President Trump’s Losing Fight to Revive the Coal Industry
Here is what it costs to produce electricity from these various sources as of December 2016 in the U.S. The following graph provides the range of costs across various projects for any one individual source. Keep an eye out for Solar PV (Utility Scale), Wind, Natural Gas (Reciprocating Engine), Coal, and Nuclear.
Source: Lazard 2016
Surprise, surprise: solar (large scale) and wind are both cheaper than coal and nuclear energy. This, of course, was not always the case. Have a look at the graph below which shows historic fall in costs in recent years:
You may have seen LCOE or Levelized Costs mentioned in the graphs above. The Levelized Cost of Energy (LCOE) measures the per unit cost of producing electricity which would make the production unit/plant break even over its life time.
In other words, it is the cost of producing electricity for any individual project or source of energy, and this number can be used for comparison across various sources.
On the campaign trail, candidate Donald Trump promised to revive the coal industry and to bring back jobs. However, the battle will be uphill, because the market logic does not favour him.
The steep fall of costs of solar and wind energy in the past few years has been enabled by a policy environment that — among other things — enabled a) faster adoption of these technologies which fostered economies of scale, and b) technological development which led to greater efficiency and falling costs.
However, now that the costs of wind and solar are regularly lower than coal, the transition away from coal to renewables is increasingly being driven by the logic of the markets. Trying to revive the coal industry in the U.S. will turn out to be a fool’s errand, which President Trump will eventually realise.
This is especially true, because much of the decline of coal has been enabled by the fall in costs and the greater availability of natural gas, owing to the fracking “revolution”. Have a look at the LCOE of gas in the first graph above. Natural gas emits half as much greenhouse gases as coal does, and no soot (read this for the consequences of soot). Again, an attempt at reviving the coal industry will necessarily go against the forces of the market.
Further, the natural gas, solar, and wind industries in the U.S. now employ far more workers than the coal industry. Bringing back jobs to the coal industry will come at the cost of lost jobs in the gas and renewable energy industry. As with the promise of exiting the Paris Agreement, President Trump will find that the choices are not that easy.
