unpaid capital balances owed investors, which while not a measure of the economic viability of one generating source over another, could end up creating tens of billions of dollars in stranded assets.
