April 3, 2019, by Hal Harvey
(Renewable Energy World)
New wind costs as low as $15 per megawatt-hour (MWh), and solar costs as low as $28/MWh. Those prices are lower than the combined operational, maintenance, and fuel costs of generating electricity from most existing coal-fired power plants.
Because of this clean, low-cost competition, 74% of existing U.S. coal capacity was “at risk” in 2018, meaning the plants could be replaced with new local wind or solar projects built within 35 miles of each existing plant. By 2025, at-risk coal increases to 86% of the U.S. coal fleet, even as federal renewable energy tax credits phase out.
Note that this analysis is based on renewable energy available within 35 miles of each existing coal plant. Building renewables in the immediate vicinity of coal plants implies wind and solar could replace lost jobs, expand the tax base, and reuse transmission—all within the same utility territory.
That is a remarkable finding, and it is a wake-up call for utilities and their regulators. Any coal plant failing the cost crossover test is a candidate for a clean replacement—and doing this cleverly means consumers save money while jobs are preserved.
Some forward-looking utilities are getting ahead of this trend: Xcel Energy is targeting 100% renewables by 2050, PacifiCorp revealed 60% of its coal fleet is uneconomic and is reviewing its options, Indiana’s NIPSCO wants to replace all of its coal with clean energy in ten years, and even Idaho Power wants to close all of its fossil fuel generation by 2045.
The coal crossover test is just the first step in thinking about closing existing coal. Replacing coal output with new wind and solar energy is complex in practice; policymakers must find ways to enable utilities to profitably retire uneconomic coal generation. Coal securitization legislation introduced in Colorado’s state legislature and passed in New Mexico’s state legislature, endorsed by Governors Polis and Lujan-Grisham, is one example of smart policy to speed the transition and reduce customer costs, all while keeping utilities whole.
- Analyzing publicly available financial information can help policymakers and utility stakeholders identify where running existing generation (particularly older, less efficient coal-fired plants) costs more than replacing it with wind or solar: Utility Financial Transition Impact: From Fossil to Clean
- When building renewables is cheaper than operating existing coal, swapping steel for fuel adds value for investors, customers, and the environment: “Steel for Fuel”: Opportunities for Investors and Customers
- Modifying depreciation schedules is an important tool for transitioning away from older assets such as coal plants, to cheaper resources such as wind and solar: Depreciation and Early Plant Retirements
- When electric utilities transition from fossil fuels to clean energy, they must address unrecovered investment balances: Debt for Equity Utility Refinance
Regulators, utilities, and investors must get ahead of the coal crossover while helping customers and affected communities. Using the right financial tools can speed the transition and help make workers, companies, and the public whole.