Could the US coal business make a comeback? | Invesloan.com

Welcome to Energy Source, coming to you from New York.

Uncertainty and the threat of tariffs circled over the Federal Reserve on Wednesday as its Federal Open Market Committee voted unanimously to keep interest rates on hold for the third meeting in a row.

Meanwhile, slumping oil prices are weighing on producers’ bottom lines, with Diamondback Energy and Coterra Energy warning they will cut capital expenditure unless there is a rapid turnaround.

Brent crude, the international benchmark, settled 0.2 per cent lower at $61.02 a barrel while US West Texas Intermediate fell 0.1 per cent to close at $58.02.

Across the Atlantic, Spanish Prime Minister Pedro Sánchez was defiant against critics who blamed last week’s nearly 24-hour blackout on an over-reliance on wind and solar, saying he would not deviate “a single millimetre” from his commitment to renewable energy.

In today’s Energy Source, we look at what appears to be a reversal in fortunes for US coal, which the industry says is essential for meeting the growing power demand caused by the artificial intelligence boom.

All hail king coal?

Despite having kept much of America’s lights on since the 1880s, for the past few decades, coal plants have increasingly been shutting off theirs.

In 2023 the US produced 578mn short tons of coal, less than half the amount produced in 2008 when production peaked in the US, according to data from the Energy Information Administration.

Meanwhile, more than 144,000 megawatts worth of coal plant capacity has been retired since 2002, with 186,000MW remaining.

In contrast to the days when “king coal” ruled, it has increasingly been written off as a dirty, irrelevant power source.

But now the industry may be finding its second wind. Across the country, a number of delays in retiring plants is buoying generation forecasts — while President Donald Trump has promised to protect the country’s “beautiful clean coal industry”.

The case for coal is being reopened as policymakers and executives consider how to meet the swelling demand for power caused by electrification and the AI boom. Nationwide electricity demand is forecast to increase by 15.8 per cent by 2029, according to consulting firm Grid Strategies.

“Everyone is talking about AI and the electrification of industry, but there’s a lot less conversation about how to meet that power demand,” said James Stevenson, coal, metals and mining research lead at OPIS, a data and analysis company.

“We think it’s going to be very hard to do so while moving away from coal.”

In late April, the Federal Energy Regulatory Commission allowed Talen Energy Corporation to continue operating two Maryland coal plants until 2029, while the chief executive of the Tennessee Valley Authority said the utility was reconsidering plans to shut down its coal operations by 2035. In April, Indiana governor Mike Braun ordered utility and energy officials to explore extending the lives of coal plants in the state.

Meanwhile, 66 plants across the nation have been given carve-outs by the administration from Biden-era pollution caps, and state representatives in Wyoming are exploring plans to build the first new coal plant since 2013.

At a time when technology companies are racing to secure the energy they need to power their efforts in the global AI race, coal has an advantage over energy sources such as solar, wind and nuclear as much of its infrastructure already exists.

“We’ve made it really difficult to build in the US and there’s a lot of ‘not in my backyard’ pushback against wind and solar,” said David Forsberg, managing partner at Ascent Energy Ventures. “So these operators have to do something to meet demand requirements.”

America’s Power, the industry’s trade organisation, thinks that the number of delayed plant retirements will only increase due to support from the White House, which it is hoping will roll back some of the environmental regulations it says are “causing the premature retirement of coal plants”.

“What’s changed with this administration is that they recognise the value of coal,” said CEO Michelle Bloodworth.

And according to Wood Mackenzie analyst Patrick Finn, another part of coal’s appeal is its cost relative to other energy resources. Over the past year, the price of natural gas has climbed nearly 64 per cent.

“When natural gas is $2 [per million British thermal units] it’s very difficult for coal to compete, but with higher prices, coal looks better from an economic standpoint.”

But operators may face difficulties operating often decrepit plants.

One company which has floated keeping part of its fleet active is North Carolina utility Duke Energy, which may continue to operate its coal plant in Gibson, Indiana for a further three years, as well as replacing others with gas-fired combined cycle units.

Executive vice-president and chief financial officer Brian Savoy said that Duke Energy was “testing how these plants could serve in a peaking capacity” in periods of high demand, but issued a warning about their operating costs and reliability.

“There are significant investments that we might need to make. These plants have served our customers well for 50 to 60 years, but they’re getting very, very old.” (Martha Muir)

Job moves

• Schneider Electric appointed Chris Collins as US senior vice-president of Digital Buildings.

• BayoTech has appointed David Best as chief executive.

• Central Hudson Gas & Electric Corporation appointed Lauren Preston as chief customer services officer and Joel Eline as chief transformation officer.

Power Points

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.