Coal Is Still A Force In U.S. Power Generation

ROBERTSON COUNTY, TEXAS – APRIL 29: Cows graze in a field near the coal-fueled Oak Grove Power Plant on April 29, 2024 in Robertson County, Texas. (Photo by Brandon Bell/Getty Images)

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The arctic blast which put a vast swath of the continental United States into a deep freeze in recent days was not a theoretical exercise – it was/is a real-world stress test of the U.S. electric grid. Fortunately, thanks to a combination of added capacity, improved communications, policy actions, and better pre-planning for emergency measures, Winter Storm Fern did not result in the widespread blackouts seen during 2021’s Winter Storm Uri. One of the workhorses of the power generation sector that helped several regions endure the storm is also one which has been widely demonized and subjected to punitive public policy measures in recent years: The nation’s coal industry.

Coal Remains A Vital Part Of The Power Generation Mix

As the Wall Street Journal editorial board noted, coal power played a decisive role in preventing widespread outages during the deep freeze and this weekend’s winter storm, supplying roughly 40% of electricity in the Midwest’s MISO grid, and 24% in PJM. Even in Texas, where natural gas was the ERCOT grid’s main workhorse, providing 50%-70% of total available generation throughout the weekend, coal played a big role, accounting for as much as 18% during key times of high demand.

Despite all the plant retirements in recent years – including many which Energy Secretary Chris Wright and others argue were premature – coal remains a vital contributor to grid stability. Data compiled by the U.S. Energy Information Administration showed that coal accounted for 22% of generation nationwide on Sunday, January 25. Only natural gas, at 41%, accounted for a bigger percentage despite years and hundreds of billions of dollars in subsidies for wind, solar, stationary batteries and other alternative generation sources.

Winter Storm Fern clearly illustrates that, in many regions, coal remains a resilient and vital part of the energy mix. But there’s a contradiction which is also becoming impossible to ignore: we are relying on coal to save the grid in emergencies while some elected officials pursue policies and others push lawsuits that make its survival financially untenable. It’s a contradiction that exists at a time when U.S. electricity demand – spurred by data centers, AI workloads, and industrial and residential electrification – is surging at an ever-increasing pace. This contradiction must be reconciled to preserve reliability on a grid which needs every dispatchable resource available.

Reviving The National Coal Council

Starting shortly after their respective confirmations last year, both Interior Secretary Doug Burgum and Secretary Wright have made the preservation of what remains of America’s coal generation fleet a top priority, issuing orders to delay retirements and incentives to some operators to cancel planned retirements entirely. The Department of Energy has put aside up to $525 million to build new or upgrade existing coal-fired power plants to “confront an urgent grid capacity crisis.” According to the notice, this program would unlock the “latent value of America’s coal-fired generation assets,” and will “secure the grid, power the nation’s industrial resurgence, and protect communities from reliability shortfalls.”

Another action Burgum and Wright took in compliance with an executive order signed by President Donald Trump was the reconstitution of the National Coal Council, which had been shuttered by the Biden administration in as part of its push to diminish the industry. At its first meeting on January 15, the NCC picked James Grech, President & Chief Executive Officer for Peabody Energy, to serve as chairman. The NCC’s role will be to serve as a sounding board for “delivering practical, real-world recommendations to ensure coal continues to support reliable power, economic growth, and national energy security.”

To deliver on its new charter, the NCC will have to confront two formidable obstacles standing in the way of reliability: capital access and market signal failure. Without mechanisms to properly value dispatchable capacity like coal, capacity markets can signal retirements too aggressively and raise prices. To correct this glitch, the White House and a bipartisan group of governors directed PJM Interconnection (PJM) to design a new capacity auction to attract firm resources as electricity prices and demand rise.

Lawsuits Threaten Coal Access To Needed Capital

Then, there’s the litigation question. Sec. Wright warned NCC members at the Jan. 15 meeting that forced divestment of coal assets through litigation could undermine grid reliability by choking off critical capital. Without investment capital for maintenance, upgrades and life extensions, even technically viable coal plants will shut down, exacerbating capacity shortfalls. The Washington Examiner reported that Secretary of Interior Doug Burgum also agreed with Sec. Wright that the forced coal divestment sought by the states would harm essentially “everybody who pays an electrical bill” given the negative implications to the coal chain from a loss of investment capital.

Those comments reinforce the reality that reliability is not just about policy paper reforms – it is also about access to capital to keep plants running. That brings us back to Texas, where I warned last September that a lawsuit filed by Attorney General Ken Paxton threatens to cut off needed capital access to some of the very coal plants which just helped the state’s grid survive Winter Storm Fern without any major hiccups. In that lawsuit, Paxton and other Republican state attorneys general are suing Blackrock, State Street, and Vanguard, alleging anticompetitive conduct tied to ESG-driven investment decisions.

Former Trump Energy Secretary and Texas Governor Rick Perry has predicted that if successful, the lawsuit would take an estimated $18 billion in coal holdings off the asset managers’ books. He said that outcome would pose “a direct threat to coal companies’ ability to raise capital, finance infrastructure and support jobs.” Secretary Wright warned that if courts compel the asset managers to divest coal-related assets, it could undermine the administration’s hard-won efforts to buttress coal mining and electricity generation.

The Coal Conundrum

It’s a real conundrum: Fresh off a significant winter storm during which coal played a big role in demonstrating that the ERCOT grid is now in far better shape than it was when it failed so badly just five years ago, the industry finds itself under attack by the state’s government. Regardless of one’s opinion about the validity of the lawsuit’s claims, it’s an unsustainable situation which cries out for re-thinking by the attorneys general involved.

The NCC’s revival is a necessary step toward aligning policy with operational reality. But policy alignment without capital alignment is insufficient. Keeping coal plants online requires more than emergency orders and short-term fixes – it requires protecting access to capital that sustains reliable power for years to come. The next polar vortex will likely arrive before courts resolve these cases, but the capital decisions made now will determine whether the much-needed coal generation capacity is there to help keep citizens safe and warm when it does.