Coal Power Losing Cost Competitiveness

A recent report by the Union of Concerned Scientists (UCS) reveals that as much as 17 percent of existing coal-fired power in the United States is no longer cost-effective compared to existing natural gas. This adds up to 329 coal units, equal to 59 gigawatts (GW) of electricity-generating capacity that are considered economically uncompetitive (or defined by UCS as ‘ripe’ for retirement). This 59 GW would substantially add to the 18 GW of coal-fired power that has already been retired since 2011, and the 28 GW that has been announced for retirement by 2025.

UCS’s study also contains a variety of other cost comparisons by energy type, including scenarios for new natural gas and wind energy. The study also adds policy scenarios, including a $20 per ton carbon tax for fossil fuel energy sources and the Production Tax Credit (PTC) for wind energy. Results from these scenarios reveal that a carbon tax most effectively reduces coal’s cost-competitiveness, making nearly 40 percent (or 138 GW) of coal-fired power uneconomical compared to existing natural gas. Many large U.S. companies are already factoring a carbon tax into their future business strategies, with tax estimates as high as $60 per ton. Additionally, extending the PTC for wind energy would make 20 percent (or 71 GW) of electricity-generating capacity from coal uneconomical. Wind energy has become an increasingly viable energy source, with 45,000 wind turbines totaling more than 13 GW of electricity-generating capacity installed in 2012. It has already reached price parity with coal and gas in certain locations.

Coal Retirement Scenarios graph

As more and more coal retires, other energy sources and efficiency will need to fill the energy gap to maintain a reliable grid. UCS’s report reveals that all regions of the country have more than enough electricity-generating potential from clean and affordable energy sources to replace all coal units that have been retired, are scheduled to retire, and are ripe for retirement. Natural gas seems like a likely replacement for the retiring coal plants. However, electricity generation from natural gas will still result in greenhouse gas emissions (the amount of emissions is dependent on how much methane leaks into the atmosphere) and gas prices may rise in the future, meaning that replacing coal entirely with natural gas is not the most environmentally-friendly or affordable option for the future.

Because of natural gas’ uncertain contribution to climate change and its price volatility, renewable energy and energy efficiency will need to play a key role in filling the energy gap from coal unit retirements. Some utilities have already announced plans to retire old coal units and replace them with new renewable energy facilities. Renewable Portfolio Standards in 29 states also encourage the adoption of renewable energy. Energy efficiency and demand-side management may be the most cost-effective replacement for coal, since retiring coal units would not need to be replaced if less power was needed. Twenty-four states have implemented Energy Efficiency Resource Standards, which is estimated to save up to 236,000 gigawatt-hours, or more than 6 percent of U.S. electricity sales, by 2020.