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Ranked: The Cheapest Sources of Electricity in the U.S.

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The following content is sponsored by the National Public Utilities Council

Ranked: The Cheapest Sources of Electricity in the U.S.

Ranked: The Cheapest Sources of Electricity in the U.S.

In 2022, the U.S. electricity sector’s reliance on fossil fuels resulted in a staggering 1,539 million tonnes of CO2 emissions.

With the urgent need to decarbonize, however, the question remains: can the transition from fossil fuels to emission-free electricity sources, such as solar, wind, and nuclear power, be accomplished in a financially viable manner?

In this graphic sponsored by the National Public Utilities Council, we seek answers to that question by visualizing the 2023 levelized costs of electricity of various technologies in the U.S., as calculated by Lazard.

Understanding Levelized Cost of Electricity

Levelized cost of electricity (LCOE) is a metric used to assess the cost of generating electricity from a specific power source over its lifetime.

The measure takes into account all of the costs associated with building, operating, and maintaining a power plant, as well as the amount of electricity the plant is expected to produce over its lifetime.

LCOE is a comprehensive way to compare the costs of various electricity generation technologies. It’s also worth mentioning, however, that there is a substantial amount of tax subsidies available for clean electricity generation in the U.S., including the $161 billion in clean electricity tax credits in the Inflation Reduction Act (IRA).

By leveraging these funding opportunities, the LCOE of renewables, nuclear power and energy storage systems has the potential to fall even further, bolstering their competitive edge in the market.

Ranking the Cheapest Sources of Electricity

According to Lazard’s 2023 analysis of unsubsidized LCOE in the U.S., both onshore wind and utility-scale solar photovoltaic (PV) technologies are more cost-effective than combined cycle natural gas power plants.

In the case of onshore wind, this has been true since 2015.

Technology U.S. Levelized Cost of Electricity, $/MWh, 2023 
Minimum Maximum
Onshore wind$24$75
Solar PV (utility scale) $24$96
Gas combined cycle$39$101
Onshore wind + 4-hour lithium storage$42$114
Solar PV (utility scale) + 4-hour lithium storage$46$102
Geothermal*$61$102
Coal*$68$166
Offshore wind$72$140
Gas peaking$115$221
Nuclear*$141$221

*2022 LCOE adjusted for inflation.

Overall, the data shows us that most emission-free sources are cheaper than fossil fuels. There are, however, some other things to consider:

  • Coupling lithium-ion batteries with intermittent energy technologies, such as wind and solar, raises costs by $6-$39/MWh. As new storage technologies, such as electrochemical batteries, mature, however, Lazard expects them to offer cost advantages to lithium-ion ones in as little as two years, especially at longer durations (6+ hours).
  • While the LCOE of nuclear seems to be high, license renewals can significantly lower the marginal cost of electricity in these power plants. 88 of the 92 U.S. nuclear reactors have received such renewals in the past.
  • The efficiency of generation technologies plays a big role in LCOE. This is especially evident in the high cost of gas peaking power plants.

LCOE Trends for Clean Electricity

There are various factors that can influence the LCOE of clean electricity technologies. These include:

  • Financing costs, policy incentives, and government subsidies
  • Geographical location, which can influence the availability of renewable resources like sunlight and wind speed
  • The availability and cost of key clean energy metals and materials, such as copper, silicon, nickel, zinc and chromium
  • The maturity of the technologies, the scale of deployment and the growth in demand
  • The overall supply chain, including where most of these technologies are primarily manufactured (China), shipping costs, and disruptions due to global events, such as wars

As seen below, the combination of these factors has dramatically pulled down the LCOE of onshore wind and solar PV since 2009, with the exception of 2022-2023.

Source: Lazard

According to the International Energy Agency (IEA), however, most of these cost pressures related to inflation and supply chain challenges are easing in 2023, allowing these technologies to remain cost-competitive in today’s volatile fuel-price environment.

Learn more about how electric utilities and the power sector can lead on the path toward decarbonization.

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Energy Shift

Animated: 70 Years of U.S. Electricity Generation by Source

In this animated chart, we explore the past 70 years of U.S. electricity generation by source.

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Animated: 70 Years of U.S. Electricity Generation by Source

Electricity generation in the U.S. has grown exponentially since 1950, going from 2.96 billion kilowatt-hours (kWh) in 1949 to 4.11 trillion kWh in 2021.

