Coal's decline may continue even under Trump

During his campaign for the White House, President-elect Donald Trump promised to eliminate regulations that target coal-fired power plants, one of the primary causes of carbon emissions responsible for climate change.

For Trump, a climate-change skeptic, getting rid of the Obama administration’s Clean Power Plan, which would curb carbon emissions from power plants by 32% by 2030, would give a boost to the declining U.S. coal industry and its decimated workforce across Appalachia.

Even if the next president were to succeed, he would probably not reverse a years-long movement away from coal in the U.S. electric power industry, the biggest consumer of the black rock, according to the head of one of the nation’s leading electric utilities.

“If he were able to do that, I don’t know really how much impact it would have because we’re moving ahead and rebalancing our portfolio,” Nick Akins, the president and CEO of American Electric Power, said recently.

“I think it’s going to be very difficult for new coal-fired generation to get developed,” he said.

Obama-era policies requiring reductions in emissions of carbon, mercury and other pollutants have contributed to coal’s loss of market share in the power sector.

Even more significant has been record U.S. production of cheap shale gas, thanks to hydraulic fracturing and other technologies, plus the slow but steady penetration of wind and solar energy into power markets.

“It’s a seven-year construction cycle for a coal unit; 15 years for a nuclear unit,” Akins said in a phone call from AEP’s Columbus, Ohio, headquarters. “You can develop a natural gas plant in two to three years, with a lot less risk for shareholders, and the price of natural gas as a fuel source is still substantially low.

“And there are areas of the country that benefit from low-cost renewable fuels, particularly wind, and solar continues to come down as well, particularly utility-scale solar. Those are areas that will continue to develop.”

For AEP, which has 5.4 million customers in 11 states, coal’s share of the company’s generating capacity has fallen from 71% in 2005 to about 47% in 2017. Over that time, gas capacity has risen from 20% to 27%, and renewable energy has jumped from 3% to 13%.

The switch is happening even faster across the USA, where gas surpasses coal as a fuel for power plants.

All told, the U.S. Energy Information Administration expects gas to provide an average of 34% of the electricity generated in the USA in 2016, compared with 30% for coal.

Also figuring heavily in utility investment decisions are changing expectations among customers, especially demands for “clean energy” among younger customers.

“There’s no doubt that there’s an element of environmental stewardship that continues to be part of the fabric of our investment thesis,” Akins said.

Trump’s bid to reverse Obama environmental policies may provide a reprieve for some older coal power plants, though gas prices, if they remain low, will probably cut into those units’ operating time, according to the utility chief.

At the same time, Trump’s bullish support for gas production and pipeline construction may exacerbate coal’s competitive problems.

“We’ll still have the capacity available, but we won’t be using the units as much, and you’ll see more utilization of natural gas to back up intermittent renewable energy,” Akins said.

Trump’s commitment to promote new infrastructure may benefit companies such as AEP, whose 40,000-mile electric transmission network is the largest in the USA.

AEP spends more than $3 billion a year on transmission improvements, including projects designed to bring new renewable and distributed energy to market.

“There’s no question that jobs are being created on the infrastructure side of things,” he said.

As for communities where AEP has shuttered coal power plants, the company works with economic-development officials in states such as Kentucky and West Virginia to see whether the sites can be marketed for new manufacturing.

“If the Trump administration really wants to focus on that part of the country, it really ought to think of them like the Go Zones in Louisiana after Hurricane Katrina,” Akins said, referring to a law passed by Congress in 2005 that provided tax incentives for businesses locating in areas in three states devastated by Hurricanes Katrina and Rita.

“That would be very beneficial as well,” he said.

Bill Loveless — @bill_loveless on Twitter — is a veteran energy journalist and podcast host in Washington. He is the former anchor of the TV program Platts Energy Week.


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