Suck It, Trump: Switch From Coal To Renewable Energy Could Save Billions A Year
Despite the pillar-of-fire reminders from Australia that climate change is here, with devastating effects, 2020 is also bringing us some good climate news.
For one thing, despite Donald Trump's attempts to prop up the coal business, 2019 saw the second largest drop ever in the number of coal-fired power plants in the US. In fossil-fuel-humping Texas, the amount of electricity generated by wind in 2019 nearly equaled the portion of the state's power (20 percent) generated by coal, and wind power in Texas is on track to surpass coal power in 2020. That's partly due to the growth of wind, even with the Trump administration ending a clean-energy tax credit, but mostly, again, to the decline of coal. (Natural gas still accounts for 47 percent of the state's electricity, however.) And nationwide, coal consumption dropped 18 percent in 2019, which resulted in a 2.1 percent drop in US greenhouse gas emissions for the year -- a welcome change from 2018, which saw an increase. Even money management giant BlackRock has announced it will no longer invest in coal, resulting in a brief boost in pun futures.
And now, as the Energy and Policy Institute reports, two major big financial services outfits, the capital-est of capitalists, indicate that the sooner electric utilities shift from coal-fired plants to renewable power generation, the better for their bottom lines, and the better for ratepayers and shareholders. Why, yes, the magic of the marketplace can help the shift to green energy, although to get the reductions in emissions the world needs, we're still going to need a radical shift away from petrocapitalism.
A December report by analysts at Morgan Stanley predicts that the "surprisingly low cost of renewables" will lead most utilities to shutter virtually all the US's remaining coal plants within the next ten years. And that would be good news for consumers and shareholders:
We conducted an in-depth, asset-by-asset assessment of the coal fleet in the US and found that >70 GWs of coal capacity will become economically at risk through the course of the next decade (excluding 24 GWs already scheduled to retire), resulting in coal-fired electricity declining from 27 percent of total U.S. power in 2018 to just 8 percent by 2030. The nationwide benefit to customers from replacing coal-fired power with renewables could be as high as $3-8b/year, we estimate, while at the same time we see a total renewables investment opportunity for utilities of $93-184b.
The analysts expect that a lot of utilities heavily invested in fossil fuels now could actually boost profits by switching to solar and wind, becoming "Second Wave Utilities" that achieve higher valuations, and therefore happier investors.
[We] believe that carbon-heavy utilities that have not historically led the pack in clean energy deployment will accelerate their earnings growth by pursuing a "virtuous cycle": shutting down expensive coal plants and investing in cheap renewables.
A separate report by Moody's Investors Service says getting out of the dirty energy business would give utilities a competitive advantage, and that they could avoid losses by not blowing money on coal plants that no longer make economic sense.
As the total cost of renewable power falls below the cost of operating coal plants, utilities are increasingly working with their regulators to accelerate their carbon transition without creating financially stranded assets or significantly increasing electric rates.
The Moody's report also noted that, compared to some other sectors of the carbon economy like the auto industry and oil refineries, utilities "can more easily achieve sharp reductions in carbon emissions when compared to other top emission producing sectors with high environmental risk."
The Morgan Stanley report notes that its projections could be wrong in a couple of directions: Utilities might build more natural gas plants and pipelines than the analysts expect, but there's also the possibility that the transition to renewable energy could go faster in response to pressure from voters who demand tougher regulation of greenhouse emissions.
Overbuilding of natural gas infrastructure, however, could leave utilities with a lot of carbon-producing plants that would lose them money:
A five-part investigation published last month by S&P Global examined electric utilities' efforts to build unnecessary gas-fired power plants in several states. That spending on gas-fired power plants and pipelines could result in more than $100 billion in stranded costs, according to a Rocky Mountain Institute report.
One thing's for sure: both the Moody's and Morgan Stanley reports say it's curtains for coal, with a likely decline to between eight and 10 percent of total US electric generation by 2030. The Moody's report says efforts by Trump and some red states to prop up coal "are not significant enough to halt the decline in thermal coal consumption." That's not a war on coal, that's evolution, although as we transition to green energy, there are a lot of people who'll need jobs or pensions -- a key provision of all the 2020 Dems' climate transition proposals.
And in the meantime, assuming Donald Trump can't personally force the construction of new offshore oil production before he's shitcanned, plans are already being kicked around to put the detritus of the carbon economy to a better use. In Long Beach, California, this weekend, the Aquarium of the Pacific hosted a conference to explore how California's 27 offshore oil platforms might be used for good, not evil and oil slicks. A dozen of the things are likely to be retired in the coming decade, and since their underwater pilings have already created artificial reefs, there might be opportunities to repurpose the platforms for wind power, or as hotels for divers.
No, we can't turn them into a dumping-ground for libertarians. Too oily, and they might get hurt insisting they're in Galt's Gulch.
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