Quantcast
Environmental News for a Healthier Planet and Life

Help Support EcoWatch

Why Investing in Aging Coal Plants is a Losing Bet

Energy

This entry is the first of a two-part follow up to the blog Long wrote last fall. This first entry focuses on the national story, the next entry will focus on coal in the west.

Across the U.S., economics are increasingly favoring investment in renewable energy at the expense of dirty coal energy. As the price of solar dips below coal and even natural gas in some instances, the domestic demand for coal wanes and a growing number of companies are eager to get out of their investments in aging coal plants that cost more than they’re worth to upgrade and, in a growing number of instances, just to keep running.

As the nation’s coal power plants age, they become more expensive to maintain. The costs associated with making long-term investments in an aging coal plant, including replacing breaking parts and upgrades like scrubbers and other pollution controls, often exceeds the economic viability of coal in the long-term.

The Intermountain Power Project north of Delta, UT was created in 1976. From Illinois to Oregon, as coal plants age, they become all the more expensive to maintain. Photo credit: Doc Searls/Flickr Creative Commons

Meanwhile, the natural gas prices remain low, ample wind and solar energy provides cost-effective alternatives, and energy efficiency, always the lowest-cost resource, reduces demand. Further public health protections and the first federal standards limiting carbon pollution from power plants—a key driver of climate change—are also on the horizon, all making dirty coal a shaky investment proposition.

Electricity Customers and Tax Payers Share Financial Risk of Coal Investment

Electricity customers bear the burden of long-term gambles made by utilities that coal will remain a viable energy investment. When deciding whether it makes economic sense to upgrade coal plants or retire them, utility regulatory boards are weighing utilities’ bids to pass these growing costs on to customers.

Recent examples of failing coal plant economics include:

  • In Illinois, coal plant owner Ameren Corp. recently had to pay a company, Dynergy, to take five coal plants off its hands—they couldn’t give away these plants for free. And there’s no guarantee Dynergy plans to invest to keep the coal plants up and running either. They’ve already announced plans to shut at least one of the units.

  • Recently, the Washington Utilities and Transportation Commission told Puget Sound Energy it needed to reconsider its bid to continue investing in a Montana coal plant rather than decommissioning it, citing the financial risk involved as natural gas prices continue to plummet. The utility board pointed out that the likelihood of new emissions standards for coal plants from the U.S. Environmental Protection Agency may also reduce the cost effectiveness of doubling down on the Colstrip plant in Montana.

Even though companies are paying to have others take over their coal plant portfolios and utility boards are examining what costs should be borne by electricity customers, the public may still be on the hook for long-term investments in the fossil fuel. As a report by Chicago Business Travel Association made clear, the coal industry actually cost Illinois taxpayers $19.8 million in 2011 when revenues, subsidies and the expenses of regulation were netted out. And that cost doesn’t include the environmental and public health costs from related air and water pollution and climate change that are borne by the public.

Coal’s Shrinking Market Share as Clean Energy Becomes More Economical

Internationally, financial support for new coal-fired plants is quickly fading. Last June, the U.S. Export-Import Bank, the World Bank and the European Investment Bank –lending organizations that had formerly invested billions of dollars into coal plants around the world—pulled out of financing overseas coal plants except in special circumstances.

Coal’s share of America’s energy market is also way down from just a few years ago. Investors already expected another bleak year for the U.S. coal industry—but 2014 may be the record-setting worst year for coal producers, according to a new report by ICF International.

Looking ahead, nearly a quarter of the nation’s coal fleet could be retired by end of the decade. Of 536 coal-fired plants in U.S., 84 have already announced retirement and Bloomberg New Energy Finance estimates that 146 units more may retire by 2020. Coal’s contribution to the U.S. energy supply also is falling. Coal accounted for 39 percent of total U.S. electricity generation last year, down from about 50 percent from 2003-2008 and a rebound from a record low 37 percent in 2012.

