Can Trump save coal industry?

Energy agency rejects plan to prop up coal and nuclear plants

Download Perspecs

Should the Trump administration keep the lights on at coal plants?

By Daniel J. McLaughlin

Donald Trump is probably the only person in the world who would be appreciative of receiving a lump of coal in his Christmas stocking.

The president has been an advocate of America's coal-mining industry both on the campaign trail - with the slogan "Trump digs coal" - and in office. To save the ailing industry, his administration want to introduce a special subsidy that would force consumers to pay more for electricity generated from coal-fed power plants to keep the demand up. Trump regularly flaunts that he is a very successful businessman, but his focus on this issue may turn out to be a bad investment for the president and his administration.

Coal has been experiencing a steady decline for some time now in the United States. NPR explains that the power grid is like an auction: when a regional grid operator is looking for power, each generator - whether it is a coal plant on the edge of town or a wind farm in a different state - offers its electricity. The operator lines up the bids from the cheapest (tends to be wind or solar) to the most expensive (coal, gas, oil), and comes up with a cutoff price. This cutoff price has dropped in recent year due to cheap natural gas and renewable energy. The coal generators, as a result, are more expensive to run, and they are either not being used or are being turned on and off.

Trump wants to keep the coal plants open. The coal and nuclear industry cannot compete with cheaper (and cleaner) sources of power, therefore the federal government wants to subsidise the plants to keep them running.

The Houston Chronicle argues that the coal industry is "doomed", no matter how many subsidies Trump and his energy secretary Rick Perry throw at it. They call the administration's efforts "crony capitalism that delivers on ill-conceived political promises". Smart, competitive companies will not be captive to the past, and they will be ready to adapt to "a future where the economics of coal no longer make sense".

Elizabeth Lippincott, executive director of the Texas Clean Energy Coalition, notes that Wall Street analysts agree that long-term forces are working against Trump's efforts. The advanced age and inefficiency of many coal plants, the reduced demand from countries that import American coal, and most importantly, the sustained price competition from cheap natural gas means that "coal subsidies are bad for business".

The policy is a really bad idea, the Economist argues - in fierce competition for one of Trump's worst policies. The regulation-cutting Trump administration paint environmental regulations as the bad guy, but the steady decline has been caused primarily by market forces. They add that the policy makes sense "only as a kind of political theatre", where the administration and Trump's base "agree to pretend that it is possible to return to some mythical glorious past". This world, however, is gone - and it is time to move on.

Donald Trump played on nostalgia on the campaign trail, promising to "Make America Great Again". However, the president should be looking forwards, rather than backwards, for his energy policy. For a man who boasts about his success in the world of business, he could be backing a bad investment with his obsession over coal.

Download Perspecs
Download Perspecs