By Rebecca J. Davis
The U.S. coal industry chalked up a couple of rare wins this summer. First the Supreme Court issued a ruling limiting the government’s ability to regulate greenhouse gas emissions from power plants. Then President Joe Biden’s climate plan stalled in Congress again.
But while some specific threats to the industry have subsided, that doesn’t mean coal-fired power plants will make a comeback.
As an economist, I analyze the coal industry, including power plant construction and retirement plans. I see three main reasons U.S. coal plants will continue to close down.
A detail related to the Supreme Court case helps tell the story. The case, West Virginia v. EPA, involved the Clean Power Plan, a set of Obama-era regulations proposed in 2015 that would have required power plants to make deep cuts in greenhouse gas emissions. For those powered by coal – historically the dominant source of carbon dioxide emissions in the U.S. electricity sector – that likely would have meant shifting away from coal altogether.
Yet even though the Clean Power Plan never went into effect, coal use has declined so much that the U.S. power sector has already met the plan’s 2030 target.
Why the power sector is moving away from coal
At its peak in 2007, coal was responsible for almost 2 trillion kilowatt-hours of electricity generation in the U.S., equivalent to powering over 186 million homes for the year.
By 2021, that total had dropped by 55%.
The drop was due in large part to an industrywide shift in electricity generation, away from coal-fired units toward natural gas and renewable energy. That shift is happening for three main reasons.
1. Natural gas prices
Natural gas prices have decreased significantly – over 60% between 2003 and 2019 – mainly because of improvements in hydraulic fracturing and horizontal drilling, which allow drillers to extract more gas from shale.
The influx of natural gas led to substantial increases in additions of natural gas-fired electricity generators. These natural gas power plants are newer, have similar and sometimes lower fuel costs, and are more efficient at generating electricity than the existing coal-fired generators.
They also are able to come online at full power within one to 12 hours, while a coal-fired generator can take up to 24 hours to be fully ready to produce power. Because of this necessary lead time, it is difficult to rely on coal-fired generators when demand rises and the power grid needs more electricity quickly.
For example, the electric system faces the highest demand for electricity generation between 7 a.m. and 11 p.m. on weekdays. If demand spikes, a coal-fired generator will miss the window when electricity is needed. Natural gas generators can meet the demand much faster, often making them more profitable for utilities.
2. The rise of renewable energy
Solar and wind energy are now cost competitive with fossil-fueled generators, primarily because of technological advancements.
Many states and the federal government also offer incentives for renewable energy production, which lowers the cost to install them. And, once built, renewable energy sources have no fuel costs and relatively low operational costs compared with coal-fired generators.
A record 17.1 gigawatts of wind capacity came online in the U.S. in 2021 after a tax incentive was extended, and 7.6 gigawatts are planned this year.
Solar energy accounts for 46% of all new electricity generating capacity expected to join the grid in 2022, about 21.5 gigawatts.
3. Environmental regulation
The government has instituted several environmental regulations over the past few decades aiming to reduce sulfur dioxide, nitrogen oxides, particulate matter, mercury and other hazardous air pollutants emitted by the electric power sector.
These hazardous emissions are linked to health problems including respiratory illnesses and neurological and developmental damage, as well as smog, acid rain and climate change. According to the U.S. Government Accountability Office, coal-fired generators are by far the largest electricity-sector sources.
To comply with the regulations, coal power plant operators have installed scrubbers to remove the pollutants from their emissions, switched coal types to lower-sulfur coal, and invested in other methods to reduce sulfur and other impurities. As a result, costs have increased for the coal-fired fleet.
These higher environmental mitigation costs, coupled with lower wholesale electricity prices over recent years, have meant coal plant operators have had a tougher time recovering the cost of the capital investments to maintain their older coal-fired generators. Instead, many have chosen to retire those units.
Coal power’s future: More early retirements
So what does this mean for the future of U.S. coal power?
The U.S. Energy Information Administration reports that coal generators account for 85% of the electric generating capacity being retired this year nationwide.
This trend is expected to continue, with substantial coal generator retirements occurring by 2030. This is a result of both market factors – cheap natural gas and affordable renewable energy – and regulatory measures.
Coal is used more widely in other countries, including China, and U.S. coal companies have increased their exports in recent years. However, coal use elsewhere could follow the U.S. trajectory.
At the 2021 United Nations climate change conference, over 40 countries committed to completely shift away from coal, and 20 others – including the U.S. – pledged to stop government financing of coal use, unless it includes carbon capture technology. The Biden administration, while unable so far to get its climate policies through a deeply divided Congress, is weighing new regulatory options that could further affect the cost of generating electricity with coal.
It all adds up to a difficult U.S. economic environment for coal power for the foreseeable future.
Rebecca J. Davis is Assistant Professor of Economics and Finance at Stephen F. Austin State University in Texas.
The Conversation arose out of deep-seated concerns for the fading quality of our public discourse and recognition of the vital role that academic experts could play in the public arena. Information has always been essential to democracy. It’s a societal good, like clean water. But many now find it difficult to put their trust in the media and experts who have spent years researching a topic. Instead, they listen to those who have the loudest voices. Those uninformed views are amplified by social media networks that reward those who spark outrage instead of insight or thoughtful discussion. The Conversation seeks to be part of the solution to this problem, to raise up the voices of true experts and to make their knowledge available to everyone. The Conversation publishes nightly at 9 p.m. on FlaglerLive.
