President Donald Trump has gutted regulations on the coal industry, falsely claimed that windmills cause cancer and installed a former coal lobbyist to lead the EPA.
In the face of those efforts to rescue coal country, America’s aging fleet of coal-fired power plants continues to shrink. New coal plants are not getting built.
Trump’s vow to rip up environmental rules has been overwhelmed by an even more powerful force: the free market. Coal just can’t keep up with dirt-cheap natural gas and increasingly affordable renewables.
“It’s hard to see any scenario where coal rebounds,” said Joe Aldina, manager of coal research at S&P Global Platts Analytics.
Approximately 15% of America’s coal fleet has been retired since 2017, the year Trump took office, according to Platts.
And that trend will probably continue. Platts expects another 10% of the coal fleet will be shuttered between 2019 and 2020. That translates to more than 100 coal-fired units at power plants.
“Coal is going to get phased out over the long term,” Aldina said.
Power companies that once relied on coal are promising to phase it out in favor of cleaner alternatives, including natural gas, solar and wind.
Over just the past month, Vistra Energy (VST) has announced plans to retire five coal-fired power plants in Illinois.
Major power companies say goodbye to coal
Duke Energy (DUK), one of America’s largest utilities, pledged this week to slash its carbon emissions in half by 2030. That’s up from its prior goal of a 40% reduction from 2005 levels.
The North Carolina-based utility also announced a goal to achieve net-zero carbon emission by 2050. Duke Energy said that makes it the largest power generator in America to make this commitment.
“Retiring coal plants is an important part of achieving this objective,” Lynn Good, Duke Energy’s CEO, told CNN Business.
Duke Energy plans to retire seven coal-fired units by 2024. That’s on top of the 49 coal units that have been shuttered since 2010.
“The economics have been front and center in this transition,” Good said. “Low-cost natural gas, the declining cost of renewables, and, frankly, low interest rates, have been an important part of how we are able to invest and retire plants.”
Cheap borrowing costs have paved the way for power companies to build natural gas, wind, solar, hydro and other more environmentally friendly plants. Good said that the corporate tax cut enacted by Trump has helped as well.
But cutting environmental rules hasn’t tipped the scales.
“I wouldn’t say regulation has been a big part of the equation,” Good said.
Duke Energy is not alone in saying goodbye to coal.
Until recently, Xcel Energy (XEL) burned coal to generate almost half its power. Last year, the Minneapolis-based utility announced an ambitious plan to deliver zero-carbon electricity by 2050 by shutting down coal and leaning on wind and nuclear.
“Wind is already beating fossil fuel alternatives — even with low natural gas prices,” Xcel CEO Ben Fowke told CNN Business in March.
PSEG (PEG), New Jersey’s largest and oldest power company, made its own carbon-free pledge in July. To get there, PSEG (PEG) is retiring coal plants, investing heavily in offshore wind and fighting to keep nuclear plants alive.
Coal’s place in power sector is fading
This trend is widely expected to continue.
Natural gas and wind are expected to be the fastest-growing sources of US power generation through 2020, according to a recent forecast by the US Energy Information Administration.
Coal, on the other hand, is expected to tumble by 15% this year and 9% in 2020, the EIA said.
Those trends will only amplify the pain in America’s coal country, where employment has plunged.
Duke Energy said it works closely with communities and local officials to mitigate the economic pain. Those efforts include investing in cleaner energy jobs and by using the company’s foundation.
“We don’t take this lightly. The impact on our communities is an important part of our thought process,” said Good, the Duke CEO.
Beyond the economics, power companies face outside pressure to switch away from coal. Although the Trump administration still favors coal, many states have adopted green energy plans. Shareholders are increasingly urging power companies to adopt renewable energy.
Corporate America is also clamoring for cleaner energy. Major companies including Facebook (FB), General Motors (GM) and Adobe (ADBE) have promised to purchase vast amounts of renewable power. Mondelez (MDLZ) recently agreed to buy enough solar power to produce 10 billion Oreo cookies per year.
Carbon tax would speed coal’s demise
Another problem for coal: America’s existing coal plants are very old, and new ones aren’t getting built. The average coal plant is more than 40 years old, according to Platts. The average lifespan is just 60 years.
Power companies make decisions about new plants with a very long time horizon, well beyond the short-term swings in regulatory policy in Washington.
“As we look out 10, 20 and 30 years,” Good said, “it has made sense to us time and again to look at new resources: natural gas, renewables and energy efficiency, rather than investing in coal, where the future is more uncertain.”
Aldina, the Platts analyst, said that one potential gamechanger is if Washington decides to put a price on carbon, such as by enacting a carbon tax.
“If there is any sort of policy on carbon pricing,” he said, “the coal industry will fall off even faster.”