Morgan Stanley says 47GW of US coal capacity could be uneconomic by 2024

Investment bank Morgan Stanley has published a new report claiming that nearly 50GW of US coal-fired power capacity will be unable to compete against renewables by 2024, advising US utilities to prepare retirement plans for their coal plants and to replace them with cheaper renewable projects.

In a report published last week entitled The Second Wave of Clean Energy — Part II: Who Can Ride the Wave? Morgan Stanley authors compared the costs of operating each coal plant against their own state-by-state forecasts of renewables costs across 13 stocks and identified 47,000MW of coal capacity that would become more expensive than renewables by 2024.

“We estimate this represents a capex opportunity of $64 billion and earnings accretion for the stocks we cover of up to 14 per cent in 2025,” the report said.

This month’s report follows a December report which forecast approximately 70,000MW to 190,000MW of coal-fired generation is “economically at risk” from the deployment of what the report’s authors described as a “second wave of renewables” across the United States. Further, these figures did not include the 24,000MW of coal-fired power generation already listed as retiring soon.

“We think that the economics make sense that the utilities in general should be pursuing this just because it seems to benefit everybody,” Morgan Stanley analyst Stephen Byrd said in a February 11 phone interview, according to S&P Global. “It benefits shareholders, customers and the planet.”

The report’s authors highlighted US firms such as Ameren Corp, American Electric Power, Duke Energy Copy, and Pinncale West Capital Corp as being well placed to take advantage of opportunities being presented by a second wave of renewable development in the US – a wave that is expected to be so cheap it will compete with coal power at scale, no matter what President Trump and the Republican Party may parrot at every opportunity.

AEP is not currently preparing to retire any of its 12,400MW coal capacity, despite the fact that Morgan Stanley concludes AEP has 11,700MW of coal-fired power which will be “uneconomic by 2024” due to the economics of wind energy generation in Indiana, Ohio, Texas, and West Virginia.

Other companies with renewable capital expenditure (capex) opportunities include Duke Energy with $US16.8 billion and a 15,400MW fleet of coal capacity with 13,00MW seen as “at risk by 2024” also due to the economics of wind energy in states like Indiana, North Carolina, and Ohio.

The fact of the matter is that when investors and executives begin to raise their heads from out of the sand and realise the financial benefits of transitioning to renewable energy, no manner of loyalty or obsession with coal-fired power will outweigh the desire for economic success.