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The Coal Cost Crossover: 74% Of US Coal Plants Now More Expensive Than New Renewables, 86% By 2025
Mar 26, 2019
<h4>New research shows 74% of existing U.S. coal-fired plants cost more to operate than building new local wind or solar in 2018, and that number jumps to 86% by 2025, meaning America has reached the &#34;coal cost crossover&#34; point.</h4>
<p class="speakable-paragraph">Renewable energy has been beating coal on cost in many parts of the United States for years, but now we know exactly where coal is out of the money compared to renewables – and exactly how far coal generation is in the red.</p><p class="speakable-paragraph"><br/></p><p>New research from Energy Innovation and Vibrant Clean Energy (VCE) shows the U.S. has officially reached the coal cost crossover point, where fast-falling wind and solar prices make simply operating three-quarters of all existing coal generation plants more expensive than building new local renewable energy .</p><p><br/></p> <p>In 2018, 74% of the national coal fleet was “at risk,” meaning the plants could be replaced with new wind or solar generation within 35 miles of each plant cheaper than the combined fuel, maintenance, and other going-forward costs of running those plants. By 2025, at-risk coal increases to a whopping 86% of the entire existing U.S. generation fleet, even as federal renewable energy tax credits phase out.</p><p><br/></p><p><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fenergyinnovation%2Ffiles%2F2019%2F03%2FCoal-Risk-Map_WindSolar_2018_lowresolution-1200x735.jpg" style="height: 579px;width: 811px;"/>​</p> <p class="wp-caption-text">Cost of operating existing coal-fired power plants compared with building new wind or solar within 35 miles, 2018. <span style="font-size: 1rem;">Energy Innovation/Vibrant Clean Energy</span></p><p class="wp-caption-text"></p><p><br/></p><p></p><p class="tweet_line"> The coal cost crossover raises serious questions for regulators and utilities as to why these coal plants should keep running unprofitably and at extra cost to consumers , instead of being replaced with new renewable energy generation.</p> <h4>The “Coal Cost Crossover”</h4> <p>The new Energy Innovation-VCE analysis uses multiple data sources to compare each coal plant’s marginal cost of energy (MCOE) to the lowest levelized cost of energy (LCOE) for wind or solar resources within 35 miles of that plant to determine if it has reached the coal cost crossover point.</p><p><br/></p> <p>In 2018, 211 gigawatts (GW) of existing U.S. coal capacity were at risk and operating at higher costs for consumers than cheaper wind and solar energy, and by 2025 that number jumps to 246 GW.</p><p><br/></p><p><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fenergyinnovation%2Ffiles%2F2019%2F03%2FCoal-Risk-Map_WindSolar_2025_lowresolution-1200x738.jpg" style="height: 579px;width: 812px;"/>​</p> <p class="wp-caption-text">Cost of operating existing coal-fired power plants compared with building new wind or solar within 35 miles, 2025. <span style="font-size: 1rem;">Energy Innovation/Vibrant Clean Energy</span></p><p class="wp-caption-text"></p><p><br/></p><p></p><p>Previous research has shown solar photovoltaic energy prices fell 90% and onshore wind prices declined 65% in the past decade, and our new analysis reveals pricing for new renewable energy generation as low as $15 per megawatt-hour (MWh) for wind and $28/MWh for solar.</p><p><br/></p><p><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fenergyinnovation%2Ffiles%2F2019%2F03%2FWind_LCOE_Map_2018_lowres-1200x708.jpg" style="height: 579px;width: 811px;"/>​</p> <p class="wp-caption-text">Map of the levelized cost of energy for U.S. wind projects in 2018 using VCE dataset. <span style="font-size: 1rem;">Energy Innovation/Vibrant Clean Energy</span></p><p class="wp-caption-text"></p><p><br/></p><p></p><p>And while wind energy resources are fairly concentrated in Midwest states, solar price forecasts made using the National Renewable Energy Laboratory Annual Technology Baseline project solar will soon be cost-competitive with coal-fired electricity in nearly every corner of the U.S.</p><p><br/></p><p><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fenergyinnovation%2Ffiles%2F2019%2F03%2FSolar_LCOE_Map_2018_lowres-1200x708.jpg" style="height: 578px;width: 811px;"/>​</p> <p class="wp-caption-text">Map of the levelized cost of energy for U.S. solar photovoltaic projects in 2018 using VCE dataset. <span style="font-size: 1rem;">Energy Innovation/Vibrant Clean Energy</span></p><p class="wp-caption-text"></p><p><br/></p><p><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fenergyinnovation%2Ffiles%2F2019%2F03%2FSolar_LCOE_Map_2025_NREL_ATB_LOW_lowres-1200x708.jpg" style="height: 579px;width: 811px;"/>​</p><p></p><p class="wp-caption-text">Map of the levelized cost of energy for U.S. solar photovoltaic projects in 2025 using VCE dataset. <span style="font-size: 1rem;">Energy Innovation/Vibrant Clean Energy</span></p><p class="wp-caption-text"></p><p><br/></p><p></p><p>These additional price declines mean that not only will coal-fired power be more expensive than new renewables, it will soon be dramatically uneconomic by comparison. By 2025, “substantially at-risk” coal – meaning coal plants with operational costs at least 25% higher than building new local wind or solar generation – rises from 94 GW in 2018 to 140 GW, or roughly half the existing U.S. fleet.