In the first quarter of 2020, renewable power sources produced more electricity than coal in the United States, according to information from the Energy Information Administration. Given that winter is one of coal-fired power’s most productive times, this is big news. Now coal’s problems have been exacerbated by the coronavirus pandemic.
Historically, coal has provided baseload power at plants that were designed to take advantage of efficiencies of scale by running at full capacity all the time. This meant that they could produce very cheap electricity. But it also meant that if demand fell below the base load, the minimum load demand for the year, at least some of them would have to shut down, and that is expensive.
If the demand is above the base load, which it nearly always is, the extra has been taken up by load-following plants, which can change production as demand changes. Where baseload plants take many hours to change their output, load-following plants can do the job in minutes. Even that is not really good enough for high quality electricity, so an ideal grid also has peaker plants, which can change output in seconds. Electricity from load-following plants, however, is expensive. And peaker plants cost even more.
That is the traditional paradigm with the introduction of solar and wind power, which have varying output. Their variability, however, is a sometimes an asset, because they can be curtailed very quickly to prevent the grid from overloading. There are also other kinds of renewable power with very different limitations and advantages. Hydropower, biogas, and geothermal are among them. And all of these can be firmed up with batteries.
Coal was first threatened several years ago by falling costs of electricity from combined-cycle natural gas plants, which are also baseload power plants. According to Lazard Associates’ Levelized Cost of Energy and Levelized Cost of Storage 2019, the cost of electricity from coal, at $66 to $152 per megawatt hour (MWh), is nearly always higher than the cost of baseload power from natural gas, which ranges from $44 to $68 per MWh.
But now, both natural gas and coal are threatened by the ongoing reduction in costs of solar and wind power. Add to that the fact that costs of batteries have been tumbling at a remarkable rate. The result is that renewable power, even if it is to be available 24/7 by use of huge batteries, is often less expensive than the cheapest baseload power provided by fossil fuels. The thing is, renewable power and batteries are not replacing coal plants; they are replacing baseload, load-following, and peaking plants combined.
A recent reverse auction in India looked for 400 megawatts (MW) of renewable power, with the catch that it had to be available around the clock, 24/7. The winning bid, out of 950 MW of proposals, was for 400 MW at $38 per MWh. That is lower than the lowest cost for baseload power, and without any need for load following and peaking plants. It does this regardless of whether the sun is shining or the wind is blowing.
Change is under way in the United States, as large batteries come online, backing up wind and solar power. In fact, Southern California Edison has just signed contracts for 770 megawatts of battery backup, to be delivered by August 1, 2021. That is more battery storage than the entire country had in 2019.
We have come to a point where there is no need for baseload plants, load-following plants, or peaker plants. And since the response time of batteries is better than that of peaker plants, the electricity has better quality.
Now, because of the COVID-19 pandemic, the demand for electricity has fallen. This has not pushed renewables off the market, however, because they provide energy at lower cost. It is cheaper to balance a grid dependent on renewable energy than to pay for energy from coal-burning plants. Since big power plants, running on coal, gas, or nuclear power, take a lot of employees, who have to work in conditions where social distancing is not feasible, the COVID-19 pandemic may even tip the scales further in favor of renewable power.
The Energy Information Administration has published the data for the first quarter of 2020. In that quarter, Coal produced 171,828 MWh, or 17.86% of our electricity. By contrast, renewable resources, including hydro, solar, wind, and others, produced 201,902 MWh, or 20.99%.
On a day-to-day basis, renewables have beat coal generation on 100 out of 148 days. They have beat coal for the last 60 days in a row. The consensus among energy industry analysts is that things are not likely to get better for coal. It looks like its place may be in history books.