Despite Trump’s Promise, Economics Will Hasten Coal’s Decline

Donald Trump racked up huge margins across coal country in this year’s presidential election with his promise to make coal central to America’s energy mix again. But even Senate Majority Leader Mitch McConnell has acknowledged that will not be the reality any time soon as the natural gas boom continues at coal’s expense. Numbers compiled by the federal government also suggest that coal is on a steady decline.

The most recent data released by the U.S. Energy Information Administration (EIA) suggests that natural gas will displace coal even more in the coming years. This year to date, 34.7 percent of the nation’s electricity was generated from natural gas; coal-fired power plants, in contrast, provided 29.6 percent of America’s electrical power needs. Gas and coal ran about even last year, with each providing approximately 33 percent of America’s power.

Several factors are at play here. More stringent air-quality regulations at the federal, state and local levels have nudged more power providers to switch from coal to cleaner burning gas. The fracking boom, for better or worse, helped make natural gas more plentiful and therefore more cost-effective to fuel power plants.

But the deregulation of the energy markets over the years has also been a contributing factor to coal’s demise. Look closely at the IEA’s data, and you'll notice that utility-owned power plants are fueled by coal more than gas. Many utilities, however, buy electricity from independent power producers (IPPs), and those companies generate more power from gas than coal by an over 2-to-1 margin.

According to a 2015 Black and Veatch report, IPPs have an upper hand in regions such as the western states and northeastern U.S., as well as in states with unregulated energy markets. These companies also invest in clean-energy projects, from solar farms in California to wind power installations in Texas.

In short: The 21st-century energy infrastructure is already falling into place, and coal is the odd fuel out.

As the Economist reported last week, the writing is clearly on the wall. Ninety-one American coal plants closed in 2015, and 41 more are expected to shut down this year. The scalability of natural gas has made it price-competitive with coal extraction; meanwhile, renewables are becoming almost as cheap as fossil fuels, despite the global slump in oil prices.

If coal were to become America’s fuel of choice once again, an incoming Trump administration would have to launch an absurd policy that goes against Republican orthodoxy: Subsidize coal in order to make it more competitive than other sources of energy.

Considering the investments energy companies have made in their natural gas and renewable power infrastructures, such a move would send the pinstripes-and-briefcase crowd running to Washington almost immediately in order to quash any such “reforms.”

Critics of the natural gas boom scoff that natural gas is not a “clean” nor “renewable” fuel, and technically they have a point. But compared to coal, it has far less of an environmental impact, and some say it could be that “bridge” fuel to the future as renewables scale and become far cheaper.

And that renewable future is underway now. Offshore wind, once seen as a foolhardy and expensive proposition, costs half what it did a few years ago. Solar power has fallen to a record low, even less than 3 cents per kilowatt-hour in some markets, adding another nail to coal’s coffin.

The coal industry will scream and kick as much as it can to stay relevant, and indeed it succeeded in helping to catapult its man into the White House. But the reality is that coal is following the same path as the buggy whip, slide rule, VCR and telephone keypad.

Jobs in the clean-energy sector surpassed those in the oil, gas and coal extraction industries for the first time last year, Bloomberg reported. And in fact, jobs in the solar power business grew at a rate 12 times that of overall job creation. The future is here, and the only way the energy sector will go back is if there is government intervention – by an administration that claims it is hostile to regulation.

Image credit: Duke Energy/Flickr