</p><p><br/></p><p><img src="https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fenergyinnovation%2Ffiles%2F2019%2F03%2FCoal-plants-substantially-at-risk-2018-and-2025.jpg" style="height: 488px;width: 811px;"/>​</p> <p class="wp-caption-text">U.S. coal plants substantially at risk 2018 and 2025. <span style="font-size: 1rem;">Energy Innovation/Vibrant Clean Energy</span></p><p><br/></p><p>Our analysis represents high confidence that replacing substantially at-risk coal plants with local renewable energy would immediately yield cost reductions, and these plants also raise the potential for resources like demand response or energy storage to cost-effectively tackle intermittency concerns.</p><p><br/></p> <p>While using solely local resources makes this analysis quite conservative, building local renewables in the immediate vicinity of coal plants is quite important for the economic transition of coal-dependent communities. This implies wind and solar could replace lost jobs, expand the tax base, and reuse transmission, all within the same local region or often the same utility territory. So communities get cleaner, with cheaper electricity costs, and stronger economies – all through the coal-to-clean transition.</p> <h4>Unlocking the coal-to-clean transition for utilities</h4> <p>Any coal plant failing the cost crossover test should be a wake-up call for regulators, utilities, and the public that clean energy transition opportunities exist in the immediate vicinity of that plant. But this is just the first step in thinking about closing U.S. coal, and replacing that output with new wind and solar energy will be more complex in practice.</p><p><br/></p> <p>Some forward-looking utilities are already tackling this challenge – Xcel Energy is targeting 100% clean energy by 2050, and Indiana’s NIPSCO intends to replace all its coal generation with clean energy within ten years – but the utility industry can’t go it alone.</p><p><br/></p> <p>Policymakers must enable utilities to profitably retire uneconomic coal generation and unlock clean energy potential. Coal securitization legislation has just been enacted in New Mexico by Governor Lujan-Grisham and is being considered in Colorado’s state legislature with the endorsement of Governor Polis, demonstrating how smart policy can expedite the clean energy transition and cut customer costs while keeping utilities profitable.</p><p><br/></p> <p>However, far more financial tools exist. A series of research briefs from America’s Power Plan outlines these tools and provides options for any analysis of potentially uneconomic coal-fired generation.</p><p><br/></p> <p>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. When building renewables is cheaper than operating existing coal, swapping “steel for fuel” adds value for investors, customers, and the environment.</p><p><br/></p> <p>Modifying depreciation schedules and early plant retirements are important tools for transitioning away from older assets, such as coal plants, to cheaper resources such as wind and solar. And finally, when electric utilities transition from fossil fuels to clean energy, they can address unrecovered investment balances through debt for equity refinancing.</p> <h4>Time to get ahead of the looming coal closure wave</h4> <p>Despite unsuccessful federal efforts to subsidize uneconomic coal generation and roll back air pollution regulations, clean energy technologies keep improving and falling in cost, meaning coal’s biggest threat will forevermore be economics and not regulations.</p><p><br/></p> <p>Policymakers must now start planning for a massive turnover of U.S. electricity generation from coal to clean, requiring a true accounting of which clean energy resources can replace existing coal plants.</p><p><br/></p> <p>Every passing day that regulators and utilities fail to wake up to the new clean energy reality locks in higher customer costs, deeper economic risks, and more emissions that cause climate change. It’s time to start the coal-to-clean transition.</p><p><br/></p><h5>Thank you to our friends at <i>FORBES</i><i> </i>for providing the original articles below</h5>

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