Carbon Rule or Not, Wind Energy Continues to Squeeze Coal

Even as President Trump repeals his predecessor's landmark climate rule, a collision of policy and market forces is putting the squeeze on aging coal and nuclear plants.

Those forces, as noted in the Department of Energy's recent grid study, include cheap shale gas, slack electricity demand, and increasing penetration of renewable energy.  In the Midwest, especially, falling wind energy costs are putting increasing pressure on King Coal.

In the nation's wind corridor, power purchase agreements are being signed for less than 2 cents a kilowatt-hour.  Even adding transmission costs, wind energy is undercutting competition from existing coal and nuclear plants.

Clean energy advocates and research analysts pointed out the trend in recent reports.  A Moody's Investors Service report this spring estimated that 56 gigawatts of coal capacity in the Great Plains is "at risk" from cheaper wind energy.  Yesterday, the Union of Concerned Scientists identified 57 GW of coal generation that is uneconomical compared with gas-fired generation.

Utilities are backing it up with their own numbers.  Last month, Ameren Missouri, a coal-dependent utility with 1.2 million customers, filed a long-range plan with state regulators that showed the leveled cost of energy from new wind projects, including the federal production tax credit, was below the cost of energy from the company's existing coal and nuclear plants.

The data in the utility's integrated resource plan support the decision to add 700 megawatts of wind energy by the end of the decade.  Ameren does not, however, plan to accelerate retirement of any coal plants.

The announcement is just one in a long list of new wind additions by utilities from West Texas to the Dakotas.

In nearly every instance, utility decisions to invest in new wind farms are driven by low costs and the ability to add generation and hedge fuel costs without raising customer bills.

Take Minneapolis-based Xcel Energy Inc.  The company already operates 4 GW of wind energy and will increase that to more than 10 GW after announced projects are completed.

"None of that is being driven based on [environmental] compliance," said Jonathan Adelman, Xcel's area vice president of strategic resource and business planning.  "Economics are driving it."

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