Renewable energy is getting so cheap that it is threatening to force gigawatts of coal plants into early retirement -- even without Obama-era climate regulations.

That is one of the takeaways from a new report, Rate-Basing Wind Generation Adds Momentum to Renewables, released last week by Moody’s Investors Service. Although the White House is expected to soon announce the end of the Clean Power Plan -- which President Trump has blamed as a culprit in coal’s decline -- the power of the market and state-level action may well blunt the impact of the move.

Pick a cliché to describe renewables in the electricity market, said Moody's Analyst Jairo Chung: “The ship has sailed; the horse is out of the barn."

“The utilities and the state legislators see renewable options as viable options for them to invest in. One thing that is important to point out is that it is not an environmental reason why they’re pursuing this. It’s an economic reason. Yes, it’s good for the environment and the consumers benefit from having cleaner power at a cheaper price, but at the end of the day, it is pursued by the utility because it is much more cost-effective," said Chung, a co-author of the report.

Chung and her colleagues examined approximately 87 gigawatts of existing coal-fired power capacity in 15 states with regulated markets in the Midwest and Great Plains regions. (Not included were Texas and Illinois, deregulated markets with strong wind resources.) They found a total of 56 gigawatts of coal capacity in the Great Plains facing stiff competition from wind generation.

According to Moody’s, average wind PPA prices in the Great Plains are now around $20 per megawatt-hour compared to an operating cost (fuel, operations, maintenance and capital costs) of $30 per megawatt-hour for most coal plants.

These favorable economics for wind mean that more utilities may not only consider retiring coal plants early, they’re also adding significant amounts of wind to their rate base.

In Colorado, Xcel Energy announced a $1 billion investment to build its first rate-based 600-megawatt wind farm in 2018.

Chung described the trend in real estate terms. “I would compare it to either owning or renting a home. If you have a PPA, it is someone else’s asset and you [the utility] are buying the byproduct from it,” said Chung. By contrast, rate-based investments by utilities are more like owning a home because it promises to drive increased earnings for the companies.

It’s important to understand what it means when Moody’s designates dozens of gigawatts of coal power plants as being “at risk,” said Chung. It doesn’t mean that coal plants will close today or tomorrow. Instead, it means that lower-cost wind will increasingly replace coal in dispatch priority, which utilities determine by operating cost.

The more wind pushes coal down the dispatch stack, the worse the economics are for coal. “If the capacity factor comes down for a plant, they produce less and less electricity and the cost per megawatt-hour produced would increase,” she explained. “Your maintenance, capex, and capital spending is the same, just now you would have less output to spread that out.”

Wind in a sweet spot

Other factors underline the threat that cheap wind poses to coal. Integration of an intermittent resource like wind was once a major concern to utilities. But a host of developments have dampened the risk of integrating large amounts of wind. Wind forecasting has improved significantly, making it easier to plan for output from one day to the next. Regional markets run by transmission operators like MISO have also made it easier for utilities to manage intermittency issues, helping to spur an increase in wind generation.

The improvements in forecasting combined with wind’s historically low cost have put wind in a “sweet spot” of providing low-cost generation without presenting grid reliability or integration hurdles, wrote the Moody's analysts.

The report references a study conducted by MISO and the Minnesota Department of Commerce concluding that a 40 percent renewable portfolio standard could be achieved with upgrades to the existing transmission system in Minnesota. Over the long term, though, Moody’s says additional gas generation and battery storage will be needed to accommodate even more wind.

Positive future winds

Even without the federal Production Tax Credit, which is slated to phase out in 2020, wind remains competitive with coal.

According to Moody's, the current $20 per megawatt-hour average for wind PPAs would rise to $40 per megawatt-hour without the PTC. But continued cost reductions for wind combined with coal’s potentially increasing operating costs would support wind’s ongoing growth, the authors conclude.

Though Moody’s acknowledges there are unknowns that could lessen the growth of wind in the future -- unfavorable tax rates or a failure to reduce equipment costs, for example -- it is widely expected that wind will continue to expand because of favorable economics.

Clean energy is sometimes still a politicized issue on the national level. But the demand for cheap wind defies stereotypical red-state, blue-state politics.

Even though conservative Kansas repealed its renewable energy targets in May 2015, the utility Westar Energy has added over 1.5 gigawatts of wind to its generation portfolio and is looking to add more, according to the report.

The wind energy industry is a known and well-supported force in the Great Plains, having contributed to employment and tax coffers for many years. Kansas Republican Governor Sam Brownback has voiced his strong support for wind, as has the farm lobby in the Great Plains states, which favors wind because it allows farmers to lease land to developers and earn additional income.

The bluer states of Colorado and Minnesota are also on track to meet and exceed their renewables mandates. And utilities in both states are actively pursuing more wind projects beyond those targets.

“If you look at states like Minnesota and Colorado, the utilities there are exceeding their RPS mandates and are now looking to reach longer-term climate goals,” said Chung.