Illinois: Where Gas and Wind are Killing Coal – 6/24/16

If you need an explanation for why no one wants to build coal power plants anymore, then look no further than Illinois.

Power companies in the state recently announced that they will be closing coal plants equal to more than 10% of the state’s generating capacity. After imports of cheap wind power from neighboring states surged 400%, competition low-cost natural gas grew substantially during the shale boom, and electricity demand fell for its fourth year, many power plants began operating at a loss. Now, operators are asking for bail outs to help recoup losses on their now unprofitable assets and prevent further job cuts.

All across the country, deregulated electricity markets are facing an unprecedented influx of cheap energy that is toppling aging generators. Since 2008, the average wholesale power price of electricity has dropped by around 50%. As cheap as coal has become, natural gas is still too cheap to beat with major shale-gas deposits being opened up by fracking and excess wind power coming in at a discount from nearby states only twists the knife. And generators in Illinois are facing disruption from inside and out of the state with no hope of a rebound as renewables are set to continue declining in price.

Natural gas prices dropped 85% over the past seven years while wind power has increased from about 2% of total electricity on the Midwest power grid in 2012 to over 10% in 2015.I In addition, several regulations related to coal pollutants have survived court challenges increasing the burden on older coal burning power plants.

Although some officials are open to making utilities buy credits struggling nuclear, U.S. regulators are proving unreliable allies. After a long era of coal lobbyists arguing against government support for renewables on the grounds that they were not economically viable, those same lobbyists will have a hard time convincing regulators that coal deserves a respite from the ruthlessness of market forces.

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