Coal subsidies derail the Texas clean energy market
“Trump Digs Coal” became one of the most recognizable slogans of the 2016 U.S. presidential campaign, and candidate Donald Trump’s promises to scrap the controversial Clean Power Plan (CPP) and bring back coal jobs struck a chord in Midwestern mining states.
The vision of an unfettered, resurgent U.S. coal industry resonated with working class voters, helping to tilt the electoral map Trump’s way.
The Trump Administration is following through on its promises to scuttle the CPP, withdraw from the Paris Climate Agreement, and abolish other environmental regulations that are odious to the coal industry. However, the coal industry has continued to struggle against strong economic headwinds, primarily market competition from sustained low (sub-$4/mmBtu) natural gas prices.
Wall Street analysts agree that long term economic forces are working against any federal effort to rehabilitate the U.S. coal industry.
They identify the advanced age and inefficiency of many coal-fired power plants; long term regulatory uncertainty that disfavors investment in new coal plants; reduced demand from countries that import U.S. coal; and most importantly, sustained price competition from cheap natural gas as the major economic factors that make a U.S. coal renaissance highly unlikely.
In Texas, several utilities have announced plans to deploy more electric power from renewable energy regardless of changes in federal regulations. Luminant has announced plans to close three coal-powered plants — Monticello, Sandow and Big Brown — in early 2018. CPS Energy in San Antonio has long planned to mothball the JT Deely coal plant by the end of 2018, and reiterated their decision after President Trump’s Executive Order in March on the CPP. The Austin City Council voted in 2014 to begin phasing out of the city’s share of the coal-powered Fayette Power Project starting in 2020, with the goal of getting out of the project altogether by 2022.
As the longed-for coal recovery has been slow to materialize, policy discussions in Washington, D.C. and in Appalachian coal country have moved beyond loosening environmental controls and into the previously disfavored arena of direct market intervention in the form of taxpayer-funded coal subsidies.
Ill-conceived policies like coal subsidies or taxpayer bailouts for coal plants would distort the U.S. energy market and interfere with the well-functioning Texas electric market, delaying or derailing the Lone Star State’s market-driven transition to clean energy.