A new federal forecast shows that 2024 could be a landmark year for the energy transition. For the first time ever, the U.S. will generate more electricity from wind and solar than from coal. There are big implications for Wyoming, which is known as the energy state. Wyoming Public Radio’s Caitlin Tan spoke with Rob Godby, who’s an associate professor with the University of Wyoming’s Department of Economics. He researches energy and public policy.
Editor’s Note: This conversation has been lightly edited for clarity and brevity.
Caitlin Tan: The U.S. Energy Information Administration (EIA) puts out these short term Energy Outlooks every month, and for the first time they're projecting that electricity generated from renewables will surpass coal. First, just break that down for us. And is this significant?
Rob Godby: It is significant. It's been building for quite a while now. Minor correction to what you just said – renewables actually surpassed coal back between 2021 and 2022. But when we think of renewables, normally people forget, what has historically been the biggest part of renewables is hydro[power]. So when people are talking about renewables, I think what surprises them is that solar and wind have come on so strongly. What's projected now is that just total solar and wind output sometime this year will surpass coal.
That honestly has been building for a while now for about a decade, for two reasons. One is, coal has really been declining. So for example, here in Wyoming this year, we expect to produce about 235 million tons of coal, and we produce more coal than the next six or seven states that produce coal combined – we produce about 40 percent of the country's coal, so we're huge in coal. But we were much bigger. A little over a decade ago, at the peak, we produced about over 450 million tons of coal a year.
So coal production has really declined in the state, it's really declined nationally. So that's one trend. The reason it's declining is because there are fewer coal plants operating and those that are operating are operating much less often than they used to. And that's really because they've been replaced by cheaper alternatives. For about a decade, it was natural gas. Natural gas became very cheap over the last 15 years, and coal competes with natural gas. But now it's renewables. Renewables are just growing like crazy. And what's growing more than anything else is solar. That growth in solar coupled with the growth that we've seen throughout Wyoming and elsewhere with wind, and you combine the decline of coal, and this is the year where the inevitable happens, where coal gets surpassed by solar and wind.
CT: What are the broad implications for Wyoming? You mentioned coal has been the bread and butter here.
RG: The implication for Wyoming is that our mining production is going to go down. If you look at the Consensus Revenue Estimating Group (CREG), which I'm a part of, we estimate mineral production in the state because it's so important for state revenues. If you look at those estimates for coal, they've been pretty bearish, in other words pessimistic, over the past few years. The reason for that is these longer term trends. We've seen coal declining – it got a little bit of a break, post-pandemic, because of the war in Ukraine, that pushed natural gas prices up and kind of tightened the energy market, and suddenly coal is a little bit more competitive. But long term, we're back to where we were.
So what does it mean for Wyoming? It means Wyoming's coal production is going to decline. The EIA (U.S. Energy Information Administration) projects that coal electricity production will decline by about 10 percent in each of the next two years. We don't expect Wyoming's coal to decline quite as quickly, we being CREG. We're estimating that this year we'll probably see about a five percent decline – that'll begin to accelerate over time. So in the following years we’ll see about a seven percent decline, and by 2028, we expect coal production in the state, which is already only about half of what it was at its peak, will decline by another 30 percent, and that trend will continue.
So the long term trend is that the coal sector in Wyoming is going to shrink over this decade. Absent some new use for the coal that we have here, it will probably decline to a much lower level – it could go away entirely depending on how policy goes, but that would be several decades away, but we see it declining at a pretty significant rate over the next five years.
CT: Some have pushed back saying this transition away from coal is too fast, that it's going to make our electric grid unstable. What do you think about that?
RG: There's a possibility if you move too quickly. If you put too many renewables on the grid, and you haven't got the infrastructure to handle that. Basically the infrastructure you need for more renewables is a lot more transmission so you can move power around more quickly and more nimbly. So, basically where the sun is shining, you want to move that electricity to where it's not. Where the wind is blowing, you want to move that electricity to where the wind isn't blowing. So if you put too much renewable solar and wind on the grid too quickly, you can destabilize that. But there's a lot of technologies now that are really expanding quickly. One of them is battery storage – that really reduces the problem of intermittency. We have a lot of major federal policies, like the Infrastructure Act, and also the Inflation Reduction Act. Both of those are major expenditure policies that will expand not only renewable energy, but also the infrastructure to make the grid more stable.
So what that means is, as renewables come on, what we could see is coal fired power plants not being retired, shut down and basically demolished, but held as kind of a reserved power. And that's what we're seeing. So you don't have to retire a coal plant to really reduce its coal demand. So the Energy Information Agency projects that about 12 gigawatts of coal, that's a lot of coal fired power plants, are going to retire in the coming year. But what they don't talk about as much in the report is how many coal plants are just going to kind of go cold and be held back as reserved power. And of course, whether they demolish the plant or whether they just don't use the plant, it has the same effect on Wyoming, which is that they don't need as much coal from us.
