COAL COST CROSSOVER 2.0 – New solar and wind cheaper than 80% of existing coal in the US, report finds

EXECUTIVE SUMMARY
Coal generation is at a crossroads in the United States, or more precisely at a “cost crossover.” 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. This report compares the economics of each coal plant in the U.S. against the expected economics of potential new wind and solar plants nearby, using publicly available data. In 2019, 239 gigawatts (GW) of coal capacity was online in the U.S. Our research finds that in 2020, 72 percent of that capacity, or 166 GW, was either uneconomic compared to
local wind or solar or slated for retirement within five years. Out of the 235 plants in the U.S. coal fleet, 182 plants, or 80 percent, are uneconomic or already retiring.

In the last two years, the cost of renewables has fallen even faster than the National Renewable
Energy Laboratory’s forecast in its 2018 Annual Technology Baseline, and faster than predicted in the original “Coal Cost Crossover” report, which was prepared in partnership with Vibrant Clean Energy in 2019. In other words, the coal cost crossover trend continues to accelerate.
As pressure on the existing coal fleet continues to build, policymakers should seize the opportunity today to improve consumer, public health, and climate outcomes. Policies informed by cost analysis of coal and renewables and focused on competitive procurement and coal asset securitization can enable a transition that more effectively balances utility, consumer, environmental, equity, and community interests. Immense savings are available across the country, with ample opportunities to reinvest regionally in replacement clean energy portfolios.


WIND AND SOLAR LCOE
We reviewed onshore wind and utility-scale solar resources using outputs from the Regional Energy Deployment System (ReEDS) model, developed by NREL.2 ReEDS provides a detailed look at the North American electric power sector, including generation, transmission, and end-use technologies. Using ReEDS, we generated LCOE values (which are all-in estimates of the cost of energy output in megawatt-hours, taking into account the entire capital expenditure, operations, and maintenance costs) for onshore wind and utility-scale solar.3 We also used the 2020 values from the 2020 edition of the NREL Annual Technology Baseline to gather inputs for the ReEDS model, including capital cost and performance.4 Our LCOE values are evaluated within ReEDs regions, which we describe in greater detail below. After providing context for the geographic regions we assessed, we lay out how we calculated LCOEs and coal going-forward cost, and how we determined whether solar or wind could entirely displace annual coal generation at a given plant cost effectively.

UNDERSTANDING WIND AND SOLAR REGIONS
Within the contiguous U.S., ReEDS defines 134 “balancing areas.”i Within those balancing areas, there are 356 further subdivided regions, called resource supply regions, which characterize the wind resource quality and supply. Balancing areas never cross state lines nor straddle multiple regional transmission operators, and they roughly (but not completely) correspond to existing utility service territories and balancing area authorities.ii The utility-scale photovoltaic solar resource information is available at the “balancing area” level, and the utility-scale onshore wind resource information is available at the “resource supply region” level. The differing spatial resolution of these two categories is intended to reflect the granularity of the quality and quantity differences of specific resource supplies.

COAL GOING-FORWARD COSTS
We developed an estimate of the going-forward costs of running U.S. coal plants using publicly available data from the U.S. Department of Energy’s Energy Information Agency (EIA), the Federal Energy Regulatory Commission (FERC), and the U.S. Environmental Protection Agency (EPA). We compiled a list of 235 U.S. coal plants operated by utilities and independent power producers, excluding plants used for combined heat and power, with a tiered system indicating our degree of confidence in each plant’s particular estimate. The going-forward cost estimate for each coal plant in our master list is the sum of three principal components: cost of fuel, operations and maintenance costs, and going-forward costs for capital investments needed to continue operating the plant.

COMPARING RENEWABLES LCOE TO COAL GOING-FORWARD COSTS
Using the calculated plant-level weighted average LCOEs for wind and solar and plant-level goingforward coal cost, we compare the three values to determine to what extent the U.S. coal fleet is currently “uneconomic.” We use “uneconomic” in the sense that it would be more costly to continue operating existing coal plants compared to building new nearby wind or solar plants to fully displace the current annual generation from those coal plants.

COAL TO RENEWABLES COST CROSSOVER FINDINGS RENEWABLES AND COAL COST COMPARISON
Our top-level findings include:

  1. Of existing U.S. coal capacity, 72 percent is more costly to operate than new nearby wind
    and solar, or is slated to retire by 2025.
  2. Of existing U.S. coal plants, 80 percent are more costly to operate than new nearby wind
    and solar, or are slated to retire by 2025.

have worsened substantially since our original analysis, which found that, as of 2018, 62 percent of coal capacity was uneconomic compared to local wind or solar. In addition, an estimated 16 GW of coal capacity has retired since the 2018 analysis. Our original analysis projected uneconomic coal capacity in the U.S. to be 77 percent by 2025—a pace that was almost reached in 2020.

Our current analysis focused on whether solar or wind could entirely displace annual coal
generation at a given plant cost effectively. The maps below show how, in many cases, solar and wind are both economically competitive options, although there can still be large cost differentials between the two clean resources even when they both beat coal on cost. That said, to displace uneconomic coal, policymakers should consider a portfolio of clean resources, including storage and demand-side resources, that is more varied than either entirely utility-scale solar or entirely utility-scale onshore wind projects.

PUBLIC HEALTH & CLIMATE IMPACTS
Coal plants emit a host of emissions. We collaborated with the Catalyst Cooperative to match plant boilers with the coal plant generators included in each coal plant in our dataset. We then collected emissions data from EPA’s 2019 eGRID database for each boiler and aggregated these figures at the coal fleet level.6 The database isn’t comprehensive, but it does provide detailed information on carbon dioxide (CO2), nitrogen oxides (NOx), and sulfur dioxide (SO2) emissions.

Modeling from RMI indicates that, more often than not, replacing coal energy with wind or solar is unlikely to negatively affect system reliability. More than 50 percent of coal plants in RMI’s 2021 analysis could be economically replaced by renewables, allowing the balancing authority to still meet its reserve margin.14 Almost half the plants in our analysis, representing 39 percent of the megawatt-hours, had a going-forward cost more than 25 percent greater than wind or solar LCOEs, indicating room to complement these resources with storage, demand response, and energy efficiency to amplify their contributions to reliability.

The wider the gap becomes between the marginal economics of coal versus wind and solar, the more coal plants will have to depend on their perceived capacity value to recover costs. Their capacity factors may drop even more, widening the gap and opening a window for dedicated resources like demand response, storage, and existing flexible resources to fill their niche. We are already seeing combined renewables-plus-storage plants win competitive solicitations and capture some of this value in high solar- and wind-potential regions (empirically,this appearsto add roughly $4-8/MWh to renewable energy costs). 15 We expect the trend to continue as battery prices slide down the learning curve.

POLICY RECOMMENDATIONS
Coal generation has been on a secular downward trend, declining 50 percent since its peak in 2011. Simultaneously, renewable energy costs are plummeting. Our analysis indicates that the coal decline will continue and policymakers should seize this opportunity for consumers, public health, and climate. Policies informed by cost analysis of coal and renewables and focused on competitive procurement and coal asset securitization can enable a transition that more effectively balances utility, consumer, environmental, equity, and community interests.

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