We’ve reached a massive milestone in the global energy transition — the ability, right now, of renewable energy sources and energy storage to match or beat the price of power from natural gas-fired peaker plants and coal-fired generators.
The problem is that energy markets are not exactly free markets — and replacement of existing generation is not entirely tied to price. There are artificial regulatory constructs and financial structures built into energy markets which can favor certain parties (utilities) and fuels (legacy coal, gas and nuclear).
So, victory in the economic realm (increasingly the case with solar, solar-plus-storage and wind) is no guarantee of market victory if the regulations are stacked against renewables.
In addition to regulatory bias against renewables, one of the massive challenges of the energy transition is the need to equitably retire thousands of existing and planned fossil-fuel plants.
The fall of U.S. coal
About 85 GW of U.S. coal capacity has been shuttered since peak coal in 2007 — and the retirements have not slowed, even under a coal-sympathetic Trump regime. Actually, the pace seems to have quickened — with 31 GW of coal power retired since the beginning of 2018.
U.S. coal power generation fell by a dramatic 30% in the first six months of 2020, according to the U.S. Energy Information Administration (EIA).
While electricity from renewables grew 5% in the first half, the real beneficiary of coal’s fall was natural-gas generation which grew by 9% in the continental U.S. in the half, according to EIA. Natural gas gained a record share of the U.S. electricity energy mix in July of this year.
EIA said that coal plants are simply “uneconomical in most regions,” because of low-cost renewables, plummeting Henry Hub natural-gas spot prices and investors intently putting their money elsewhere. Nevertheless, about 236 GW of coal capacity is still active in the U.S. according to the Rocky Mountain Institute.
Outcompeting gas out West
The withering of the U.S. coal industry has an air of inevitability, whereas the existing (and planned) U.S. natural gas fleet will be a persistent part of the energy mix for decades.
Still, interconnection queue data, especially in the West, show new solar-plus-storage projects outcompeting gas plants. California’s interconnection queue included 29 GW of proposed solar-plus-storage plants as of year-end 2019, while Western utilities’ queues had another 33 GW. Yet planned gas units totaled only 0.2 GW in California’s queue and 4 GW in Western utilities’ queues. (data from Lawrence Berkeley National Laboratory report “Hybrid power plants: Status of installed and proposed projects”)
While the majority of plants proposed in interconnection queues are not subsequently built, a Western trend favoring solar-plus-storage over gas units is obvious. The Midwest shows signs of a similar trend, as the region’s interconnection queues (ERCOT, MISO and SPP) had 21 GW of proposed solar-plus-storage plants at year-end 2019, well above the 13 GW of proposed gas units. Gas is still favored in the East, as Eastern queues had 59 GW of proposed gas units at year-end 2019 and only 13 GW of proposed solar-plus-storage plants.
An additional finding: solar-plus-storage has 99.8% of the capacity value of a theoretical “perfect generator” in California’s CAISO grid region, according to a study commissioned by California’s three major utilities — easily matching gas.