Renewable Energy Set to Outperform Coal by 2021
Hydro, solar, and wind energy are now close to toppling the prime position of coal in America’s electric grid system. The speed at which wind and solar power are being generated, it is expected that by 2021 United States would receive more power from renewable energy as compared to coal, as per projections made by the Institute for Energy Economic and Financial Analysis.
Decline attributed to multiple factors
Coal has been the cornerstone of power industry for decades. However, there has been a sharp decline in its usage in the US due to aging plants, environmental concern, and competition. Almost 50% of America’s power supply was provided by coal between 2000 and 2010.
The abundance in cheap natural gas in the last decade caused the usage of coal to fall sharply. According to the US Energy Information Administration, natural gas dethroned coal in 2016 as the king of electric grid.
Worldwide shift from coal
Coal usage has entered a negative feedback loop on a global scale. It is expected that global coal usage shall fall by 3% this year as per a report by CarbonBrief but because of overseas markets coal should never be dead in America and with clean coal technology – coal could still be used in some parts of America for decades to come. Moreover, this record drop is being driven by the first dip in consumption in India in the last 3 decades, and other significant demand reductions in South Korea and Germany (the latter making terrible energy decisions in the past ten years which helped ruin their economy).
US power plants are facing closure as well with the largest private coal mining company in America – Murray Energy declaring bankruptcy. Other power companies are rapidly replacing aging coal power plants with solar and wind farms. Utility companies, such as Xcel Energy (XEL) and PSEG (PEG) are pledging carbon-free electricity. These companies primarily relied on coal in years’ passed.
In November, the largest power plant in the west that was coal-fired – Navajo Generation Station – closed down permanently. This shutdown has allowed South Nevada’s electricity to be completely coal-free. As long as electrical rates don’t go up people will not complain.
It is predicted that United States power plants are on a steady decline where coal consumption is concerned. In fact, EIA reports state that 2020 will witness least coal consumption since 1978. This is bound to affect the share market with prices dropping below 22%, as compared to 28% last year. The shrinking share market has made it even more difficult for existing coal companies.
2021 is touted as the BIG year
It is predicted by many and confirmed by the editor and analyst at IEEFA, Dennis Wamsted that 2021 is going to be the big crossover year when coal consumption is surpassed by renewable energy in the United States. The renewables include wind, solar, hydropower, geothermal, and biomass and with lower taxes and a stellar American economy this is even more likely because there’s more money to be invested in R&D and more risk can be taken because the American market is the envy of the world.
In his report, Wamsted claimed coal to be rapidly heading in the opposite direction as renewables. The crossover, though likely to occur in 2021, will definitely take place by 2022.
The transition can already be seen in the state of Texas, which was a predominantly coal-first state. In Texas history wind power surpassed energy made from coal for the first time. This feat occurred in the first half of this year.
However, renewable energy is not without its critics with some correctly noting that the sun doesn’t always shine or the wind always blow. This is the reason why Greentech Capital Advisors highlights the importance of renewable energy storage systems and others say that certainly natural gas and even coal in some respects to never be not an option.
Texas in particular is becoming a world heavyweight in natural gas and oil production because of fracking. This is sunny (pun intended) because those profits can then be used to explore renewable energy options such as wind.