Coal Projected To Exit US Electricity By 2033. Trump Might Have Killed It.


In 2019, the Navajo Generating Station closed. Decades earlier, it was blamed for hazing up the views of the Grand Canyon, and causing other environmental ills. While they worked to clean up the plant’s emissions, it still became a posterchild for the ills of coal power generation and even pollution in general. The beautiful desert and rock views around the plant made the perfect background to showcase environmental devastation.

Last year, the station’s iconic smokestacks were demolished, over a year after the plant ceased operations. The plant was originally slated to run as long as 2044, but things changed, leading to utilities deciding to close it down early.

The biggest problem: economics. While burning coal had been very polluting, the price of natural gas fell and it even got to the point where renewables were cheaper. Utilities aren’t in the business of losing money, so they decided to convert plants to run on gas, build new gas plants, and just shut down the unneeded coal-fired plants as renewables have been growing. Nobody in the government made them do it, either. It was just the best business decision.

For this reason, it shouldn’t be surprising that Bloomberg and Morgan Stanley project that coal is on its way out, and will be gone from the US market by 2033.

In the short term, coal is projected to make a small comeback. Natural gas prices are going up a bit, and cuts in the supply of gas from public lands could make them rise by 48%. The remaining coal plants will see more use as power companies adjust their power mix to keep power cheap for customers. That short term trend won’t be enough to overcome long-term price trends, nor will it be enough to overpower the move to green energy that’s likely to accelerate under Biden.

Because coal has no political future, and it’s been dying economically for so long, don’t expect plants like the Navajo Generating Station to be rebuilt. Sinking that kind of money into a project that might get used for a couple of years just wouldn’t make sense, no matter how much natural gas climbs in price. Because new construction won’t be profitable, coal has nowhere to grow after all of the shrinking it’s done.

The market death of coal was fortunate in its timing. As coal plants closed down, Trump tried to step in to save it. He campaigned on saving the jobs of coal workers, and in office hatched a scheme to do just that. To prop up coal, he planned to give economic incentives and subsidies to any power plant that can hold 90 days of fuel on site. On the surface, the stated goal was to improve disaster preparedness, but it was obviously targeted to subsidize coal and nuclear power. Most of the help would have gone to protect coal plants from shutting down.

He sort of defeated himself, though. While he was trying to do this, he was also deregulating gas production and making it easier to drill for oil and gas on public lands. The price of both oil and gas dropped precipitously, leading to the situation for coal plants getting worse. He didn’t have any policy levers he could pull to make it easier to dig coal out of the ground, so the market responded by going with whatever was cheapest.

The planned subsidies probably wouldn’t have been enough to make up for the massively increased gas production, and its attendant price drops, but that’s not how the plan got killed. The lack of economic incentive to use more coal kept the power industry from having any reason to support his plan. It failed, and couldn’t be implemented due to a committee in the executive branch voting the plan down.

In other words, he dug the political ground out from under his own plan, and then marveled at how it fell.

Those low natural gas prices went on for too long for anybody to justify running or even maintaining the coal plants, so now there’s no place to burn much more of the stuff now that the days of cheap gas are coming to an end. If anything, Trump sowed the seeds of coal’s final destruction instead of saving it.

Ironically, had Trump not expanded gas production, Biden would now have a hell of a time getting rid of coal. If gas production had not expanded, the prices wouldn’t have dropped like it did, and power companies would have kept more plants either running or ready to turn back on in the future. They certainly wouldn’t have demolished plants as much as they did.

Today, with Biden restricting new drilling permits and even pulling some existing ones that weren’t issued properly, natural gas prices are going to be on the upswing. If the coal plants had been kept around, power companies might have been in a position to fire them back up and cut back on gas as prices rose. Because presidents aren’t kings, Biden probably wouldn’t have been able to do much about it without getting the support of Congress.

With the Senate still short of a filibuster, the chances of getting a bill through to force the closure of existing plants wouldn’t have been feasible, so the plants would have likely gone on for years burning more and more coal until other forces brought them back to normal levels.

This was a complex situation to be sure, so we can’t put this all on Trump. Prices were starting to drop under Obama, with Trump only accelerating that trend. If people in the industry had predicted not only a Biden win years in advance, but the restrictions on gas drilling, they might have had more foresight to keep coal plants on standby for the time when natural gas prices went back up.

In the end, though, Trump accelerated policies that undermined coal, leading to its early demise. This left coal in a position where it couldn’t ride favorable market forces back up to frustrate Biden’s plans. An honest appraisal of the situation has to place at least some of the blame on Trump’s inability to formulate a coherent plan to save coal.

Campaign promises are great, but to deliver on them you need a candidate capable of playing chess. Trump wasn’t even a good checkers player.

Featured image: Navajo Generating station via US Bureau of Reclamation


 

 


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