Phasing Out US Coal Plants Could Save Consumers $10 Billion Per Year
A new report has concluded that phasing out unprofitable coal plants in the United States could end up saving consumers $10 billion per year by 2021, while simultaneously boosting the country’s competitiveness.
The new report from financial think-tank Carbon Tracker, No Country for Coal Gen: Below 2°C and Regulatory Risk for US Coal Power Owners, is the first study of its kind to look at the economics of each US coal plant and provide investors with the means to support a rational closure of coal plants, while also helping investors to align their portfolios with the Paris Agreement to keep global warming below 2°C. For the authors of the report, the situation for coal in the United States is black and white:
“Around 30 GW of coal capacity has been retired over the last three years, with coal generation declining by 13% over the same period. The economics of US coal power could not be starker: new coal capacity is not remotely competitive, while in the next few years it will be the exception rather than the rule for the operating cost of existing coal to be lower than the levelized cost of new gas and renewables.”
More specifically, Carbon Tracker concludes that by the mid-2020s it will be cheaper to build new combined gas cycle gas turbines (CCGT) rather than continuing to run 78% of the existing coal power plants in the US. Needless to say, increasing levels of onshore wind and utility-scale solar PV are also beginning to make their economic value known, further devaluing coal power. If changes are not made, the report concludes that by 2021 consumers will end up paying $10 billion per year to prop-up existing coal power plants — the equivalent to 10% of household energy bills in Kentucky, 9% in Indiana, and 7% in Michigan and Wyoming.
“Cheap gas and renewables are here to stay and will continue to undermine the economics of coal,” said senior analyst and co-author of the report Matthew Gray. “President Trump has pledged to revive the industry but the reality is that phasing out coal power in line with the Paris Agreement will save consumers billions and make the US economy more competitive.”
The Carbon Tracker report compared coal owners’ current business as usual plans with the International Energy Agency’s (IEA) “Beyond 2°C Scenario” (B2DS), which sees all unabated coal power by 2035 and gives a 50% chance of limiting global warming to 1.75°C. The authors of the report were able to assess the operating cost of each coal power plant in the US, and by assuming that the least economic plant will close first, they were able to establish a rational closure program and identify which companies are most exposed under a B2DS scenario. Under this scenario, the report also established the stranded asset risk for the US coal owners out to 2035 to be $104 billion.
“While cheap gas and renewables are quickly cannibalising the market share of coal; the US power sector remains entirely unprepared for a coal phase-out consistent with a B2DS outcome,” the report concludes.
“Phasing out coal to meet climate targets makes economic sense,” added data scientist and co-author of the report, Laurence Watson. “Our asset-level model provides investors with a tool to align with the Paris Agreement in an economically rational way and protect their portfolios from losses.”
Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.
CleanTechnica Holiday Wish Book
Our Latest EVObsession Video
CleanTechnica uses affiliate links. See our policy here.
