New analysis shows that renewables beat existing coal plants 99 percent of the time, thanks to long-term trends and an assist from the Inflation Reduction Act.
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A coal-fired plant near Gillette, Wyoming stands alone in the nation on one measure of economic viability—a positive distinction for that plant, but a damning one for coal-fired electricity in general.
Dry Fork Station, with generating capacity of 405 megawatts, is the only coal plant in the country that costs less to operate than it would take to replace the plant’s output by building new wind or solar plants in the same communities or regions, according to a new report issued today by the think tank Energy Innovation.
The report joins prior editions in 2019 and 2021 that, when viewed together, show how the economics of coal power are deteriorating. In 2019, the authors found that more than 70 percent of coal plants were more expensive to operate compared to the alternative of building new wind or solar. That share has now grown to 99 percent, with only the plant in Wyoming stopping it from being 100 percent.
The shift is due in large part to the Inflation Reduction Act, signed in August, which has several incentives that make wind and solar less expensive.
“The trends of coal getting more expensive, and renewables continuing to get cheaper, has definitely continued, but the IRA is, for sure, the big, big shift here,” said Michelle Solomon, a policy analyst at Energy Innovation and co-author of the report.
Even with the recent spike in inflation, which has made just about all electricity sources more expensive, the costs of wind and solar have continued to improve relative to other major sources.
But the report’s estimates do not mean that the owners of the coal plants are losing money by continuing to operate them. Indeed, many of the plants are profitable for a number of reasons, including state regulatory systems that allow the owners to pass all costs on to customers and policies from grid operators that allow the companies to “self schedule,” which means the plants run even when there are less expensive options available on the grid.
The larger point is that consumers could save billions of dollars if power plant owners would replace most of their coal plants with a mix of wind and solar power.
The IRA also includes incentives for carbon capture, which some power plant owners may use to install retrofits. The report’s authors didn’t take into account the possibility of retrofits because no plant has successfully done so other than pilot projects and it’s not yet clear whether such modifications would work or how much they would cost.
The report doesn’t attempt to quantify the benefits to the climate and health of closing coal plants.
Coal Is ‘Struggling to Stay Around’
At the same time, advocates for fossil fuel industries have argued that coal and natural gas power plants have benefits that can’t completely be explained in terms of costs because the plants are capable of running around the clock, and, in the case of coal plants, they can have weeks or months of fuel stored on site. This is in contrast to wind and solar plants, which depend on wind and sun.
But the report’s authors say the potential for cost savings by closing coal plants is so huge that companies could develop wind, solar and energy storage in a way that largely mimics the around-the-clock capabilities of coal and natural gas plants, and still save money.
The authors illustrate this point by showing that most coal plants are substantially more expensive than wind and solar. About 80 percent of the coal plants in the report have operational costs that are at least one-third more than the costs of getting that electricity from new wind and solar.
“Most plants are well away from that line of demarcation,” said Eric Gimon, a senior fellow for Energy Innovation and co-author of the report.
And that’s important, he said, because it means that the cost differences are large enough that the fundamentals aren’t likely to change based on variations in how the estimates are done or minor changes in costs going forward.
The report looks at 210 coal plants in the continental United States and uses publicly available data to estimate their costs, and compares those figures to the costs of building and then operating wind and solar plants in the same regions as the coal plants.
The findings ring true to Emily Grubert, a professor of sustainable energy policy at Notre Dame who was not involved with the report.
“This is a system that is kind of struggling to stay around,” she said, about the interconnected economies of coal-fired power plants and coal mines.
One of the key points when comparing coal and renewables, she said, is that coal plants need to pay for fuel, which includes paying to transport it. The fact that solar and wind plants don’t need to pay for fuel gives them an edge in terms of not only having lower costs but also having more predictable costs as plant operators look ahead to decades of operation.
The authors didn’t compare the costs of building a new coal plant to those of renewables because the construction of new coal plants has almost completely stopped in the United States. Since 2014, the only new coal plant to come online was a 17-megawatt system at the University of Alaska Fairbanks that provides electricity and heat for the campus.
Developers are responding to the competitiveness of other types of power plants, including renewables and natural gas, and the financial risks that the federal government or states may pass legislation that would force plants to pay more for their emissions.
‘It’s Barely Scraping By’
Dry Fork Station, which went online in 2011, was part of the last wave of new coal plants. The plant, which cost $1.35 billion to build, is majority owned by Basin Electric Power Cooperative, a company that sells electricity to rural electric cooperative utilities in nine states across the Mountain West and Midwest.
Dry Fork Station was notable at the time of its completion because of its high efficiency in the amount of electricity it produces relative to the amount of fuel it consumes. Also, the plant is located right next to the coal mine that supplies it with fuel, so it has almost no fuel transportation costs. Those factors combine to make the plant inexpensive to operate compared to others that run on coal.
“Dry Fork Station is part of our all-of-the-above energy strategy that ensures affordable, reliable, and responsible power to our members,” a spokesman for Basin Electric Power Cooperative told Inside Climate News.
But even with its efficiency, Dry Fork Station is barely less expensive than new renewables. The report estimates that Dry Fork has operational costs of $16.64 per megawatt-hour, while building a new wind farm in the region and operating it would have a cost of $16.96 per megawatt-hour, a difference of 2 percent.
“It’s barely scraping by,” Solomon said about the small difference.
The cost estimates for renewables vary based on how much sun and wind the area near a coal plant gets, and on other factors, including variations in the levels of tax credits available in different locations.
Several other coal-fired plants come close to a breakeven point with renewables, or, in the case of Prairie State Generating Station in Illinois, the costs are the same. The Illinois plant, which went online in 2012, has an operational cost of $20.47 per megawatt-hour, which is the same as the estimated cost of building and operating a new wind farm in the region.
But those are among the outliers. More typical are cost gaps that are so large that consumers should be asking if it makes any sense for the plants to remain in service, Solomon said.