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Colorado could save $2.5 billion by rapidly shutting down its coal power plants

In the Centennial State, greener and cheaper are one and the same.

colorado coal plant Shutterstock

California may get the bulk of the media attention, but when it comes to clean energy, it’s worth keeping an eye on Colorado. There’s an argument to be made that no state is better positioned to accelerate a transition to clean energy.

For one thing, thanks to its bountiful sunlight and wind, Colorado has enormous potential for renewable energy. And most of that potential is untapped: The state gets only 3 percent of its electricity from solar and just under 18 percent from wind.

colorado sun and wind
Colorado renewable energy potential: sun on the left, wind on the right.
NREL; sun, wind

The political climate is favorable as well. As of this month, Democrats have a “trifecta” in the state, with control over the governorship and both houses of the legislature. The incoming governor, Jared Polis, campaigned on a promise to target 100 percent clean electricity by 2040.

That only exacerbates what is already a terrible economic climate for coal in the state. Last month, PacifiCorp, which owns coal plants in Colorado (among other states), revealed that, according to its own analysis, 13 of its 22 coal plants are uneconomic — as in, currently losing money. An analysis commissioned by the Sierra Club showed that it would be cheaper to replace 20 of the 22 plants with wind.

This poor climate for coal extends beyond Colorado, of course. According to the Energy Information Administration, more coal capacity has retired under two years of President Donald Trump than in Barack Obama’s entire first term. Coal consumption is now lower in the US than at any point since 1979.

Meanwhile, renewable energy continues its inexorable decline in prices, and there too, Colorado is at the center of the action. Xcel Energy, the utility that provides much of Colorado’s electricity, recently announced plans to go entirely carbon-free by 2050.

Early last year, Xcel put out a request for proposals for energy in Colorado, and not only did it get hundreds more bids than usual, the bids for renewables came in ridiculously cheap. The cost of not just wind power, but wind power paired with a few hours of battery storage, is now cheaper in the state than the cost of operating existing coal plants. The same is true of solar PV, and in many cases, solar PV paired with battery storage.

That crossover in prices was a milestone even optimistic utility executives didn’t expect until the early 2020s. And while it can’t necessarily be replicated right now in other states, it is a harbinger of things to come.

Whether Colorado can achieve Polis’s goal of completely decarbonizing its electricity system by 2040 is a complicated question. But if running existing coal plants is no longer economic, then maybe the place to start is shutting down the eight utility-scale coal plants that currently supply about 40 percent of the state’s electricity and replacing them with a mix of renewable energy, storage, and natural gas.

colorado solar
Colorado solar.

In theory, that would save money, reduce local air pollution, and reduce greenhouse gas emissions, accomplishing three of the government’s goals at once. But would it work in practice?

The effects of shutting coal plants in Colorado

Happily, a new bit of research targets just that question. An energy research shop called Vibrant Clean Energy (VCE), headed by longtime energy systems modeler and analyst Christopher Clack, has a new paper out Tuesday detailing the financial and employment effects of shutting coal plants in Colorado.

Long story short: Through 2040, the state could capture $2.5 billion in net savings by rapidly phasing out its coal fleet, while providing reliable power, lowering customers’ power bills, improving public health, and reducing carbon emissions by more than a half-billion metric tons. “This saving is in addition to repaying all the remaining capital on the coal power plants,” VCE writes.

$2.5 billion is a lot of money for a state like Colorado. Shutting coal plants would be worth doing even didn’t make the air cleaner and reduce carbon emissions.

VCE modeled three scenarios for 2020 to 2040. In the first, all remaining coal plants in Colorado are run through 2040. The second scenario is programmed to find the least-cost phaseout of coal through 2040. And in the third, all coal plants are shut down by 2025 — in just over five years, causing a mad scramble to replace that all that power.

The scenarios were generated by VCE’s WIS:dom model. (That stands for [deep breath] Weather-Informed energy Systems: for design, operations and markets.) WIS:dom brings to bear an enormous amount of data, including high-resolution weather mapping and detailed information on demand, informing models that detail grid power dispatch “at 5-minute intervals with a 3-km resolution for power plants.” It is state of the art.

What did the modeling show?

First, in all three scenarios, power was provided reliably, without fail. Colorado has many energy options.

