Mig writes:

>1. These are all numbers for *new* plants.  The current planning calls for closing a number of
>functioning coal plants which are probably generating electricity for around 3 cents per kwh.  So
>electricity would be more expensive as we transition away from coal.

Yes, new generation is more expensive than the marginal cost of fully amortized funcioning old generation, but nobody (yet) in the US is shutting down coal plants that are economicially viable.  Replacement is always ongoing- amd built into the rate structures, it's not some new expense.

Utility operators (or mechant power generators) attempt to make financially rational decisions are what to replace the old stuff with.  Once new capacity is built, the new generators begin to eat into the capacity factors of the old stuff whenever their marginal cost of operation is lower than the old plant. That is the case with 50% efficiency cc gas @ $4.50/MMBTU vs. 25-30% thermal coal $2.50/MMBTU. As the a generation asset's capacity factor drops, it's economic viability drops with it, and they become vulnerable to any other regulatory changes that come down the line that would require more invesment in the old asset to keep operating.  Building ANY new capacity (even new coal) will shorten the operating lifespan of the old stuff, since the newer capacity (almost always) has a lower marginal operating cost.  That's just the way it is in the power biz.

So what that really means is, electricity prices aren't much affected by the transition away from UNLESS there is just too much excess new capacity being built, and the ratepayers are required to PAY for the excess.  While that may in fact be happening in Australia, so much new capacity is on the ratepayer's side of the meter (and thus economic for the owners of that new power) that it's making some of the proposals for new coal plants INSANE invesments, guaranteed to fail. There's scant evidence of that happening broadly in the US, with the possible exception of the new nuclear plants being built in Georgia (which have already raised electricity prices in GA, years before they go on line)and a few other outliers.

And now that the PV + storage on the ratepayers side of the meter has crossed a new threshold worldwide with (US company SunPower) getting into the game (it's not just SolarCity anymore), it probably spells doom for even more coal plant operators in Australia:

ONLY if the ratepayers are required to compensate the coal plant operators for their stranded assets will it affect power rates.  In the Georgia case ratepayers are already on the hook, paying for the nukes right now (which has everybody from the Green Tea Party on the right to the Green Party on the left united in opposition.)  But the recent cancellation of a similar project in Florida underscore just how risky large projects like that can be:

If it's ratepayers rather than the investors get stung for the costs of stranded assets, prices go up.  In markets where merchant generators compete, they don't. But there are now built-in price limits.

Retail electricity prices can only rise so far before they invite the "utility death spiral" scenario, where the cost of new stuff on the ratepayers side of the meter is so much cheaper than the grid rate that grid-defection with PV + storage is a financially rational choice. The crossover point right now is about 25-30 US cents /kwh- a price already exceeded in some places.  But the crossover point is still sinking pretty fast, which is why  states like NY (where the average rate is 22 cents and rising) are shaking up the regulatory envronment in an attempt to stay ahead of the curve.  Some utilities in Australia are already feeling the heat, with demand for utility-generated power falling faster every year:

>2. Natural gas prices are much more volatile, so much more risk in the NG plants.

Volatility of fuels in the utiltiy industry (all fuel types) is managed by long term contracts. The operators have to caculate the relative risks over the lifecycle of the unit when buying new generation. The odds that 40% efficiency thermal coal without carbon sequestration will be allowed to operate for 40 years without expensive carbon sequestration or carbon taxes are pretty low in most analyst's estimation.  But even new gas-fired plants are under direct threat from distributed renewables, and those in the power biz (and their financial backers) are factoring that into the decisions. The proposals for replacing the retired coal plant in Salem, MA  by a cc gas has been scaled back dramatically, including it's anticipated lifecycle. The downscaling may render it uneconomic from the get-go, even if gas prices stay under $5/MMBTU, but it's the investors, not the ratepayers who are taking the risk.

>BTW, I am not a fan of coal

There's not much to like there.  It suffers big time from the three-Ds:  Dirty, Destrucive and Dangerous, from the process of digging it up to the point where the emissions are disposed of (including the ash).  While natural gas wind & solar aren't exactly free of those issues, it's a matter of degree.

Electricity prices have fallen in big-wind states like Iowa, even as legacy coal and legacy nukes have gone off line- the marginal cost new stuff is just too cheap.  The cost rationale of any new centralize fossil power (even combined-cycle gas) is going to be tough in a decade, fighting the headwinds of cheap distributed PV and falling grid demand.  Everywhere in the US except Texas demand for grid power is flat to falling due to both increased efficiency and private PV, but even in Texas the growth of wind & solar is faster than than the growth of demand.  It remains to be seen how much coal "replacement" by other central generating assets such as cc-gas. Total grid-power demand numbers in the US are shrinking every year- Sanford Bernstein bank is predicting that cheap PV will induce widespread electricity price DEFLATION, setting in around 2025, spreading to all energy sectors by 2030.


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