Lazard Asset Management is some kind of investment bank and consulting firm based in New York City. Every year, among I imagine many other things, they publish a report detailing the cost of producing electricity in the USA by various means. The latest one shows something astonishing: the cost of wind and solar power is now lower than the cost of electricity from coal plants.
For the past few years, the cost of solar photovoltaic panels has been falling rapidly, as process optimizations and economies of scale improve. The question has merely been whether they would keep falling long enough to put the most carbon-intensive electricity sources, like coal, out of business.
Many analysts seemed to think that this would never happen, and argued that much of the perceived decline in prices was illusory, due either to government subsidies or to incorrect pricing models. Solar and wind are not available on-demand; nature decides when you get to make power, which may not be when you need it. As a result, electricity produced in this manner must sometimes be sold when demand is low, leading to lower prices than “dispatchable” energy sources like natural gas turbines.
Lazard’s report computes “levelized” costs, which are subject to this cost modeling problem, so they are somewhat optimistic. However, their calculation is for unsubsidized costs, even though substantial subsidies are available in many places. According to their model, utility-scale solar now costs $60-86 per MWh (and wind costs $37-81), compared to $66-151 for coal, and $61-87 for the most efficient natural gas plants.
If I were in the business of building coal-fired generators or digging coal mines, I would be very concerned. Coal plants take years to build, and decades to recover the construction costs. It seems reasonable to anticipate that renewables will continue to fall in price, driving down the wholesale price of electricity until coal plants operate at negative margin. This has already started to happen in places like South Australia, which had to turn off all its coal plants for one day in September because renewable energy sources were filling all demand with no fuel cost.
It’s hard to pay back the mortgage on your coal plant if, with increasing frequency, it’s not even running. The industry knows this, which is why in 2013 the US installed twice as much new solar generation capacity as coal. That means coal plants are being retired much faster than they are being constructed or expanded.
Coal is dead, and everyone already knows it.
At least the mines might still be useful in a renewable-energy world, for transient energy storage.