US coal-based generation to be outplayed by renewables in 2020, says GlobalData

GlobalData Energy 16 July 2020 (Last Updated July 16th, 2020 17:37)

US coal-based generation to be outplayed by renewables in 2020, says GlobalData

Coal-based electricity generation has fallen to its lowest level in the US, representing a 23.5% share in the generation blend. With the Covid-19 crisis in place and climate concerns taking a bigger stage, a renewable-based generation might cast a shadow over the coal-based generation this year.

Coal-based electricity dropped to a 42-year low in 2019, with the share falling by almost 16% in comparison to 2018. On the contrary, generation from renewables expanded by 3.8% compared to 2018, where renewables accounted for 19.1% of the generation. The Covid-19 outbreak is expected to hurt the coal-based generation further as electricity generators reduce electricity generation in response to reduced electricity demand.

Utilities are looking at renewables, committing to their objectives of addressing climate change. This is anticipated to expedite the closures of coal-fired power plants since they are already challenged to compete with natural gas, wind and solar sources, which are all currently at par or cheaper sources of electricity generation.

The Covid-19 pandemic has added further woes to the already disturbed sector that was confronting solid competition from the cheaper sources of generation. With plunging electricity demand following the temporary shutdown of factories, offices, and retailers, utilities chose other sources of energy. While the operational cost of coal power plants (when compared to gas, solar, wind or nuclear) is more expensive, with long-term power purchase agreements for coal-based power generation in place with multiple rural communities, industries and companies, it is less likely that the utilisation of coal would soon end completely.

The ageing coal-based power infrastructure, a steep decline in the cost of building renewable projects (especially wind and solar) and a low-cost natural gas scenario are likely to push coal-based power generation share in the minority in the generation mix.

Low gas prices and the Covid-19 pandemic has acted as a catalyst, initiating the move towards low carbon energy transition in the US. It is estimated that by 2025, generation from coal will drop by another 22.1%, compared to 2020, representing 17.5% of the generation in the US power mix.