Partly driven by falling renewable energy prices, at least 70,000 megawatts of coal-fired capacity could be shuttered this decade, on top of the 24,000 MW that is already set to retire, according to Morgan Stanley & Co.
“We are at the start of a ‘second wave’ of renewables deployment and coal plant retirements, led by utilities that have historically not been leaders in decarbonization,” analysts with the investment firm said in a report released in December.
Replacing coal with renewables could save consumers $3 billion to $8 billion a year, according to the report, The Second Wave of Clean Energy. It also represents a renewable energy investment opportunity of $93 billion to $184 billion, the analysts said.
The pace of coal plant retirements depends on several factors, including how much lower renewable prices go, the analysts said, noting that prices have fallen more than many forecasts predicted.
Retirements will also depend on how utilities conduct economic assessments of coal plants compared with renewables, and whether there is a price on carbon dioxide emissions, the Morgan Stanley analysts said.
In its analysis, Morgan Stanley considered five scenarios that looked at different levels of renewable energy prices, utility economic assessments, and carbon prices.
Under the equity firm’s mid-range scenario, 69,200 MW of coal-fired generation, representing 36 percent of the U.S. coal fleet, is at risk of retirement.
About 126,000 MW, or 66 percent of the coal fleet, would be uneconomic under even lower renewable prices. If a $40 per ton carbon price is added, the entire U.S. coal fleet — 192,000 MW — faces possible retirements, according to the analysis.
Morgan Stanley expects coal-fired generation to fall to 8 percent of all U.S. power production in 2030, down from 27 percent in 2018.
At the start of this decade, power plants will use more natural gas, but by 2030 natural gas demand from generators will fall by 13 percent amid a surge in renewables, according to the report.
With anticipated changes to the generation mix, the Morgan Stanley analysts expect carbon emissions from the power sector to fall by about 65 percent below 2005 levels by 2030 under the mid-range scenario.
Midwest, southeast biggest potential for changes
The Midwest is the most likely region for coal plant retirements given its robust wind economics, according to the report. The analysts expect levelized prices for Midwest wind to be as low as $20 per megawatt-hour by 2024 (after the federal production tax credit has expired), compared with $30/MWh for operating existing coal-fired power plants.
Under the mid-range scenario, nearly half of the Midwest coal fleet, or 33,600 MW, is uneconomic by 2030, according to the report.
The Southeast could also see major power plant changes driven by levelized solar prices, which could be as low as $30/MWh by 2024, the analysts said, noting that coal-fired plants in the region produce electricity for $41/MWh on average.
Under the mid-range scenario, 20,900 MW, or 37 percent of the Southeast coal fleet, would be uneconomic by the end of this decade.
Under a bullish scenario for renewable energy prices, all coal plants are uneconomic in the Mid-Atlantic, Southwest and Northwest regions, the Morgan Stanley analysts said.