The natural gas boom has certainly played a big role in coal’s shrinking market share, but the lower cost of clean energy is also a growing trend. In fact, solar energy is making headlines for its record-low prices, including in Texas. Austin Energy (a city-owned utility) is about to sign a 25-year power purchase agreement with Sun Edison for 150 megawatts of solar power at “just below” 5 cents per kilowatt-hour (kWh). In comparison, the municipal utility estimates that natural gas would cost 7 cents per kWh and coal would cost 10 cents per kWh—meaning solar is the most affordable source of energy available for the utility, in addition to being the cleanest option. And the utility can lock in that price for 25 years through this contract, a winning proposition given the volatility predicted on the horizon for the other energy options.

As coal plants become more financially untenable and renewable energy continues to become more economical, long-term investments in clean energy is quickly becoming the smart economic choice for investors, electricity customers, and the planet.

This post was co-authored by Meredith Connolly, NRDC Energy Law & Policy Fellow. The post originally appeared on the Natural Resources Defense Council's Switchboard blog.

Visit EcoWatch’s COAL page for more related news on this topic.

EcoWatch Daily Newsletter

A man pushes his mother in a wheelchair down Ocean Drive in South Beach, Miami on May 19, 2020, amid the novel coronavirus pandemic. CHANDAN KHANNA / AFP via Getty Images

The U.S. reported more than 55,000 new coronavirus cases on Thursday, in a sign that the outbreak is not letting up as the Fourth of July weekend kicks off.

Read More Show Less
To better understand how people influence the overall health of dolphins, Oklahoma State University's Unmanned Systems Research Institute is developing a drone to collect samples from the spray that comes from their blowholes. Ken Y. / CC by 2.0

By Jason Bruck

Human actions have taken a steep toll on whales and dolphins. Some studies estimate that small whale abundance, which includes dolphins, has fallen 87% since 1980 and thousands of whales die from rope entanglement annually. But humans also cause less obvious harm. Researchers have found changes in the stress levels, reproductive health and respiratory health of these animals, but this valuable data is extremely hard to collect.

Read More Show Less

Sunscreen pollution is accelerating the demise of coral reefs globally by causing permanent DNA damage to coral. gonzalo martinez / iStock / Getty Images Plus

On July 29, Florida Governor Ron DeSantis signed into law a controversial bill prohibiting local governments from banning certain types of sunscreens.

Read More Show Less
Oat milk is popping up at coffee shops and grocery stores alike, quickly becoming one of the trendiest plant-based milks. jacqueline / CC by 2.0

By Kelli McGrane

Oat milk is popping up at coffee shops and grocery stores alike, quickly becoming one of the trendiest plant-based milks.

Read More Show Less

"Emissions from pyrotechnic displays are composed of numerous organic compounds as well as metals," a new study reports. Nodar Chernishev / EyeEm / Getty Images

Fireworks have taken a lot of heat recently. In South Dakota, fire experts have said President Trump's plan to hold a fireworks show is dangerous and public health experts have criticized the lack of plans to enforce mask wearing or social distancing. Now, a new study shows that shooting off fireworks at home may expose you and your family to dangerous levels of lead, copper and other toxins.

Read More Show Less
Billions worth of valuable metals such as gold, silver and copper were dumped or burned last year as electronic waste produced globally jumped to a record 53.6 million tons. Curtis Palmer / CC by 2.0

By Ashutosh Pandey

Billions worth of valuable metals such as gold, silver and copper were dumped or burned last year as electronic waste produced globally jumped to a record 53.6 million tons (Mt), or 7.3 kilogram per person, a UN report showed on Thursday.

Read More Show Less

Trending

A women walks with COVID-19 care kits distributed by Boston's Office of Neighborhood Services in Boston, Massachusetts on May 28, 2020. The pandemic has led to a rise in single-use plastic items, but reusable bags and cloth masks can be two ways to reduce waste. JOSEPH PREZIOSO / AFP via Getty Images

This month is Plastic Free July, the 31 days every year when millions of people pledge to give up single-use plastics.

Read More Show Less