King Coal rules no more in the biggest electricity market in the world.
The combined impact of new technology and regulation means that there will be no new coal plants in the US, and even those already built are under a growing threat.
According to analysts at investment banking giant Citi: the growing impact of renewables and falling demand is squeezing the need for big new generators – and some existing ones – out of the market, and Barack Obama has just slammed the door shut on new coal with his new carbon emissions rules.
A new analysis by Citi says the business case for new coal plants in the US is already being eroded by the big increase in wind and solar capacity, declining demand and energy efficiency measures.
The new carbon rules announced by the Environment Protection Authority last Friday effectively price new coal out of the market – even if the carbon capture and storage technology does work. Citi suggests this will pave the way forward for a major restructuring of the US electricity market and a much greater focus on renewables, particularly solar.
“With the fall in renewable costs including solar and the significant drop in gas prices, it’s hard for us to imagine that IGCC plants with CCS will ever be competitive with other sources of generation,” the analysts say.
“The cost of renewables is falling fast. The fast learning rates for solar/renewables with depressed gas will make CCS’ cost competitiveness very difficult to achieve.”
The assessment of Citi is significant because the future of coal, or indeed any technology, is governed by the flows and costs of finance. Analysts at all major investment banks are now re-assessing the markets for fossil fues in the light of decisions such as Obama’s, and the recent limitations imposed by China, which have banned new coal generation in three key industrial areas, and put a cap on coal use.
Added to this is the continued fall in costs of renewables, which is changing electricity markets from the inside out, as well as an increased focus on “carbon budgets”. Those concerns and influences are working their way through to financiers, and on to the availability and the cost of funding.
Citi puts the levellised cost of energy (LCOE) of a new integrated coal gasification plant (IGCC) with CCS at 15.6c/kwh ($156/MWh). That is way above the LCOE of a peaking gas plant (11.3c/kWh) and solar (13.6c/kWh). And solar, it says, is getting cheaper and is effectively “stealing” demand from fossil fuels at the most lucrative part of the demand curve, diminishing returns from incumbent generators.
“The growth of renewables could partly provide the incremental generation needed to meet new load or to fill the gap left by retired plants,” the Citi analysts say.