Second, scenario one — keeping coal plants running — yields the highest total system costs, the highest retail power rates, the highest carbon emissions, and the highest public-health impacts. Coal is Colorado’s worst option, economically, environmentally, socially, and every other way.

Third, the cheapest scenario is the second, the gradual phaseout of coal. (That’s not surprising, since it was programmed to be the cheapest.)

Fourth, however (and most interestingly), the third scenario — shutting down all coal plants by 2025 — achieves lots more emissions reductions than the gradual phaseout, for a relatively small price premium. The most-economic-phaseout scenario and the shut-down-coal-fast scenario are not that far apart, and it wouldn’t take much to get from the former to the latter.

Here’s what happens to annual carbon dioxide emissions from the Colorado electricity sector in each scenario:

co annual emissions VCE

As you would expect, a gradual phaseout of coal means a gradual drop in annual emissions. A fast phaseout means a fast drop. But annual emissions in the second two scenarios converge in 2040, when all coal has been replaced.

Here’s what that means in terms of cumulative emissions from the Colorado electricity sector through 2040:

Not surprisingly, through 2045, scenario one yields more than double the cumulative carbon dioxide emissions of scenario three.

Notably, however, a rapid phaseout of coal results in 131 million fewer metric tons of CO2 than the gradual phaseout. Though VCE doesn’t calculate them, this reduction in CO2 would be accompanied by a reduction in particulates and other local pollutants, which would translate directly into reduced health costs. In other words, the rapid phaseout produces additional environmental and social benefits that aren’t included in electricity system costs.

Here’s what the phaseout does to retail power rates, i.e., what consumers will pay for the power:

co retail rates VCE

As you can see, rates stay fairly stable, within a roughly penny-per-kWh range, regardless.

Continuing to run the coal plants produces the highest retail rates. The rapid phaseout will cost consumers slightly more than the gradual phaseout, but the difference peaks at ¢0.36/kWh in 2030. That’s not much.

Here’s a look at total electricity-system costs through 2040:

co electric system costs VCE

The rapid phaseout of coal is cheaper than continuing to run the coal plants, the to tune of $2.5 billion in net savings through 2040 (plus whatever value the state puts on the additional health and climate benefits).

The direct electricity-system savings are greater in the gradual phaseout scenario, though the health and climate benefits are reduced.

Finally, here’s a look at employment, which will obviously rise if the state needs to replace 40 percent of its energy supply.

co energy employment VCE

To summarize: Phasing out coal in Colorado and replacing it with a mix of renewable energy, efficiency, and natural gas is cheaper than continuing to run it and can be done with no impact on power reliability. That alone means there’s no reason to keep those plants open.

Phasing out coal would also produce enormous local employment and health benefits. Phasing it out gradually is cheaper in direct costs, but phasing it out rapidly creates more social benefits.

Either way, getting rid of coal is a good deal for Colorado.

Decarbonizing Colorado will mean more than just coal

It’s important to add a couple of notes to these results.

First, closing down coal plants before the end of their rated lifespan and simply eating the remaining debt is something utilities can only do if permitted by Colorado legislators and regulators. It will take bold action on their part, likely in the form of legislation, but it will be a necessary piece of decarbonizing electricity by 2040 (or even 2050).

[UPDATE, January 8: Speaking of legislative solutions, a bill was introduced in 2017 that would have allowed utilities to close coal plants early using ratepayer-backed bonds; it cleared the state assembly but was killed in the GOP-controlled state senate. Now Dems control both chambers and the bill was just reintroduced. Stay tuned.]

Second, however, getting rid of coal plants will not be enough to get Colorado to a zero-carbon electricity system. As the very first graph in this post shows, it would cut the sector’s emissions by more than half, but after that they would plateau — unless the state takes on [ominous music] natural gas.

For Colorado, a fracking state, eliminating natural gas from the electricity system will be a much more fraught undertaking than eliminating coal, both politically and economically. Natural gas is a more powerful industry with more political influence. And on a purely physical grid-planning basis, it is more difficult to replace. (VCE plans some follow-up modeling on decarbonizing the state’s electricity sector entirely.)

But whatever the state of the natural-gas fight, closing down coal plants is an obvious and readily available move for state leaders. There’s no sacrifice — it’s cheaper to build new clean energy than to keep running coal plants.

That’s true in Colorado now and will be true in more states every year. Colorado leaders have a chance to show what a state can make of it.

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