Policymakers have dramatically strengthened the economic case for retiring U.S. coal-fired power plants with the Inflation Reduction Act, according to research released Jan. 30 by Energy Innovation Policy and Technology LLC, a nonpartisan energy research group.

The Inflation Reduction Act, signed into law in August 2022, extended and expanded multiple tax credits for low-carbon energy projects and introduced new funding to back loans for refinancing fossil fuel assets and reinvesting in energy infrastructure. The bill also offers a 10% tax credit for renewable projects in communities particularly affected by the transition away from fossil fuels.

Energy Innovation reviewed 220 GW of coal capacity remaining in 2021 and concluded that 99% of the plants are more expensive to operate on a going-forward basis than the all-in cost of replacement renewable energy projects. About 97% of the coal plants analyzed were more expensive than a new renewable project sited within 30 miles.

"Almost every utility plan that was created before last August needs to be ripped up and looked at again because of the seismic shift in economics," Eric Gimon, a senior fellow with Energy Innovation, said in an interview. "That's one of our first recommendations: Look at the plans again because this is a big difference from the situation just a few months ago."

In December 2022, an S&P Global Market Intelligence Power Forecast projected that 117 GW of fossil generation would retire as pressure from the Inflation Reduction Act mounts over the next two decades. The Energy Innovation study suggests that they should retire a lot sooner.

"We're really excited about this result because now it looks like, by siting renewables really close to coal plants, you could use their grid interconnection, potentially, and avoid a lot of that grid interconnection delay and costs," said Michelle Solomon, a policy analyst with Energy Innovation's electricity program.

Just one of the 210 coal plants studied proved less expensive than renewable alternatives available locally or regionally: Basin Electric Power Cooperative's Dry Fork Station in Wyoming, which Solomon said was slightly cheaper than regional wind resources. Researchers said it is also one of the newest coal plants in the U.S. and therefore has lower maintenance costs.

Incorporating the Inflation Reduction Act's new energy community tax credit renders 199 of the 210 coal plants less cost-effective than solar energy options that could be sited within 30 miles of the existing coal power generators. Comparatively, wind could cost-effectively replace the power of 104 coal plants within 30 miles of existing plants.

The researchers estimated that replacing the existing coal with local wind or solar power could produce $589 billion in local capital investment.

Coal production has declined dramatically over the last decade, but it has been relatively stable in recent years, in part due to increased exports and higher demand as the economy recovered from the initial blows of the COVID-19 pandemic. Coal's share of electricity generation in the U.S. is expected to fall to 18% in 2023 and to 17% in 2024, from 20% in 2022, according to the latest short-term energy outlook from the U.S. Energy Information Administration.

Despite a strong economic case, researchers acknowledged cultural and economic roadblocks to weaning the grid from coal power. Local communities have blocked both wind and solar plants, and former President Donald Trump, who remains influential with his constituents, rarely misses a chance to criticize wind turbines.

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