By Rebecca Smith
Donald Trump campaigned on a promise to resurrect the ailing
U.S. coal industry and put miners back to work. Delivering on that
vow could prove nearly impossible.
Electric utilities that buy more than 95% of the coal mined in
America have already retired hundreds of their coal-burning power
plants from Colorado to Connecticut -- amounting to about a third
of the total capacity -- and have plans to mothball even more.
While in Appalachia earlier this year, Mr. Trump pledged to
"bring the coal industry back, 100%" by rolling back environmental
regulations. But coal's biggest problem is that it is no longer the
cheapest fossil fuel around. It is being displaced by natural
gas.
American Electric Power Co. of Columbus, Ohio, one of the
nation's biggest utility companies, has sold or retired half its
fleet of coal-burning power plants in recent years. No matter who
occupies the White House, "it's not coming back," said Nick Akins,
AEP's chief executive.
Even if Mr. Trump makes good on his campaign promise to relax or
repeal pending limits on carbon emissions, it won't be enough to
restore coal's market share. "We're moving to a cleaner-energy
economy and we're still getting pressure from investors to reduce
carbon emissions," Mr. Akins said. "I don't see that changing."
Investors love gas-burning power plants because they take less
time to construct, cost less to operate and convert fuel into
electricity with greater efficiency. Gas has just half the carbon
emissions of coal and, thanks to the U.S. drilling boom, most of
the country is now flush with new supplies.
Since the 2008 recession, the gas glut has become so acute that
prices have plunged by more than 60% while coal has been relatively
stable, federal data show.
To understand what the coal industry is up against, consider one
of the newest coal units in the U.S.: Duke Energy Corp.'s power
plant in Mooresboro, N.C. Built in 2012, the plant already needs
modernization it so it can compete amid rapidly changing market
conditions. Duke is adding equipment so the plant can run on coal
or gas, depending on which can produce electricity more cheaply at
any given time.
The percentage of electricity Duke generates by burning coal has
steadily dropped from 58% in 2000 to 35% in 2015, mirroring a
nationwide trend. The company closed 40 coal plants in the last
five years and expects its coal-fired power generation to keep
dropping until it stabilizes at 23% in 2030.
Atlanta-based Southern Co., one of the biggest coal-burning
utilities, is also pouring money into gas projects because they
lower power-generation costs and offer better growth opportunities.
Southern recently bought AGL Resources, a gas utility, and said it
would spend $1.5 billion on a 7,600-mile pipeline network to
connect Gulf Coast gas supplies to consumers in Alabama, Georgia
and South Carolina.
When a utility builds a power plant, it has to live with that
decision for decades. With so much uncertainty about climate
policy, power companies say they have no intention of rushing back
to coal, though it makes sense to keep it in the mix as a hedge
against any gas price increases and because it is easy to stockpile
for emergencies.
Aside from investors who want to see cleaner electricity
generation, some state-level power standards demand it. A few
states, such as California and New York, now discourage coal use
altogether.
Many others require utilities to consider cost and pollution
profiles when they decide which power plants to run. Since it is
generally cheaper and cleaner to make electricity with gas,
companies haven't been running their coal plants as hard.
Xcel Energy Inc. in Minneapolis is "focused on renewable and
other infrastructure projects that will reduce carbon-dioxide
emissions," said Frank Prager, vice president of policy. Last month
Minnesota utility regulators said Xcel could shut down two coal
plants and add more clean-power generation to the grid. Xcel aims
to get more than 60% of electricity from zero-carbon sources --
such as wind and solar power -- by 2030.
Mr. Trump has said he would throw out the Obama administration's
Clean Power Plan, which was designed to greatly reduce carbon
emissions. If he is successful, some utilities may keep some coal
plants running for longer. Twenty-four states, including Texas, New
Jersey and Wyoming, sued the federal government to block the Clean
Power Plan; the issue is now before a federal appeals court. Even
in those states, some utilities supported President Obama's
carbon-reduction efforts.
"Markets are driving a lot of the behavior," said Tom Williams,
a spokesman for Duke. "Regardless of what happens to the Clean
Power Plan, we'll continue to move toward a lower carbon energy
mix."
Coal basins in Appalachia and the Powder River Basin in Montana
and Wyoming are hurting. U.S. coal companies have shed 21,000 jobs
nationwide since 2008. Employment fell 12% in 2015 to 66,000
employees, with West Virginia and Kentucky the taking the brunt of
the cuts.
A rare bright spot for coal miners: Natural-gas prices are
expected to rise modestly in 2017. If that happens, some coal
plants may become more profitable and boost demand for coal
deliveries.
Write to Rebecca Smith at rebecca.smith@wsj.com
(END) Dow Jones Newswires
November 13, 2016 18:54 ET (23:54 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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