Moody's: Falling wind energy costs threaten Midwestern coal plants

Dive Brief:

  • The declining cost of wind generation has many utilities looking to add it into their ratebase, a trend which could accelerate the demise of some older and less-efficient coal plants.
  • According to new analysis from Moody's Investor Services, some 56 GW of Midwest coal-fired generation is at risk, as wind energy comes online with lower all-in costs.
  • The average cost of wind power in the Great Plains states has fallen to around $20/MWh, according to Moody's, while coal-fired generation runs at about $30MWh.

Dive Insight:

President Donald Trump campaigned on bringing back the coal industry, a promise many questioned as the energy industry has increasingly turned toward cleaner energy resources. But while that trend was supported by markets, policies and price supports, Moody's Investor Services says the renewable energy industry in particular may have turned a corner.

 "Wind power economics are driving coal generation up the dispatch curve and into earlier retirement," Jairo Chung, a Moody's analyst, said in a statement. "Around 56 gigawatts of regulated coal-fired capacity in the Midwest has operating costs that are higher than the all-in costs of new wind power."

Those are the conclusions of a new report available to Moody's subscribers, titled "US Power and Utilities: Rate-Basing Wind Generation Adds Momentum to Renewables."

While the cheaper wind is helping lower consumer bills, Moody's said the new resources are also a potential boon for investors. The firm said favorable pricing on wind generation has allowed utilities Iowa and Kansas to invest in their rate bases, "leading to higher earnings for investors, lower rates for customers and a cleaner energy portfolio."

Montana and Colorado, on the other hand, have renewable portfolio standards for utilities to increase renewable investments. "The economics of wind power have allowed these states to target even more aggressive environmental standards," Moody's said.

The declining cost of renewables has had significant impacts on wholesale power markets, with fuel-free renewables putting pressure on high-operating cost fuel-based plants. But if vertically-integrated utilities begin turning to construct wind projects, that trend will put even more pressure on traditional generation, sowing more doubt that changes to environmental policy can help revive coal plants and mining towns.

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Filed Under: Solar & Renewables
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