Nevada’s last coal plant is scheduled to close in 2025 after 40 years of service due to rising operation costs. The closure will dramatically improve air quality, yet the economic impact will be borne by dozens of plant employees, as well as the surrounding community of Humboldt County.
So what will replace the North Valmy coal plant?
Local utility NV Energy is planning for a clean economic transition: Two new solar-plus-storage facilities will be built adjacent to the closing plant by 2025, creating hundreds of construction jobs, replacement union jobs, and long-term sustainable tax revenue.
These solar-plus-storage projects could generate even more jobs harvesting solar energy across the region. As coal’s era ends, new Inflation Reduction Act (IRA) programs mean utilities across the United States can follow Nevada Energy’s example to secure nearly $600 billion in new investment.
Coal in decline nationwide
U.S. coal-fueled electricity generation is in secular decline, falling from more than half of our annual electricity supply 20 years ago to less than 20% today. This decline was initially driven by natural gas competition and energy efficiency improvements reducing electricity demand.
But the acceleration of coal’s economic decline is now being driven by fast-falling clean energy prices—and smart government policy.
The Coal Cost Crossover 3.0 analysis from Energy Innovation Policy & Technology LLC® and the University of California, Berkeley, shows IRA passage will substantially accelerate this trend. 209 out of 210 existing U.S. coal plants are now more expensive to run compared to replacement by new cheaper wind or solar energy in the same region.
The IRA also provides thoughtful new economic transition opportunities for coal-dependent communities. The law provides additional tax credits to incentivize new clean investments in these same communities, offering new employment and tax revenue for communities just like in Nevada.
While the IRA facilitates the coal-to-clean transition and rural revitalization, policymakers must act to seize the opportunity. Public utility commissions and state legislators can fully tap IRA opportunities with proactive planning. Nearly all utility master plans are out of date given the new IRA tax credits and loan programs.
Regulators should require power plant owners and operators to re-evaluate their planning and procurement, now taking IRA programs into account, while prioritizing a smooth transition for workers and communities.
Comparing the cost of legacy coal to new, clean energy
The Energy Innovation® report updates two previous studies comparing the cost of continuing to operate existing coal plants across the U.S. with new renewable energy costs. The first Coal Cost Crossover report found 62% of U.S. coal capacity was more expensive to run than to replace with renewables, while the second iteration found 72% was more expensive than renewables.
This trend is unquestionably and irrevocably accelerating.
The updated Coal Cost Crossover study compares coal plant costs to four different renewables scenarios, including IRA tax credits. With the IRA, 99% of U.S. coal plants are now uneconomic compared to new renewables.
The first two scenarios in Coal Cost Crossover 3.0 compare the cost of each existing coal plant to new solar or wind in the same region, roughly corresponding to the utility’s service territory. The second two scenarios compare coal costs to the cost of local solar and local wind within a 30-mile radius of existing coal plants.
Local solar and wind projects now have the advantage of the IRA’s additional “energy community” tax credit bonuses, which helps offset losses due to local siting constraints. This Coal Cost Crossover report also evaluates how much battery storage capacity could be financed with the savings from switching to local clean energy.
Inflation Reduction Act unlocks major savings and new economic opportunities
The local replacement opportunity unlocked by the IRA can speed renewable deployment and generate significant savings: The cost of either new wind or solar is at least 30 percent cheaper than the cost of running more than three-quarters of existing U.S. coal plants. Coal Cost Crossover 3.0 analysis finds:
- 99% of all U.S. coal plants are more expensive to continue to run than new renewables.
- Replacement with local renewables (<30 miles) is a cheaper option for 97% of coal plants.
- Moving energy generation to local renewables could drive more than $589 billion of investment in energy communities across the U.S while saving customers money.
- Replacing coal generation with local renewable resources could finance the installation of about 137 GW of four-hour battery storage (or about 62% of the entire coal fleet’s power).
Apart from the health, jobs, and tax benefits, local replacement also opens the option of re-using valuable transmission infrastructure at retiring coal plants without having to extend long spur power lines or fund large inter-regional transmission projects to access the country’s richest renewable resources
Connecting to the grid in a timely way is a pressing concern for renewable energy developers. As of 2022, the two largest power markets in the U.S., MISO and PJM, together had about 500 GW of wind, solar, and battery projects waiting to be studied for connection to the grid: three times the capacity of their entire coal fleet.
Because savings from switching to local solar or wind could finance batteries to buffer renewable production, new energy storage could provide a ready plug-and-play solution to this planning conundrum in a win-win for electricity consumers, the local community, public health, and the environment.
Two other new IRA programs are game changers for coal economics, though they were not included in this analysis: First, the IRA created a $9.7 billion fund for rural electric co-ops to reduce greenhouse gas emissions. With nearly 18 GW of plants operated by co-ops, this program, if used to its greatest potential, could transition almost 10% of the coal fleet.
Rural co-ops are ideally placed to take advantage of local replacement, but these areas also often have land that could be used for larger wind and solar projects that support additional commercial and industrial development powered by cheap, clean energy. For example, a cannery could use batteries to store excess clean electricity, providing cheap renewable heat for its operations. Local renewables could act as the seed for broader economic revitalization for energy-intensive operations like data centers while lowering energy costs.
Second, the new IRA loan guarantees provide all power plant owners access to low-cost capital to cut emissions and reinvest in clean energy via the Department of Energy’s Loan Programs Office.
Policymakers must act to captures savings and investment opportunities
IRA programs open the doors to new savings and reinvestment opportunities—but utilities must walk through them. Given the enormous savings potential of IRA tax credits and funding programs, public utility commissions (PUCs) and cooperative utility leadership should require utilities to update prior coal retirement plans to reflect the new prices and low-cost capital now available.
Utilities should also consider reinvesting proceeds from government-backed loans in local clean replacement of annual generation and capacity to support the grid. The loans do not require that plants be immediately retired. Rather, loans could support projects that gradually reduce coal while increasing renewable generation and diversifying the community’s economy, supporting community transition.
Utility master plans for infrastructure needs submitted to PUCs routinely overestimate costs of new renewables, and the new IRA credits make these overestimations even higher. Any investment plan or any market-based solicitation for renewable contracts completed prior to August 2022 is now out of date. Despite the procedural headache, PUCs should insist that utilities redo their plans, with an eye for the benefits of local renewables to replace coal power.
State PUCs, legislatures, and state energy offices all have a role in ensuring a just transition for coal communities. State legislation should require the PUC and utilities to plan for and assess the value of federal loan guarantees for community transition. While the IRA has several reinvestment programs, energy communities cannot rely on clean energy alone to fully create enough new jobs and tax revenue for full replacement. Proactive diversification of local economies centered around direct access to cheap renewables is one path for success. Legislators should also consider following Colorado’s example by creating and funding a just transition office to help coal communities develop transition plans.
Seizing the moment
The IRA has opened the doors to a bright future for coal plant communities. Replacing coal plants would mean creating tens of thousands of construction jobs, thousands long-term jobs in the clean economy, and drive hundreds of billions of dollars of new investment, while slashing 60% of U.S. greenhouse gas emissions from the power sector and preventing thousands of deaths, hospital admissions, and heart-attacks every year.
So what are state policymakers waiting for?
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