What's Really The Biggest Threat To The Coal Industry

Jan 18, 2018
Originally published on January 18, 2018 6:30 pm
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MARY LOUISE KELLY, HOST:

The Trump administration had a plan to save the coal industry, but a panel headed by a Trump appointee rejected that plan. Stacey Vanek Smith co-hosts the Planet Money podcast The Indicator, where she's been reporting on the threats to the coal industry.

STACEY VANEK SMITH, BYLINE: When President Trump took office, he promised to save the coal industry.

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PRESIDENT DONALD TRUMP: My administration is putting an end to the war on coal.

VANEK SMITH: And by war on coal, Trump meant environmental regulations that had been put in place by the Obama administration. And President Trump did undo some major coal-related regulations almost as soon as he took office.

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TRUMP: With today's executive action, I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion and to cancel job-killing regulations.

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VANEK SMITH: But it turns out regulations were not the biggest problem for the coal industry. Coal had traditionally been the cheapest source of fuel, but about 10 years ago that started to change. Christopher Knittel is an energy economist at MIT.

CHRISTOPHER KNITTEL: So fracking started to come of age, if you will, around 2008.

VANEK SMITH: Fracking was famous for unlocking an enormous amount of oil in the U.S. But it also unlocked an enormous amount of natural gas. And all of a sudden, coal was no longer the cheapest form of energy.

KNITTEL: The use of coal in - within the U.S., it started to collapse.

VANEK SMITH: So fracking killed coal?

KNITTEL: Well, I think what the current administration doesn't realize this is the actual war on coal has come from cheap natural gas.

VANEK SMITH: In the year 2016, for the first time ever, natural gas became the main source of energy in the U.S. all because of fracking. And coal went from providing about half the energy in the U.S. to around 30 percent and falling. So last September, Trump's Energy secretary, Rick Perry, came up with a new plan. Perry said, we have to make sure our energy supply is resilient, make sure if there's some kind of crazy cold snap or some emergency and we suddenly need a lot of power we've got a reserve.

KNITTEL: So it would have provided a subsidy for any power plant that had 90 days of fuel onsite.

VANEK SMITH: This subsidy, billions of dollars a year, would have been paid by people who use power, by us. But here's the thing - power plants that burn natural gas don't really store much gas onsite. You know who does store lots of fuel onsite? Coal plants. Also, by the way, nuclear plants.

KNITTEL: I have to give it to Secretary Perry. It was quite a creative policy to target coal and nuclear plants.

VANEK SMITH: Secretary Perry's plan had to be approved by the Federal Energy Regulatory Commission. There are five commissioners, and four of them, including the chairman, were appointed by President Trump. The commission ruled on the plan last week, and all of the commissioners voted against it. Knittel says this is because the way to get energy supply resilience is not by stockpiling coal. Moreover, creating new subsidies for coal and nuclear power plants would mess up the market for electric power. And that is the market the U.S. has spent decades trying to create to encourage companies to figure out cheaper, more efficient ways of getting power to people. And, says Knittel, that market is working.

KNITTEL: Cheap natural gas isn't going away. And it's not that coal's getting more expensive. It's that alternatives to coal are getting cheaper. And that's going to continue to happen.

VANEK SMITH: Regulation isn't coal's biggest problem. Coal's biggest problem is competition. Stacey Vanek Smith, NPR News.

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KELLY: And Stacey Vanek Smith is co-host of NPR's newest podcast, The Indicator from Planet Money. It gives you one quick economic take on a topic that's in the news that day.

(SOUNDBITE OF NAUTILUSS' "ODYSSEY") Transcript provided by NPR, Copyright NPR.