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Report claims most US coal plants are uneconomic vs. local wind, solar


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Report claims most US coal plants are uneconomic vs. local wind, solar

Most coal-fired power capacity in the U.S. is uneconomic compared to local wind or solar or is scheduled to retire within five years, according to a new report from Energy Innovation: Policy and Technology LLC, an organization focused on accelerating clean energy with policies that reduce greenhouse gas emissions.

The report concluded that in 2020, 72% of U.S coal-fired generation capacity was either uneconomic compared to local wind or solar or was set to retire within five years. Of the 235 coal plants in the U.S., 182, or 80%, are uneconomic or already retiring, the report added. Energy Innovation worked with open energy data organization Catalyst Cooperative and a researcher with the University of California Berkeley's Center for Environmental Public Policy to produce the report.

"Due to rapid recent cost declines for wind and solar, the combined fuel, maintenance, and other costs of most existing coal-fired power plants are now higher than the all-in costs of new wind or solar projects," the report released on May 5 said.

Energy Innovation noted that the cost of renewables has fallen faster than predicted by both the National Renewable Energy Laboratory in 2018 and the organization's 2019 report produced with Vibrant Clean Energy.

"This cost crossover raises questions for state policymakers regarding the longevity, cost-effectiveness, and equity implications of coal plants' continued operation," the report said. "The coal cost crossover will not in and of itself cause existing coal plants to shutter — replacing coal plants with new wind and solar energy is much more complex in practice."

Many utilities have pledged to hit net-zero emissions targets in the coming decades, and U.S. President Joe Biden aims to decarbonize the U.S. power sector by 2035. Moody's Investors Service wrote in an April 27 note that net-zero pledges among governments and the financial sector will increase credit pressure on major emitters of greenhouse gases.

"We expect the impact will be more significant than the limited effect to date of patchwork policy implementation, gradual changes in disclosure requirements or moves by investment funds to reduce their fossil-fuel holdings," Moody's analysts wrote.

Without a substantial ramp-up in deploying carbon capture technologies, the steady trend of coal-fired power plant retirements and diminished demand for coal is likely to continue. In recent years, utility executives' conversations about coal on quarterly earnings calls have largely revolved around the closure of coal capacity and, in some cases, the substantial savings that creates for consumers.

During a Jan. 26 earnings call, NextEra Energy Inc. Chairman, President and CEO Jim Robo said there is "not a regulated coal plant in this country that is economic today."

"[It's] becoming clearer and clearer the economics as we go along that the operating cost of coal plants are higher than the new build cost of renewables with storage," Robo said. "That becomes even clearer as costs come down for renewables and ... operating costs continue to go up for coal. ... In Florida, we've shut our coal down, and we've saved customers literally billions of dollars of present value over the expected life of the new generation we put in place."

On an April 29 earnings call, Southern Co. Chairman, President and CEO Tom Fanning said closing facilities with intensive operating and maintenance costs such as coal plants is one lever that offers Southern the flexibility to keep customers' rates lower than in some other parts of the country.

"[P]art of the secret sauce here is reconfiguring the portfolio absent coal," Fanning said. "Coal carries with it a whole lot of [operating and maintenance costs]."

CMS Energy Corp. President and CEO Garrick Rochow described the retirement of some of its coal-fired power plants in 2016 as the beginning of the company's "playbook for success." The company has plans to retire even more coal capacity.

"Part of our clean energy transformation includes the retirement of our remaining coal fleet," Rochow said on an April 29 earnings call. Another company executive said the planned retirements of the company's five remaining coal units would net $90 million in savings, excluding potential fuel cost savings, that CMS could use for future investments.

America's Power, a trade organization that advocates on behalf of the nation's coal-fueled power fleet, said that as wind and solar power generation is increasing substantially, policymakers need to consider the value of dispatchable generation from sources such as coal and natural gas plants.

"Although necessary to maintain the reliability of the power system, these generators face reduced operations and weak electricity market prices as their output is displaced by renewable resources, whose power is intermittent in nature," the organization wrote in a white paper published in April. "To keep these balancing generators online, it is increasingly important that the value they provide is understood and compensated through capacity markets and other market mechanisms."