With the growth in electricity generation, the U.S. electricity mix has also evolved, especially as clean electricity sources such as nuclear, wind, and solar power grew in use.

In the animated chart by the National Public Utilities Council above, we explore the past 70 years of U.S. electricity generation, following along with the country’s dynamic electricity mix over the decades.

Trends in U.S. Power Generation Since 1950

The U.S. generated 1,200% more electricity in 2021 compared to 1950.

Here’s how the share of each source in the electricity mix changed over that period.

YearCoalNatural
Gas
SolarWindHydroNuclearOther
195046%13%0%0%30%0%10%
202122%38%3%9%6%19%3%

While coal and hydropower led as the largest sources of electricity in the 1950s, the growth in U.S. electricity demand is met primarily by natural gas today, followed by coal, nuclear, and wind power.

Despite coal’s heavy share in the U.S. electricity mix since 1949, its use has declined in recent years, peaking in 2007 in terms of total electricity generated.

With the low cost of natural gas and the advancement of decarbonization efforts, 80+ coal plants have retired or are set to retire in the next three decades in the United States. Despite this, coal remains the largest contributor to power sector emissions, accounting for 58% in 2021.

Besides the rise and fall of coal use, the animation highlights other interesting trends in the country’s power generation over the last 70 years, including:

  • Nuclear energy slowly starts contributing to the electricity mix in 1957 as the Shippingport Atomic Power Station comes on in Pennsylvania. By 2020, nuclear power accounts for nearly 20% of total electricity generation.
  • Solar and wind power start contributing to the mix in 1983-84, with wind accelerating faster than solar power to account for 1% of total electricity generated by 2008 and 9% by 2021.
  • Electricity sourced from natural gas surpasses that from coal in 2016 and continues to absorb most of the decline in coal use through the present day.
  • Hydropower’s share in the electricity mix remains stable since 2000, making up 5 to 6% of total electricity generated each year.

The Road to Net-zero

While the decline in coal use for electricity aids in lowering emissions, the U.S. power sector has a long way to go in decarbonizing. In 2021, the use of fossil fuels for power generation contributed 1,537 million tonnes of carbon dioxide emissions in the country.

Therefore, accelerating the deployment of carbon-free energy sources is critical for the road to a decarbonized power sector.

The chart below shows how U.S. electricity generation needs to change to achieve net-zero emissions by 2050.

In the net-zero scenario, Energy Innovation’s policy simulator counts on a complete phase-out of coal-fired electricity by 2034, along with a 36-fold increase in solar power generation and a 10-fold increase in wind power generation by 2050 (compared to 2020 levels.)

The rapid transition from fossil fuels to clean-energy sources, coupled with adequate transmission expansion and investment in battery storage, is integral for a carbon-free power sector. With prompt action, the next 30 years of U.S. electricity generation has the power to look a lot like the projected graph above, giving way to lower emissions for all other sectors that use electricity.

Click here to learn more about how electric utilities and the power sector can lead on the path toward decarbonization.

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Road to Decarbonization: U.S. Coal Plant Closures

This infographic highlights announced coal plant closures in the U.S. and how much power will be affected.

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US coal plant closures

Road to Decarbonization: U.S. Coal Plant Closures

This was originally posted on August 17, 2021, on Visual Capitalist.

As the push to decarbonize starts to kick into gear in the U.S., how do coal plant closures factor into the equation?

With a target of net-zero emissions by 2050, the U.S. is examining all aspects of its economy to see where action is needed. In the automotive industry, for example, the Biden administration is aiming for half of new vehicles to be electric by 2030, following in the footsteps of automakers that have made similar commitments.

But in the power sector that supplies electricity for much of the country, fossil fuels continue to be large emission sources. Coal, which accounted for just 19% of electricity generated in the U.S. in 2020, created 54% of the power sector’s emissions.

That’s leading to U.S. utilities feeling the pressure to retire coal plants and look for alternatives. This infographic from the National Public Utilities Council visualizes the coal plant closures that have been announced, and how much power will be affected as a result.

Where Are U.S. Coal Plant Closures Happening?

Accurately tracking coal plant closures currently means turning to non-profits and parsing through company reports. To assemble this list, we leveraged the Global Energy Monitor and Carbon Brief and cross-referenced against company sustainability reports and news releases.

The result? 80 coal plants with a total capacity of 98.3 GW publicly scheduled for full retirement over the next three decades.

