Related Articles
Forward article link
Share PDF with colleagues

The disappearing case for coal in the US

A large wave of pit retirements may soon be followed by another

Coal supplied half of the total US power generation as recently as 2008, but after a decade of retirements now accounts for just a bit more than a quarter. A long wave of plant closures was driven by a mix of factors including the rise of natural gas, combined wind and solar, some policy tightening and pit depletion.

Most observers have long believed that a smaller, leaner coal industry would emerge by now; largely safe, and economically viable. But a string of recent reports suggests that even younger coal plants may succumb to closure.

Eric Gimon is a senior fellow at EnergyInnovation.org in San Francisco and is a co-author of The Coal Cost Crossover (March, 2019), which finds that as much as three-quarters of the remaining coal industry could be replaced with wind and solar, while delivering savings to customers. The calculation can be hard for many to accept, given the associated closure and newbuild costs. However, he notes that the running costs of coal plant could ultimately be greater than building an alternatively fueled alternative.

One country, two systems

The US has not one, but two coal systems. The first is a network of legacy coal-fired power generation that is concentrated east of the Mississippi River. the second is a national supply chain of coal production, concentrated in Wyoming and Appalachia. The ongoing contraction in the first system has driven US coal consumption to a 39-year low. But the second system is seeing signs of life, as coal exports, both thermal and metallurgical, have risen to a five-year high-a proxy for demand in the leading consumer destinations of India, Brazil, and Canada. And this is not a statistical anomaly; 2018 total coal exports reached 103.57mn tonnes, just shy of the 2012 peak of 112.5mn tonnes.

Gimon and his co-authors spotted cost inefficiencies in the connection between these two systems that play into the risk existing coal plants face. Thermal coal is shipped very long distances by train in the US, adding to already high running costs. "The background to our study was to construct detailed maps to determine how to best provision lowest cost energy, depending on local wind or solar resources," says Gimon. In other words, wind and solar not only have zero-cost marginal inputs, but they are local.

Gimon notes that Xcel Energy calls this exchanging "steel for fuel," in which you replace the dependency on daily fuel supply with building local facilities.

Clean energy

The calculation is not complicated. New wind power can cost as little as $15/MWh and solar as little as $28/MWh. When existing coal plants have all-in operational costs above those levels, as many do in southeast America, it may advantage ratepayers to close those plants, amortise the losses and deliver all-in savings over time with clean energy. As of 2018, combined wind and solar have grown to provide 9pc of total US electricity. This does not mean, however, that closing existing plants is easy.

"Each plant is like a house with a mortgage," says Gimon, "and the owner of the mortgage needs to get paid." According to Gimon, in some cases, the mortgage stream itself is an income source for utilities, in addition to the delivery of electricity. However, solutions to this problem are coming into view as the prospect grows to replace these plants. "It's like a refinancing," he says. "There's a stream of savings from going [from coal] to wind and solar. But there's another stream of savings from capitalising the losses of the existing plants, which can be bundled up into a bond, and which actually winds up being lower too."

Also in this section
Clock ticking on Guyana election
22 August 2019
South America's most exciting new province has yet to call an election, despite first oil rapidly approaching
China looks west to solve energy riddle
22 August 2019
Xinjiang has potentially huge untapped reserves, but exploration in the desert province presents complex geological and political challenges
Dangerous dance in the Gulf
20 August 2019
The US and Iran have thus far reacted to a string of provocative moves more in word than deed, but the potential for miscalculation is high