100 Percent of Minnesota Coal is Lower Cost than Wind or Solar
There is a pervasive myth that it is now cheaper to build new wind than it is to simply operate existing coal plants in Minnesota. These narratives have been employed by renewable energy advocates, but also the editorial board and staff writers at the Star Tribune. Unfortunately, this narrative is incorrect. In fact, data from the Federal Energy Regulatory Commission (FERC) show that Minnesota’s coal-fired power plants are among the lowest-cost generators in the state.
The graph below shows the cost of generating electricity at Minnesota’s three largest coal plants, Sherburne County (Sherco) the Allen S. King Plant (AS King), and the Clay Boswell (Boswell) plant located in Northern Minnesota. It also shows the cost of generating electricity at the High Bridge gas plant.
Each and every one of these plants generated electricity at a lower cost than the cost estimates created by Bloomberg New Energy Finance for new unsubsidized wind, which was $38 per megawatt hour- although I believe these costs are unrealistically low. BNEF estimated the unsubsidized solar to be around $60 per megawatt hour.
This is important to understand because Sherco, AS King, and the Boswell plants represent 96 percent of all the coal generation in Minnesota, meaning 96 times out of 100 coal is more affordable than new wind, even using BNEF’s assumptions, in pure cost per-megawatt hour terms.
However, BNEF’s cost estimates do not convey the whole cost of wind because they do not account for the large costs associated with generating electricity when the wind is not blowing, building transmission lines for new farms that are located far away from the more-densely populated areas where the electricity is consumed, the additional property taxes that will be paid on both the wind turbines and transmission lines, or the profits government-approved monopoly utility companies are guaranteed to make by building new infrastructure.
When all of these costs are accounted for, the total cost of wind is $113.35 per megawatt hour, which is 3.6 times more expensive than the cost of generating electricity at Sherco. Once the total cost of wind is considered, even the old Hoot Lake coal plant, which generated electricity in the $60-$70 per megawatt hour range in 2017 due to low utilization, is more affordable than new wind.
This is incredibly important to understand because the wind and solar industries, along with legislators that have introduced legislation to increase Minnesota’s renewable energy mandates, have been citing a study by Vibrant Clean Energy (VCE) which claims it is more affordable to build new wind and solar than it is to operate 74 percent of existing coal plants, but this study can only make these claims by including subsidies for wind and solar, not accounting for the cost of load balancing, and assuming unrealistically low capacity factors for coal-fired generators.
Coal plants are able to generate such low cost electricity because they are fully depreciated. In other words, they have “paid off their mortgages,” and no longer have to pay off the principle on their loan. It’s the same concept of paying off the mortgage on your house. Once the mortgage is paid off, the cost of living in the house is at it’s lowest point.
Advocates of renewable energy mandates are incorrect in claiming that new wind is more affordable than existing coal, and this has important implications for the legislation being considered at the capitol. The total cost of new wind is 3.6 times more expensive than existing coal. This is why claims that Minnesota can close coal plants, build more wind, and reduce costs could not be more wrong, and this error will force Minnesota families and businesses to pay more to keep their lights on.