CT: With coal being such a large part of the state's revenue, and it has helped historically fund schools and all sorts of things like that. Do you see this being a big issue for Wyoming going forward?
RG: Well, it's definitely been flagged by CREG, so it's not just me. This is a concern that we have, is that the amount of revenue that we get not just from coal, but fossil fuels, in general, is flat to declining. What people don't realize is the production of natural gas is slowly declining. Prices of natural gas have been weak, and we've had a very difficult time competing with other regions in natural gas production. So we have one, or maybe no drilling rigs right now for natural gas in the state, far lower than the normal number. And when you don't have any rigs, that means eventually natural gas production is going to decline as those wells just naturally declined.
So what does it mean for state revenues? Well, they are declining. The share of fossil fuel revenues as the total share of Wyoming revenues is declining. So it means a couple things. One is we're going to have to diversify our revenue sources. That can be done in a few ways. One is growing parts of the economy that could generate revenue. So you've seen a lot of alternative energies being developed, whether it's hydrogen or nuclear power. And of course, renewables are a possible source of taxes – they don't replace coal tax, the revenues we get from coal, or from oil and gas. But part of a larger story, they could replace some of it. So we already do that. We are really the only state that has a statewide production tax on wind energy. We've talked about it for solar, you've got to be really careful when you do that, though. Because if you price yourself out of the market, you'll kind of kill the goose that could lay the golden eggs.
Also, our economy is growing, so sales taxes have become more important. A really important part has been our investment portfolio, which now generates over 20 percent of the state's revenue, which is why people like the Governor have said, ‘Let's put our surplus into savings right now,’ because it can create revenues in the future from those investments.
But you know, longer term, we may have to change how we tax things here, which doesn't mean we need to have an income tax, but we may have to raise some of our other taxes. We have very low sales taxes relative to the country, we have very low property taxes, all that's a flashpoint right now – they've really increased. It may mean that we just have to pay more for our public services. Right now, we basically get other people to pay for our public services. And as the day comes, and it already has begun, where people buy less of our major export, which is fossil fuels, we're going to have to find a way to replace that and to replace the revenues. And if we don't, then that means we're either going to have to decide to live with fewer public services, or we'll have to pay more for them.
CT: We're going into a presidential election year and something I hear from people is that they have hopes based on who could become president that maybe the coal industry could be saved. Can you talk about that? And is the market demand bigger than being determined by a presidential election?
RG: I think you just nailed it. Donald Trump was elected in 2016, coal still declined faster than it had ever declined before. The president maybe is the most powerful person in the world, but even the president can't stop markets. The bottom line is markets are moving away from fossil fuels, especially in electricity. Renewable energy is just so cheap now. An existing coal fired power plant that's been depreciated to nothing, which means that you don't have to pay any investment cost in it, still can't produce electricity competitively in terms of price with renewable energy. And people might say that's because of the subsidies for renewable energy, but even without the subsidies, they can't.
The bottom line is once you put a wind turbine in the air, you put a solar panel out there, the electricity is free after that, and the cost of building those things has declined so much. The bottom line is that our electricity production is moving more and more towards these sources. And that's before you talk about climate change policy or things like that. So no matter who's elected next time, they may bend the curve a little bit, and maybe they can slow down the adoption a little bit by maybe taking away some of the incentives, or not supporting them quite as much as this administration has. But, again, the Infrastructure Act, the Inflation Reduction Act, both of those were passed by bipartisan majorities, both parties. And so it's really hard to imagine that the transition stops, much less reverses. So, we've got to look to the future and be realistic about it.
CT: Anything else you want to mention or flag that stood out to you in these forecasts?
RG: Not really. These are forecasts that we've been expecting for a while, they're just the combination of long term trends. A decade ago, wind and solar made up very little of our electricity grid. But as they've gotten cheaper, companies have adopted them more and more. There's certainly been policy to incentivize that as well. But at this point, whether there were any subsidies or not, they would still be adopted because of the cheapest way to produce electricity. A coal fired power plant has not been built in this country since 2015. The last major one was 2012. When you're not building coal fired power plants, eventually, you're not going to need coal to fuel them, because they will all just be too old. And they'll eventually retire – that's still a few decades away. But the average age of a coal fired power plant is now around 50 years old. That's when they start thinking about retiring them. If not being replaced, the demand for that fuel is going to go away as well. Natural gas and oil will continue to be produced for a while yet, they're used in a lot more areas. So we'll see. But it's part of the change that we're seeing across the energy sector.
So you know, stay tuned. One thing we can say is that it's going to develop in unpredictable ways. Wyoming is really engaged in finding new uses for these resources and using them in a way that doesn't cause climate change. We're among the leaders in thinking about that. We're one of the few states that really takes the potential for carbon capture seriously. We're hoping to build a nuclear power plant – a state of the art brand new type. So our economy can transition, and we're right in the center of that energy mix, so stay tuned.
