The Difficulty of Bringing Back Coal Jobs – 11/17/16

Promising to resuscitate the U.S. coal industry and bring back coal jobs is easier said than done.

According to data collected by the EIA, almost all new electricity generation capacity in 2015 came from non-coal sources as wind, natural gas, and solar power dominated.

by state

And the trend away from coal looks like it will continue.

American Electric Power Co. (AEP), one of the nation’s biggest utility companies, has already sold or retired half its fleet of coal-burning power plants in the last few years.

No matter who occupies the White House, “it’s not coming back,” said Nick Akins, AEP’s chief executive. “We’re moving to a cleaner-energy economy and we’re still getting pressure from investors to reduce carbon emissions… I don’t see that changing.”

Overall, the electric utilities that buy more than 95% of the coal mined in America have already retired about a third of the total capacity of coal power plants since 2010. They have done so in part because regulatory costs for mercury and other pollutants fall heavily on older coal plants, but mostly because there are cheaper, cleaner alternatives in many parts of the country. Natural gas alone makes for an insurmountable competitor so long as shale drilling keeps prices low and its cleaner burn makes it more palatable for those with environmental concerns.

A coal power plant is a monumentally expensive asset; its construction is a fixed cost requiring decades in service to provide a good return on investment. With so much uncertainty surrounding the future of climate policy at all levels of government, power companies are reluctant to invest heavily in coal when gas-burning power plants can be built faster, operated at lower costs, and run with putting off fewer emissions.

If Obama administration projects like the Clean Power Plan are abandoned, then some states may keep some coal plants running for longer. However, markets still expect a move toward a lower carbon energy mix for the foreseeable future.

The biggest economic incentives for clean energy — federal tax credits for solar and wind projects — are already in place. Both were set to expire at the end of last year, only to have Congress unexpectedly extend both credits. And given the success of wind power in many red states and renewables in general with Democrats, the political will needed to repeal the extensions doesn’t seem to exist.

Without new regulations, companies will keep existing coal power plants online longer; however, they will have no incentive to build new ones when they have a number of better options.

To make new coal jobs, you need to have an actual use for coal. Beyond burning in power plants, coal doesn’t have many other uses where it is needed in bulk. So long as the government doesn’t control the markets, utilities will use whatever fuel they see as the best fit for shareholders and so far coal seems to get further and further from fitting that role.

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