Inside Clean Energy: Real Talk From a Utility CEO About Coal Power

Let’s begin with a game of, “Who said that?” Here’s the quote:

“There is not a regulated coal plant in this country that is economic today, full period and stop,” he said. 

You might guess that it’s someone from the Sierra Club Beyond Coal Campaign or the Natural Resources Defense Council.

But the correct answer is that those words came from the CEO of the country’s largest electricity utility by market value, Jim Robo of NextEra Energy, speaking last week in a conference call with analysts about the company’s latest earnings report.

Robo spoke in unusually frank terms about why coal-fired power plants are retreating from the market, and why the remaining coal plants are being used less than ever before. He’s saying coal-fired power is unprofitable everywhere in the country because of competition from less expensive sources like wind, solar and natural gas.

And he would know. His Florida-based company owns and operates coal-fired power plants, even though NextEra is better known as a leading developer of utility-scale renewable energy, and is phasing out coal. Environmental advocates have praised NextEra, but have also criticized the company for its continuing reliance on natural gas and for being hostile to rooftop solar.

One of the most telling indicators of coal’s decline is the falling “capacity factor” of coal-fired power plants, which is a percentage that shows how much the plants are being used compared to their full capacity. The national average capacity factor for coal plants dropped below 50 percent last year for the first time on record in 2019.

We don’t have numbers yet for all of 2020, but the monthly figures show that coal plants dropped to new lows in utilization during the coronavirus shutdowns, with capacity factors falling below 30 percent last spring, which is astonishingly low.

Those numbers underscore the reality Robo was describing, and raise the question of why coal plants aren’t closing even faster.

The answer, as Robo went on to say in the call, is that many of the remaining coal plants are able to keep operating because they are in states or regions with regulatory systems that force consumers to cover the costs. For utilities in those states, it makes more sense to continue operating a plant at a customer-guaranteed profit than to go through the risk of proposing and building something new.

“In Florida, we’ve shut our coal down and we save customers literally billions of dollars of present value over the expected life of the new generation that we’ve put in place,” he said. “So, there is an enormous opportunity. There (are) several states in the country that are not taking advantage of that opportunity, because of some of the regulatory approaches.”

He doesn’t name those other states, but I will. We’re talking about most of the South and Mountain West, plus West Virginia, among others.

Robo added that the Biden administration’s policies probably will accelerate the shutdowns of coal-fired power plants, which he said is a good thing because customers are losing money by continuing to operate unprofitable plants.

One of the most interesting states to watch this year is Indiana, where several utilities are moving quickly away from coal-fired power and the coal industry has responded by trying to get the legislature to intervene.

Meanwhile, companies continue to disclose timetables to shut down coal plants. On Tuesday, Alliant Energy of Wisconsin announced what it called “the end of an era” with a plan to close the Columbia Energy Center, with a capacity of about 1,100 megawatts, in 2025, as Chris Hubbuch reports in the Wisconsin State Journal. The company has said that closing coal plants and adding solar power can save customers more than $6 billion over the next 35 years.

The trend is clear. Utilities have found that they can save money by closing coal-fired plants and replacing them with wind, solar and other sources.

Just look at the power plants that are scheduled to come online this year in the United States, according to the Energy Information Administration. Solar and wind are the leaders by a mile, followed by natural gas.

The usual caveats apply, including that wind and solar are intermittent sources. They need to work with battery storage or other technologies to provide electricity around the clock.

The list of new plants includes nuclear, but that represents just one project, the Vogtle plant in Georgia, which has had years of delays and billions of dollars in cost overruns.

Absent from the list is coal, with zero new plants.

GM’s Big Change: I wrote on Friday about General Motors’ big announcement that it was aspiring to stop selling gasoline cars, trucks and SUVs by 2035, part of a plan for the corporation to reach carbon neutrality by 2040. I got some colorful comments from David Victor, an international relations professor at the University of California, San Diego, who said some legacy automakers will probably follow GM’s lead and others will be much more cautious.

“What I see is the global auto industry fracturing,” he said. “It’s no longer Tesla and upstarts, kids in Birkenstocks smoking dope who happen to be making cars. This is the big kids who are getting crushed by those new entrants, and so you have this potentially complete reorganization of the industry.”

EVs Help Cut Energy Waste: The transition to EVs could save a lot of energy that we now lose through wasted heat, according to this story by Bloomberg reporters Liam Denning and Elaine He. They do a great job explaining how many parts of our current energy system are inefficient, and how a switch to EVs, along with a continuing transition to renewable sources of electricity, will lead to a significant reduction in waste.

Probing Carbon Offsets: Anna Kusmer of The World has a story about carbon offsets, the little-understood accounting practice that many companies rely upon for their claims of reducing their carbon footprints. By paying a third party to take actions like preserving forests, companies say they are canceling out some of the emissions produced by their operations. But a growing number of researchers and environmentalists say that these products are often not delivering the benefits they advertise.

Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to [email protected].