PlantStateRetirement DateCapacity (MW)
BurlingtonIA2021212
Dolet HillsLA2021721
AES HawaiiHI2022204
Coal CreekND20221,210
E.D. EdwardsIL2022645
EdgewaterWI2022414
Fayette* (announced not confirmed)TX20221,690
HeskettND2022115
JoppaIL20221,100
MeramecMO2022924
San JuanNM2022924
St. ClairMI20221,210
Taconite HarborMN2022168
Trenton ChannelMI2022536
A.B. BrownIN2023530
Big BendFL20231,824
Bull RunTN2023950
ChesterfieldVA20231,053
KarnMI2023516
LawrenceKS2023517
Martin DrakeCO2023207
MeromIN20231,080
North OmahaNE2023354
North ValmyNV2023567
SchahferIN20231,944
ColumbiaWI20241,112
G.G. AllenNC20241,155
South Oak CreekWI20241,240
BaldwinIL20251,260
Brunner IslandPA20251,558
CentraliaWA20251,460
ChollaAZ2025840
CloverVA2025848
Herbert WagnerMD2025495
IntermountainUT20251,640
NauhgtonWY2025448
Prairie CreekIA202550
NortheasternOK2026473
AES Puerto RicoPR2027510
ColstripMT20272,272
KincaidIL20271,319
Miami FortOH20271,115
MorgantownMD20271,252
NewtonIL20271,235
Victor J. DanielMS20271,097
WinyahSC20271,260
ZimmerOH20271,426
Allen S. KingMN2028598
CayugaIN20281,062
CraigCO20281,427
HaydenCO2028466
Michigan CityIN2028540
PawneeCO2028552
RockportIN20282,600
SiouxMO20281,099
White BluffAR20281,800
Belle RiverMI20301,396
BonanzaUT2030500
IndependenceAR20301,800
Ray NixonCO2030207
Sherburne CountyMN20302,469
Four CornersNM20311,636
CumberlandTN20352,600
GallatinTN20351,255
KingstonTN20351,700
MarshallNC20351,996
ShawneeTN20351,750
Jim BridgerWY20372,441
GibsonIN20383,340
Belews CreekNC20392,160
IatanMO20391,725
JeffreyKS20392,160
La CygneKS20391,599
Rush IslandMO20391,242
ComancheCO20401,636
J. H. CampbellMI20401,540
MonroeMI20403,280
LadabieMO20422,389
PetersburgIN20422,147
James E. RogersNC20491,481

Noticeably, most of the coal plant closures are targeted in the Midwest (which uses the most coal for power). And most of the retirements are coming early, with the 2020s seeing more than half of announced closures and retired capacity (53.6 GW).

But the largest coal plants with announced retirement dates are currently scheduled for the 2030s and 2040s. That includes Duke Energy’s Gibson power plant in Indiana, the fifth largest coal plant in the U.S. and the largest with a retirement date.

What’s Next for U.S. Decarbonization?

Though it seems like the U.S. has a lot of coal plant closures announced, there’s a lot left to go.

The 98.3 GW of tracked coal plant closures is just 45% of U.S. coal electricity production in 2020. Though many utilities have talked about eventually assessing and planning retirements for some of the remaining 55%, no concrete plans have been announced yet.

“In our industry, deciding to exit coal-fired power is not taken lightly,” said Omaya Ahmad, Sustainability Policy Consultant at Arizona Public Service. “Our coal plants are often the oldest in our fleet and are largely the reason our service territories have grown and flourished into what they are today. However, the pressures presented by climate change and the economic demands tied to coal have required a commitment to transition to clean energy.”

Coal Plant Closures Are Part of a Larger Equation

But as Ahmad explains, turning off coal plants is not such a quick-and-easy fix.

“Such a transition will be a lofty undertaking and will not come without its own challenges,” said Ahmad. “Recognizing the regional transition landscape and timeline depicted on a map like this one will help utilities adequately prepare for and support their coal communities as we all take steps to reach a clean energy economy.”

And coal plants are just one part of the decarbonization equation. Some utilities are opting to transform coal power plants into natural gas plants, which are more cost-efficient and emit less than coal. Even though many utilities and consumers are turning away from carbon emitting fuel sources entirely, there are more than 200 new natural gas plants planned in the U.S.

But the big question is how the generated electricity from coal will be replaced. Communities that rely on coal for power (and economic strength) will have to turn to natural gas or work on renewables capacity, while others have already started the transition.

National Public Utilities Council is the go-to resource for all things decarbonization in the utilities industry. Learn more.

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