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FILE PHOTO --  A view of mining operations is seen during a tour of Peabody Energy's Rawhide coal mine near Gillette, Wyoming, U.S. June 1, 2016. The company filed for Chapter 11 bankruptcy in April.  REUTERS/Kristina Barker/File Photo - RTX2RU15
The Avenue

Coal plant retirements will continue despite Trump’s EPA pick

Devashree Saha and Sifan Liu

The appointment of Oklahoma Attorney General Scott Pruitt to head the Environmental Protection Agency (EPA) reveals that President-elect Trump is dead serious about his campaign promises to rein in environmental regulations and revive the coal industry. Pruitt is a vocal critic of the EPA’s Clean Power Plan (CPP), which seeks to cut carbon dioxide emissions from power plants, and he has threatened to dismantle CPP to end the “war on coal.”

Authors

However, the war on coal is a false narrative that oversimplifies what is happening in the energy economy. In blaming environmental regulations under the Obama administration as the sole reason for the recent turmoil in the coal industry, Trump and Pruitt are ignoring fundamental market realities that are buffeting the industry.

A December 2016 Brookings paper shows how the ongoing large-scale switch in the power sector from coal to cheaper and abundant natural gas—a trend driven more by investors and market forces than by environmental regulations—is playing a huge role in states’ increased ability to “decouple” their economic growth from growth in carbon emissions. The natural gas glut has reshaped how we get electricity across the board, with natural gas-fired generation expected to surpass coal generation in the United States for the first time in 2016.

At the same time, renewable energy is continuing to increase its market share aided by declining costs, increasing efficiency, and economies of scale. Renewables, including hydro, wind, solar, biomass, and geothermal, provided 16.9 percent of electricity generated in the first half of 2016. That compares with 13.7 percent in all of 2015.

The wave of coal plant retirements in recent years, therefore, is not surprising as utilities continue to move away from coal to burn cheaper natural gas and increase their renewable capacity. The latest data from Energy Information Administration’s (EIA) September Monthly Electric Generator Inventory shows that in 2015 alone, utilities retired power plants generating 22.2 gigawatts of electricity. Coal-fired plants accounted for 67 percent (14.8 gigawatts) of the retirements. The loss in coal energy represents 5 percent of the nation’s total coal-fired electrical generation capacity, a significant number in a single year. The industry retired another 6.5 gigawatts of coal-fired generation in the first half of 2016.

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Coal plant closures are happening in both red and blue states. Red states Georgia, Ohio, and Kentucky all had more than 10 gigawatts of coal capacity before 2015 but are among the states that have lost the highest percentage of coal-fired generation capacity in 2015. Georgia retired 18 percent of its coal-fired generating capacity, Ohio retired 16 percent, and Kentucky 11 percent. Red states Indiana, West Virginia, and Virginia—states with high levels of coal-fired electricity generation—each retired at least one gigawatt of coal capacity in 2015.  The blue states of the District of Columbia, Maine, Rhode Island, and Vermont no longer have coal-burning power plants. Connecticut, Delaware, Hawaii, Oregon, and South Dakota each have only one remaining coal plant. In 2016, Oregon became the first state in the nation to legislate an end to coal-powered electricity.

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The Energy Information Administration has identified an additional 14 gigawatts of coal capacity earmarked for retirement through 2028. The proposed coal plant retirements are geographically concentrated, with most closures in the mid-Atlantic, Southeast, and Midwest where most coal generation takes place. Massachusetts plans to retire its largest remaining coal-fired plant in New England, the Brayton Point coal plant, in 2017. Maryland plans to retire 22 percent of its current coal capacity by 2020. Minnesota is slated to close four coal-fired generators by 2025; those closures compose 35 percent of the state’s coal-fired capacity. Two generators in Kentucky are scheduled to close by 2017 that compose 9 percent of the state’s coal-fired capacity. Significant coal plant retirements have also been announced in Missouri, North Carolina, Tennessee, and West Virginia, among other states.

In short, the frequency of coal retirements highlights the speed at which the nation’s utilities are changing the energy mix by replacing coal with natural gas and renewables, particularly wind. Few new coal plants are in the works to replace those that are being shut down. Of the 100.5 gigawatts of electricity generation planned through 2023, only 1.5 gigawatts will be from coal-fired plants. The remainder will be from natural gas, renewables, and nuclear. Solar, natural gas, and wind are expected to account for almost all of the new generation in 2016—of 26 gigawatts in new electrical generating facilities, 9.5 gigawatts is expected to come from solar, 8 gigawatts from natural gas, and 6.8 gigawatts from wind. As a recent study from the Energy Institute at the University of Texas at Austin explains, in most of the United States, the cheapest power plant to build today tends to be natural gas combined-cycle plants or wind farms. New coal plants are more expensive to build in most places.

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Despite President-elect Trump’s EPA pick and the coming onslaught on federal climate and energy policies, market forces enabling natural gas and renewable energy penetration across the nation will continue to drive down coal use. Regardless of the fate of the CPP, the utility industry is likely to move forward with cleaner energy. The CEO of Michigan’s largest electric power provider recently announced that his company is still planning to retire eight of its nine remaining coal plants by 2030, regardless of whether Trump tries to repeal President Obama’s climate policies. Other large electric utilities are also realigning their long-term investment strategies in favor of natural gas and no-carbon power sources.

As a result of a confluence of factors, the coal industry’s decline has been a long time coming. The story of coal’s decline goes far beyond the false narrative that Trump and his EPA pick Scott Pruitt are advancing that points to EPA regulations as the sole reason for coal plant retirements.

 

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