Originally published on Forbes.com. December 7, 2020

Biden’s climate plan states, “He will launch a national effort aimed at creating the jobs we need to build a modern, sustainable infrastructure now and deliver an equitable clean energy future.” It is worth clarifying what the plan may mean for energy companies, and in particular for coal, oil, and natural gas companies.  

Coal is missing, if not missed

Coal is noticeably absent in Biden’s climate plan – not unexpected because it’s the dirtiest of the fossil fuels when its burned and emits CO2 and particle pollution. What’s not specifically mentioned is the ongoing closure of coal-burning electrical power plants, or their changeover to natural gas.

BP has projected three different futures for coal, oil, gas and renewables. In Figure 1, the most aggressive transition, the decline of coal from 1900-1975 was due to the rise of oil and gas. From 2015 the decline of coal is due to the rise of natural gas and renewables. The decline of worldwide coal usage and the rise of renewables is dramatic under this “fast exit” scenario.

Figure 1. BP data and predictions of global consumption of fuels for a “fast exit” scenario, due to increased regulation, carbon taxes, consumer conservation. Fossil fuels would fall from 85% now to 37% in 2050. Renewables would rise from 5% now to 45% by 2050. Source: BP Energy Outlook 2020, 14 September 2020.

Biden’s climate plan includes the line, “Move ambitiously to generate clean, American-made electricity to achieve a carbon pollution-free power sector by 2035.” In power plants, companies have switched from burning coal to natural gas over the last 10 years partly because shale-gas was so successful and cheap (Figure 2).

So, in the next 15 years one target for the US could be to stop burning natural gas which emits CO2 and switch to wind and solar (the 1-year forecast in the figure predicts this and should herald another decade of straight-line changes). Wind and solar have been slightly cheaper than natural gas the past few years, and are about half as cheap as coal, and a third as cheap as nuclear. Also, large-scale storage battery prices have dropped by 50 percent since the start of 2018.

Figure 2. US electricity generation by fuel, all sectors. Source: Energy Information Administration.

Changeover is accelerating

The move to change over from coal power plants is accelerating. Big commercial names have, within the last two years, recently joined the list of those pledging to reach net-zero carbon dioxide emissions, usually by 2050: Excel Energy, Duke Energy, Dominion Energy, Ameren, Entergy, and Vistra Energy. Vistra, the largest independent, non-utility company, announced closures by 2027 of all seven of its coal-burning plants in the mid-western states.

With cheap natural gas and renewables now much cheaper, the industry knows they can save money and improve their carbon footprint. But it’s not a quick or complete changeover to renewables. Duke Energy’s target by 2030 is to reduce emissions by 50% from 2005 levels, which may not be enough to make net-zero by 2050. Ameren will close coal-burning plants slowly – over twenty years.

An example of moving too quickly is South Australia that in early 2016 turned off their single coal-burning power plant. By August 2016, 41% of their power was provided by renewables, mostly wind farms. But in that year a mini-hurricane knocked over 20 transmission towers and initiated a power loss across the entire state – and they didn’t have a backup. I happened to be there at the time and found it surreal driving through the streets of Adelaide in complete darkness, save for occasional car headlights. Since then the so-called Big Battery, one of the largest in the world, has been built and has served well as a backup. 

As an advanced concept of a changeover from a coal-burning power plant, California is building a new replacement gas-fired power plant in Utah. But the kind of gas it uses is a novelty. The plant is slated to open in 2025 burning 70% natural gas and 30% “green hydrogen.” By 2045 the plant is designed to burn 100% hydrogen. The argument that California gave for building the new power plant was that a backup was needed in case the wind didn’t blow and the sun didn’t shine.

Most hydrogen is produced from natural gas and this requires electricity. But this makes the eventual process in California seem a bit circular, with renewable electricity producing green hydrogen which is then burned in a power plant to create electricity. The economists would need to show why a gas-burning power station is needed at all – especially if a local Big Battery could do the job of storing renewable electricity. 

The question becomes: What are the costs of renewables versus fossil energy power plants. The EIA quoted LCOE (levelized cost of electricity) for best-in-class wind and solar projects across the world of $US23/MWh – $US29/MWh. “Such projects will compete with existing fossil fuel power plants,” they conclude.

RenewEconomy in Australia several months ago stated, “Further cost reductions in both large scale solar PV and onshore wind projects mean that these two technologies are now the cheapest form of new-build energy generation in areas that count for two thirds of the world’s population.”

In 2016 the goal of the Clean Power Plan by Obama was to decrease carbon emissions by 32 percent by 2030. While the changeover from burning coal to natural gas has contributed to that goal, Biden’s target will have to be much more ambitious to reach carbon-free electricity by 2035.