Economics, not Regulations, are Killing Coal Plants
Despite government efforts to boost coal plants, a new UT study finds they’re on their way out, and the U.S. is on track to meet climate targets for its electricity sector. Part 2 of a Q&A.
By Steve Brooks
In a recent project, UT Austin’s Energy Institute brought together 23 experts from 11 different parts of campus to forecast the future of the electric grid. Its Full Cost of Electricity study included three who teach at McCombs: Jim Dyer, professor of Information, Risk and Operations Management; Carey King, lecturer in Business, Government and Society and assistant director at the Energy Institute; and Finance Lecturer Fred Beach, who’s also the Energy Institute’s assistant director for policy studies. You can read Part 1 of their Q&A here.
In Part 2, they discuss some findings that surprised them: It’s economics, not regulations, that is killing coal plants, and wind farms are making grids more reliable, not less. They also explain the study’s online tools, which invite users to experiment with different assumptions and create their own forecasts.
The big loser in your study looks like coal. It makes economic sense in less than 1 percent of America’s counties, even before you add in environmental costs.
Beach: Coal is dead economically. It’s just not competitive because of the low cost of natural gas and zero fuel cost of wind and solar. It doesn’t require a war on coal. It’s just basic market dynamics.
Once upon a time, just about every house in America had a coal chute into the basement. Are we sad that those days are gone? We don’t have whale oil anymore. That was a huge energy source back in the mid- to late-1800s. This is life. This is the inexorable pace of technological change.
The new administration wants to scrap the Environmental Protection Agency’s Clean Power Plan and pull out of the Paris climate agreement. Will that help coal to come back?
Beach: I don’t think so. It’s a shame to retract any laws or proposed laws with regards to reducing emissions, but the reality was, the United States was already on a pace to meet or exceed anything we were claiming in the Paris Accords anyway. Our “formally backing out of it” is irrelevant other than from a PR perspective.
What about the Department of Energy’s argument that we need coal plants to keep our grids reliable?
King: My general thought is that it’s a politically motivated justification for propping up coal-fired power plants. Significant quantities of coal plants have already retired due to economic reasons, probably 30 gigawatts in the Midwest and the Northeast in the last 10 years.
Dyer: Even the coal pile is not that reliable. In Hurricane Harvey, some coal plants had to stop burning coal because the coal pile got so soaked in water that they couldn’t actually use it anymore. Some switched to using natural gas if they had the capability.
In Texas, you found that the grid actually has gotten more reliable over the last decade, even while coal plants closed and the state added 8 gigawatts of wind capacity. How could that be?
King: There were some big changes in 2009 to the market. One, it went from dispatching power plants every 15 minutes to every five minutes. That helps you adjust to a shorter time scale, changes that might come from something like wind.
Dyer: When the turbines were built, they were scattered over a pretty wide area. The wind doesn’t blow right here but is still blowing over there, so it smooths things out a bit. We have gotten much better over the years with forecasting weather, so they can do a better job of anticipating how much power will be produced by the turbines. I’ve been in a control room in Pennsylvania where they were trying to schedule power plants. Their first call of the morning was to a meteorologist about what’s going to happen around the state today.
One interesting thing about your results is that you don’t claim they’re the last word. You have online tools that let anyone try out different numbers and create their own maps on where to site new power plants. How do they work?
Beach: You can see how the map changes as you make different assumptions, like the cost of natural gas going forward or the carbon cost of emissions. If you put a price of $10 a ton on CO2, the map doesn’t change much. If you put $50 a ton on CO2, it changes quite a bit. It doesn’t tell you what the right number is, but it shows you the sensitivity of the different technologies to that number and where the tipping points are.
How do you hope people will use the tools on your website?
King: It’s a place where people can go to start a conversation about what you might want to install in your particular region. You might say, ‘It’s not cheap enough in my state, but it’s cheap enough in my neighbor’s state. I also know how much it costs to build powerlines. Let me add that together and see if we can make it work.”
Does being a public university make these tools more credible than if they were coming from a partisan think tank or a trade association?
Dyer: I think so. Oftentimes universities are seen as being as neutral as you can get. I hope that these results and our calculator will be used to make the conversations a bit more rational, so that people can have a better way of separating the emotional arguments from analysis.
Lastly, will you be doing any followup studies to this one?
Beach: Our next large study is going to build on this one. We’re going to look at the energy infrastructure of the United States as a whole: not just electricity, but oil, gas, electricity, and how they interact. A big part of that is going to build upon this theme of decarbonization and greater electrification. If that trend continues, what kind of energy infrastructure do we need to support that? If we wanted half our transportation to be electric, would we need to be building more power plants to enable that?
Actually, the answer is no, which highlights something we brought to the fore in this study: There’s a lot of generation capacity that sits idle most of the time. We could more than cover the additional electricity needed just by running it more often at night and charging at night. In a way, the vehicles themselves are the storage. We would have to burn a lot more natural gas than we currently burn. But we technically wouldn’t need to build a single new power plant.
For more information, go to the Energy Institute’s report Full Cost of Electricity.
