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'No room for coal': Wind, solar, gas seen as cheapest US power without subsidies

SNL Image

Wind turbines in a field near Northwood, Iowa. New research identifies wind as the nation's cheapest power source.

Source: Associated Press

Wind energy is America's overall lowest-cost source of new power generation, when not considering incentives, while solar and natural gas-fired facilities are also the cheapest options across wide swaths of the country, according to new analysis from the Energy Institute at the University of Texas at Austin.

"This shows why, even in coal country, nobody is building coal," said Joshua Rhodes, a research fellow at the Energy Institute whose recent analysis yielded roughly 20% and 40% cost declines for wind and solar, respectively, compared to a 2016 Energy Institute report on the levelized cost of electricity. "With gas and renewables in the system there's just no room for coal anywhere."

The update almost eliminated coal from the institute's interactive online map of lowest-cost new power sources throughout the United States and broadened the footprint of wind and solar as the least-expensive technologies in the county-by-county analysis. On an unsubsidized, levelized-cost basis, wind farms in Colorado, Kansas, Oklahoma and Texas are the nation's cheapest generation sources, with the cheapest wind in those states ranging from $46.76/MWh to around $48.85/MWh, the research found.

The cheapest new gas generation, according to the University of Texas' updated data, would be combined-cycle facilities in Idaho, Washington, Montana and Oregon at $52.50/MWh to $53.61/MWh. The lowest-cost U.S. solar farms, located in New Mexico, Arizona, Texas and Colorado, ranged from $62.79/MWh to $64.36/MWh. The only places new coal generation would be the cheapest option are three remote counties of Washington state, with levelized costs around $111/MWh. The analysis does not view new nuclear power as the most cost-effective technology anywhere in the country.

The research results align with other recent data that contradict President Donald Trump's claims of creating a "vibrant" U.S. coal sector, one of his central promises. It also comes as wind and solar developers face a phasedown of key federal tax incentives that have helped to fuel record levels of renewable energy additions in recent years.

The production tax credit for wind power, which dropped 20% to 1.9 cents/kWh in 2017, fell by 40% for projects starting construction in 2018 and falls 60% for projects breaking ground in 2019. The 30% investment tax credit, meanwhile, drops to 26% for commercial and utility-scale solar projects commencing construction in 2020, to 22% in 2021 and to 10% thereafter.

While the Energy Institute's analysis appears to bode well for the future competitiveness of wind and solar as federal tax incentives phase down, experts remain split on how the real impact may play out in the marketplace. Analysts from Bloomberg NEF, IHS Markit and Navigant Consulting, for instance, recently presented wildly diverging views on future solar capacity additions as the investment tax incentive declines for businesses and zeroes out for homeowners. IHS, the most bearish of the three on solar, also foresees a plunge in wind investment post-federal tax breaks.

The University of Texas analysis is part of an ongoing multi-study initiative on the "full cost of electricity," including direct capital costs and indirect "external" costs of fossil fuel emissions on human health and the environment. When incorporating external costs, which the Energy Institute pegs at $62/ton of carbon dioxide in its reference case, new wind and solar generation become the lowest-cost resources across the vast majority of the country.