Using national security as his pretext, President Trump has ordered the Department of Energy to keep open as long as possible a number of coal and nuclear-fired power plants slated for closure. Although the precise mechanism for making this happen is not yet clear, it is a ridiculously bad idea.
Its consequences will be bad for Trump and, in the long run, bad for coal as well.
First, this unprecedented government interference in energy markets will harm the economy under Trump’s watch. If energy prices rise, everyone will feel it. Voters will be deciding this fall whether to deprive Trump of the ability to enact his agenda and make appointments. To the extent that he pursues economy-crippling central planning policies, he risks losing that election.
Second, anything Trump does unilaterally to bail out coal will be temporary. And it’s actually worse than that. Not only will the next Democratic president instantly reverse Trump’s policy, but he will also use Trump’s precedent — citing the same national security emergency in doing so — to prevent the use of coal for generating any electricity in the U.S. And in case that sounds far-fetched, please note that liberal environmentalists have already been discussing and salivating over this possibility for the better part of a month.
Third, there’s a good reason the market has been choosing against coal. Note that, just 15 years ago, people were discussing a coming natural gas shortage. Today, thanks to fracking, the U.S. has suddenly become the Saudi Arabia of natural gas. Gas is now cheaper than coal, and it is also much more versatile. It can be instantly dialed up and down based on demand. Natural gas also makes wind and solar power less useless because it can be turned up to compensate whenever a cloud covers the sun or a breeze stops blowing. Coal, despite its longstanding value as a cheap fuel, can’t do any of that.
All the arguments in favor of special handouts to coal and nuclear are based on the false premise that the market doesn’t already reward coal and nuclear power for their stability and reliability in carrying large electricity loads. But the market does reward them, and they are still losing market share in spite of it. Advocates will claim that coal and nuclear power are unique in their ability to stockpile fuel, but the numbers show that this characteristic is almost never relevant. More than 90 percent of outages result from distribution failures, not problems at power plants. And a 2017 study found that from 2012 to 2016, less than one customer-hour of outage in a million, or 0.00007 percent, was the result of anything having to do with a power plant’s fuel supply.
Given the insignificance of the alleged security problem, together with the irrelevance of fuel sources to most threats to the electrical grid, there’s no reason to view Trump’s bailout as anything but a money-grab by a troubled industry.
America’s coal industry still has a future. Coal companies have long been adjusting to the new reality and selling their fuel abroad, to countries just beginning to use electricity and where coal electric generation makes much more sense.
Trump’s attempt to manipulate electricity markets in the U.S. will only disrupt this evolution and force Americans to pay higher energy prices in the process.