FlaglerLive relies on a strong core of donors. But they’re just a fraction of the 25,000 readers who daily depend on FlaglerLive for reliable, fearless reporting and analysis you cannot get anywhere else. If you’re still on the sidelines, we need you to join the Friends of FlaglerLive today. Elections, storms, the latest catastrophe - when dependable and factual local reporting will be more essential than ever, take a stand for integrity and have a direct voice in fostering serious journalism in your community. As little as $10 makes a difference, or better still, become a monthly donor: Become a "Friend of" FlaglerLive, a 501(c)(3) non-profit news organization. Donations are tax deductible. Think of it as buying a "scoop", in every sense of the term!
Reader Interactions
Comments
Leave a Reply
This site uses Akismet to reduce spam. Learn how your comment data is processed.
Dennis C Rathsam says
As we Americans pay more for everything, we see the currant administration, with the lead from John Kerry (the climate czar) who flys his poluting jet all over the world, wants the people of our country to suck it up and go electric. Even though it takes fossil fuels to make electricity. As we stop the polution here in America, China is building 3 more coal fired power plants in their country! This president, and his policies have made China stronger, & America weaker. Americans suffer needlessly, because of this failed leader. Its a sad day for the USA. We used to lead, now we follow.
Mark says
“Even though it takes fossil fuels to make electricity.” Dennis writes.
Nope, you can produce electricity other ways, without any fossil fuels, ask any student who has taken science. I learned over 50 years ago electricity could be produced using solar, wind, water, etc.
mr. commonsense says
Maybe they could fine 1 small to medium sized town and set up a renewable energy test to see what it would take to efficiently and effectively convert alk the towns power supply to renewables.
Ray W. says
It strikes me as sad that Dennis C. Rathsam is not blaming President Eisenhower for today’s declining coal powered electrical generating capacity.
The issue is metal fatigue. When post-WWII America rapidly expanded its demand for electricity, many coal-fired electrical generating plants were built. When each coal-fired plant opened, it received a certificate to operate for a particular regulatory term; in most instances for 60 years, for the obvious reason that highly pressurized welded pipes suffer metal fatigue over time. We just can’t have highly pressurized steam pipes bursting when welds get too old.
Before the certificate of operation expires, the coal-fired electrical generating plant owner needs to decide either to rebuild its piping or to shut the plant down. This is just one of many reasons why we are seeing so many coal-fired generating plants shutting down. Capitalism at work right here in America.
Coal-fired generating plants are no longer efficient enough to produce the cheap electricity that can be produced by wind turbines, utility-grade solar facilities and natural gas turbine facilities. FPL switched over to natural gas turbine plants decades ago, but it still held a number of long-term contracts to buy electricity from owners of coal-fired plants. About five or so years ago, FPL bought two coal-fired plants and closed them before the expiration of the certificates of operation, rather than continue to pay the contracted price for electricity that was considered a bargain price 25 years ago when the contract was originally signed but was no longer a bargain when compared to the cost of electricity produced by more modern natural gas turbine plants.
As I have commented several times, most of the coal-fired electrical generating plants that were built in the 50’s and 60’s convert between 30-35% of the energy contained in the coal into electricity. The most efficient coal-fired electrical generating plant in the world is in Europe; it converts over 40% of the energy it consumes into electricity. Mitsubishi’s latest J-model natural gas turbine plants convert about 65% of the energy in the natural gas into electricity, when three natural gas turbines are combined with one steam turbine that converts the waste heat from the gas turbines into steam power. These types of plants are called combined cycle generating plants. That 65% number continues to rise as Mitsubishi improves its design (both my oldest daughter and her husband work in Mitsubishi’s heavy power unit: specifically, the gas turbine division).
Contrary to Dennis C. Rathsam’s claim about America now following other nations, we are leading the world in gas turbine generating facilities. We have relatively cheap supplies of natural gas, though that is changing as more and more natural gas liquifaction facilities open; they liquify compressed natural gas and load the LNG onto supertankers for export. Now that Russia is using its natural gas as an economic weapon against EU nations, they are rapidly building port facilities to off-load LNG, so demand for American LNG is going to rise, which will affect compressed natural gas prices that natural gas power plant owners pay to produce electricity. Blame Russia for this one.
China is building coal-fired electrical generating plants because that country lacks significant natural gas resources. We are certainly leading China in that category.
Yes, China has large shale rock formations bearing crude oil and natural gas, but most are in their desert region and the shale rock in China is not the same form as that in American shale formations. China’s shale rock is harder to frack and the desert location lacks ready access to adequate water supplies that are necessary for fracking. China is simply building coal-fired generating plants because it is cheaper for them to do so.
All in all, Dennis C. Rathsam presents as someone who just doesn’t know what he is talking about when it comes to electrical generating capacities. My mother would read his comment and say he is just talking to hear his head roar. If utility-grade solar panels are now capable of producing electricity in America at a lesser cost than can be obtained from a coal-fired generating plant, no utility company in America would ever spend the money to rebuild an existing coal-fired plant that is aging past its certification period, much less build a brand-new coal-fired facility.
FlaglerLive readers should exercise great skepticism for anything Dennis C. Rathsam posts on this subject matter. Then again, this is nothing new for Dennis C. Rathsam, who continuously posts comments in his role as a partisan instead of as a zealous advocate. A partisan has no obligation to exercise intellectual rigor for anything he or she posts. A zealous advocate has a duty to exercise intellectual rigor.
Mark says
Coal shipments, domestically and exports too, have fallen drastically. “Coal production peaked in 2008 with 7.71 Million carloads. By 2020 that number had tumbled to 2.9 Million carloads”, Trains Magazine August 2022.
“Fossil Fuels” will continue to tumble World Wide as time goes on and this a win-win for everyone except fossil fuel producers and their shareholders, Boo Hoo.