About five years ago, when UCS looked at the economics of coal plants, we found that about 40 percent of coal plants were more expensive than cleaner alternatives. Almost every year since our report has come out, a new study has come out and come to a similar conclusion with one notable difference: The amount of coal that is uneconomic seems to always be increasing. And the latest study has found that the number has reached 80 percent!
What is even more fascinating is that the numbers are starting to paint a very clear picture: that transitioning away from coal and towards clean energy could save customers money today.
My rough, back-of-the-envelope calculations suggest that it could save customers up to $6.5 billion a year.
Energy innovation’s latest research builds on research from last year and the notion of the “coal crossover.” This is the idea that the costs* of coal have continued to rise while the costs of clean have continued to drop. The crossover point for any given coal plant is going to depend on the costs of the coal plant but also the costs of local clean energy that can replace it.
*and in this context, I mean just the private costs, not the social costs of burning coal which includes substantial externalities that, if internalized would make all coal uneconomic to burn.
Apples to oranges and low hanging fruit
Now, trolls on Twitter will be quick to claim that comparing coal costs to renewables is “apples to oranges” because coal fire power plants are “baseload,” and renewables are not. First off, no coal is not baseload.
Second, the grid of the future is going to be a concert orchestra where a medley of resources contributes to maintaining a safe, reliable, and affordable grid. Baseload demand won’t be met with a single type of power plant. And, as we transition to that grid of the future, there are plenty of firm resources on the grid today that can make sure we keep the lights on.
In reality, replacing most of the coal fleet with renewables is easy, in part, because there is so much excess capacity that we can lean on after the coal plant has shuttered its smokestacks.
Rather than focusing on bad faith arguments like “baseload,” I would rather focus on what I find particularly remarkable about EI’s study: that all of this is that this is happening at a time when there has been a wave of coal retirements. Of the 40 percent of coal plants UCS found uneconomic, just about half were slated to retire, and now that a few years have passed, many of them have.
That means the coal fleet EI was analyzing should have been “more economic” than the fleet we analyzed because all the “low hanging fruit (least economic coal plants) had already retired.
But here is the thing about low-hanging fruit. Every year it grows back.
The same is true for the economics of coal vs renewables. Every year more coal gets more expensive while clean energy gets more affordable. And that is why every year one of these studies comes out, more coal looks uneconomic.
A big win for consumers
The most important takeaway of the coal crossover concept is that we are able to save money, today, by replacing coal with clean energy.
Based on the numbers in the appendix of the Coal Crossover 2.0 study, customers could have saved $6.5 billion dollars in just one year had utilities replaced dirty expensive coal with clean, affordable renewable energy.
Yes, that assumes that the energy can be replaced 1:1 and assumes that the whole coal plant can shut down and avoid all sorts of expensive maintenance. An assumption that easily holds true for the first few Gigawatts of shuttered coal plants, but admittedly, gets harder to defend as you approach 80% of the coal fleet retiring…
So, let’s call that $6.5 billion figure an upper limit. It is only an upper limit today. We must remember, the gap between the cost of clean vs coal will continue to widen. New low-hanging fruit will appear, and additional consumer savings could be realized.
A big win for wealth creation
The other opportunity the transition from coal to clean presents it to help you make money. For you and your community to build wealth. Right now, coal-fired power plants create wealth but primarily for the wealthy corporate shareholders and executive suites of electric utilities and coal mining companies. Coal mining companies have literally extracted the wealth out of poor communities in Central Appalachia for more than a century.
Clean energy, on the other hand, is an industry full of start-ups and competition. Its products present a genuine opportunity for families and communities to invest in energy efficiency and clean energy; and hopefully, make a return on their investment.
How much wealth could be created by switching from coal to clean? It is a very hard question to answer.
Here is how I start to think about it:
$29.4 billion per year: That’s the total amount spent on an annualized basis to replace uneconomic, dirty coal, with affordable clean energy.
Spending $29.4 billion a year in clean energy helps avoid $36 billion a year in direct fossil fuel costs (which is how I derived the $6.5 billion in potential savings). Not to mention the public health costs that will be avoided by the reduced pollution.
Now, embedded in that $29.4 billion are profits to developers and manufacturers along with labor costs (think, of the salaries to workers throughout the renewable energy supply chain). This raises important questions like:
- Will the raw materials for solar come from Uyghur slave labor camps?
- Will installation and manufacturing jobs here in the US be good-paying union jobs, as President Biden has promised?
- How do we support the current labor pool of coal miners and coal-fired power plant workers whose jobs are at risk from this transition?
That last question is actually something my colleague Jeremy Richardson has spent a lot of time thinking about. Not just thinking about but working with labor groups to conduct analysis and come up with solutions.
The big question on my mind is who will that money go to?
Will only large monopoly companies be allowed to invest in the energy transition? Or, will local communities and families be able to build wealth by investing directly in clean energy? Afterall, many frontline and disadvantaged communities have been the ones suffering from the economic and health costs associated with an electric grid that has been reliant on fossil fuels.
Time will tell
Who will suffer and who will benefit are hard predictions to make. But who SHOULD be the ones to benefit, who should be the ones to be protected, who should we prioritize? Those are much easier questions.
We should prioritize those communities that have suffered the most in cumulative damages from air and water pollution.
We should make sure that the entire supply chain of renewables is just, equitable, and sustainable. That includes end of life and recycling issues.
We should protect and support coal miners, coal-fired power plant workers, their families, and the communities they call home.
I am not an optimistic person but I do believe that the transition away from fossil fuels is inevitable. My concern is about if it will be done fast enough and will it be done in a just and equitable fashion.