Coal-fired generation in Colorado’s energy portfolio is economically unviable, and it’s burdening electricity customers with extra costs when compared with cheaper wind and solar


A coal train enters the Craig Station power plant near Craig, Colo. on Tuesday, June 16, 2015.(Nathaniel Minor/CPR News)

Retiring Colorado’s fleet of coal-fired power plants could cut carbon and save utility customers billions of dollars, according to a new analysis by the Sierra Club. 

The study looked at the economic impact of replacing 10 coal units in the state with cheaper wind and solar.

The Sierra Club hired the consulting firm Strategen to examine different scenarios. The firm found that utilities could save about $1.7 billion if they replaced the units with wind, and $1.4 billion if they replaced coal with solar instead. The analysis did not include coal units currently slated for retirement such as Nucla and Xcel’s Comanche Units 1 and 2

When Strategen calculated the social cost of carbon on the plants to account for public health and property damage using recently approved state formulas, it found nearly $18 billion in savings. The social cost of carbon looks at the overall cost of climate change to human health, economies and society.

“The report shows how the coal-fired generation in Colorado’s energy portfolio is economically unviable, and how it’s burdening electricity customers with extra costs when compared with cheaper wind and solar,” said Anna McDevitt, senior campaign representative at the Sierra Club’s Beyond Coal Campaign.

The Sierra Club is calling on electricity providers like Xcel Energy, Tri-State Generation and Transmission Association to retire coal plants early. State lawmakers have also put new pressures on utilities to reduce greenhouse gas emissions that contribute to climate change. In the last session, they passed HB 1261, which requires the state overall to reduce emissions 90 percent by 2050. 

Tri-State didn’t comment directly on the report’s findings, but said in a statement it’s doing its own analysis, and remains committed to purchasing renewable energy. Xcel Energy did not respond to requests for comment by press time.

Executive Summary:

Coal-fired generation in Colorado is becoming less economically competitive when compared to renewable energy resources such as wind and solar, or market purchases. Already, older coal-fired units owned at least partially by Public Service Company of Colorado (which does business as Xcel Energy) have higher levelized costs of energy (LCOE) than replacement options. Newer coal-fired units such as Xcel’s Comanche 3 are the most cost competitive compared to replacement options but still have high long-term costs when considered on a net present value basis. Cleaner replacement alternatives can be economically competitive with these coal-fired units while still providing equivalent energy and capacity by accessing market options. Among replacement options, wind generation already appears to be cost-competitive on an LCOE basis when compared to all of the Colorado coal units analyzed, including five owned at least partially by Xcel. Solar photovoltaics (PV) are also more competitive than nearly all of the analyzed Colorado coal units, including four units partially owned by Xcel.

For nearly all coal-fired power plants in Colorado, retirement in the 2023 timeframe and replacement with alternative resource options could provide significant economic benefits to electricity consumers due to reduced operating and maintenance costs (including fuel) and avoided incremental capital costs. Replacing all ten coal units examined with solar resources would reduce costs by $1.4 billion on a net present value basis (NPV) and replacement with wind resources would reduce costs by $1.7 billion. For Xcel in particular, replacing its share of five remaining coal-fired units could yield benefits ranging from $187 million (NPV) for a solar resource replacement to $360 million (NPV) for a wind resource replacement. More specifically, replacing Xcel’s most expensive units, Hayden 1 & 2 and Craig 2, could save Xcel customers $148 million in the case of solar or about $156 million in the case of wind.

The benefits from retiring existing coal units are even larger when the social cost of carbon (SCC) is considered. As required by the Sunset Public Utilities Commission Act, SB 19-236, factoring in a SCC of at least $46 per ton of carbon dioxide emitted increases the cost (on an LCOE basis) of all of Colorado’s coal-fired units well above that of replacement options. When the SCC is included, the additional societal benefits of replacing all coal units in Colorado would range from $17.7 billion (NPV) for a solar replacement to $18.7 billion (NPV) for a wind replacement. The additional societal benefits of replacing Xcel’s five remaining coal-fired units would range from $7 billion (NPV) for a solar replacement to $7.3 billion (NPV) for a wind replacement.
The benefits to Xcel customers from early coal retirements can also be enhanced through financing options such as “securitization.” Much like refinancing a home mortgage, securitization would replace the current cost of financing existing coal plants with a lower cost bond option. Strategen estimates that replacing Xcel’s coal units and using securitization would provide an additional $467 million (NPV) in benefits to Xcel customers versus a “business as usual” scenario.