The Inflation Reduction Act has greatly impacted the future of coal as a source of energy. With the exception of a single coal-fired power plant in Wyoming, all 210 coal facilities in the US would be more cost-effective to replace with renewable energy options such as wind or solar, according to a report from Energy Innovation and UC Berkeley. The IRA’s inclusion of renewable energy credits has altered the economics of solar in coal communities, with the median cost of new solar being roughly $24/MWh and the median marginal cost of coal being approximately $36/MWh with high variance. This highlights that the end of the coal era is rapidly approaching. More and more studies are revealing the advantages of renewables and some even suggest billions in savings compared to the traditional coal power.
The latest study on renewable energy shows that replacing coal with new solar sources could result in substantial financial benefits for communities. The cost of turning decommissioned coal plants into renewable energy facilities and utilizing existing grid connections would be covered by the cost savings from reduced operation expenses. The study estimates that communities could see up to $589 billion in clean energy investments and eliminate energy stability concerns by transitioning to local solar. Additionally, the replacement of coal with local renewable resources could finance the installation of 137 GW of four-hour battery storage, which is 62% of the coal fleet’s nameplate capacity. With the finding that coal is no longer cost competitive with renewables, it debunks the notion that coal will continue to be a dominant source of energy. The peak of coal use was in 2007 and since then, its use has declined dramatically as renewable energy and alternative fossil fuels like natural gas have risen.
The decline of coal as an energy source in the US has been steadily decreasing, with renewable energy surpassing coal in terms of electricity generated in early 2020. That same year, coal production reached its lowest point in 56 years. The International Energy Agency has revised its predictions for the growth of the renewable energy sector, expecting wind and solar to surpass coal as the world’s leading energy source by 2025. Last year, wind and solar accounted for 10% of the world’s electricity demand, making this a plausible prediction. In its first Coal Crossover Report in 2019, Energy Innovation found that 62% of existing coal capacity was not economically viable. This increased to 72% in the 2021 report, with 80% of existing coal plants being more expensive to operate due to tax credits.
The rapid decline in the use of coal as an energy source was surprising, according to Michelle Solomon, as the new study shows that not only have renewables become more cost-effective but the Inflation Reduction Act is further accelerating this trend. Although a direct replacement of coal with renewable energy is unlikely to occur, the study recognizes that barriers still exist in the transition to clean energy. The report concludes that policymakers must take action to overcome these barriers and regulators should work to improve electrical grids for the integration of renewables, utilize available funds from the IRA, and encourage coal communities to use clean energy as a catalyst for larger economic transitions.