Monticello, Texas’ Largest Coal-Powered Plant to Close: Future of U.S. Coal Industry on Shaky Ground

Texas’ Largest Coal-Powered Plant to Close
iStock.com/kamilpetran

President Donald Trump may be keen on keeping the nation’s coal industry going, but recent events show that not even Trump can stop the country’s growing dependency on natural gas and renewable energy. In fact, Luminant, a subsidiary of Vista Energy Corp (NYSE:VST), recently announced plans to shut down its Monticello Power Plant, one of Texas’ biggest coal-fired electricity plants. In total, approximately 1,880 megawatts (MW) of power will be taken offline when Monticello closes permanently on January 4, 2018.

Coal Plant Closures Jeopardize U.S. Coal Industry

On October 6, Luminant announced its plans to permanently shutter the Monticello Power Plant, located roughly 115 miles east of Dallas in the Mt. Pleasant community of Titus County. This move will leave 200 out of work.

The plant has been a major source of pollution from the smog it creates. It has an operating capacity of 1,880 MW, which is enough to power nearly 950,000 homes in normal conditions and 376,000 during a period of peak demand.

The company noted that it was closing the Monticello plant because the “unprecedented lower power price environment has profoundly impacted its operating revenues and no longer supports continued investment.”

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Hydraulic fracking has made natural gas production a cheaper option than coal, as well as cleaner. Also, consider that electricity generated via the sun and wind contributes a greater amount of MW to Texas’ power grid each year. On top of that, Texas’ deregulated electricity has left costly operations like Monticello in the dust, as the move made more competition possible.

Monticello is just the latest in a string of coal plants to announce closures across the country. In fact, Monticello represents the 259th coal power plant to either retire or announce it was closing since 2010. The U.S. is now just three coal plants away from closing half of the coal power plants that were in operation seven years ago.

And it might not take long to pass that dubious milestone. In addition to Monticello, eight other major coal-fired power plants have announced plans to retire before their expiry date. These closures total 9.4 gigawatts (GW) of lost generating capacity—which, for context’s sake, is more than all of Qatar produces today.

Economic Impact of Coal Plant Closures

In 2015, U.S. utilities retired 22.2 gigawatt hours (GWH) of power plant capacity, with coal-fired plants accounting for 67% of that number. In January, the Energy Information Administration said that trend will ramp up over the next two years.

The electricity industry is expected to increase its natural gas generating capacity by 11.2 GW in 2017 and 25.4 GW in 2018. Combined, these additions will increase natural gas capacity by eight percent over 2016. In contrast, coal-fired capacity fell by 47.2GW, or 15%, between the end of 2011 and the end of 2016. Many are also questioning whether or not the U.S. should keep a raft of nuclear plants that are in danger of closing in the coming years afloat.

Depending on which side of the argument you’re on, the death of the coal industry is either great news or a disaster in the making. While cleaner, the reliance on natural gas and renewable energy could leave the country prone to volatile electricity prices.

Moreover, coal plants and nuclear power plants add a great deal to a region’s economy. Case in point: the Navajo Generating Station, which is a 2,250 MW coal-fired power plant located on the Navajo Indian Reservation near Page, Arizona, was commissioned to run for 75 years through 2044. But now, its future remains uncertain.

Retiring the Navajo Generating Station would be a huge hit for the town of 7,600. It is estimated that the power plant contributes over $50.0 million to the city’s annual coffers. This includes $34.0 million in direct expenditures and a $17.0-million ripple effect that comes from workers spending their paychecks.

The power plant employs 226 Page residents and it is estimated that nearly 150 jobs in Page are created by the economic activity generated by the plant; that’s about five percent of the city’s total employment. Should the coal-power plant close, up to $51.0 million could disappear from the area’s economy.

This example could easily be extrapolated to show the economic impact retiring coal-fired power plants will have on regional economies across the country.

Future of the Coal Industry in the U.S.

On the campaign trail, Donald Trump said a vote for him would mean saving the country’s flailing coal industry, while a vote for Hillary Clinton would mean the death of the industry. It doesn’t look like it really matters who you voted for, as it now appears as though Trump’s recently announced efforts to repeal the federal government’s controversial Clean Power Plan won’t be enough to save coal.

It will not please some of his voters, but not even a president with the economic acumen of Donald Trump can ignore the numbers when it comes to the benefits of natural gas and renewable resources over coal-fired and nuclear options.

One recent report looked at which of the 706 currently operating coal-fired electric operating units are more expensive to run than cleaner alternatives. It found that a full 57 GW of coal capacity is uneconomic compared to existing natural gas. Moreover, another 51 GW of coal capacity is already slated to either be retired or converted to mostly natural gas.

38% of the country’s coal-fired electricity is more expensive to operate than existing natural gas plants or is scheduled to go offline. Even though 16% of the country’s coal fleet has been retired over the last five years, voters in coal-rich areas of the U.S. shouldn’t expect new coal-fired plants to fill the void.

Of the four new coal projects planned to open, only one looks like it actually will. It’s the smallest of the four—a tiny plant being built by the University of Alaska, Fairbanks.

Even giant coal utilities are switching over the natural gas and renewable sources.

Despite Trump’s desire to keep coal burning for years to come, operators of coal-fired power plants across the country have seen the writing on the wall for years. Many of them are already retiring uneconomical coal-fired power plants and replacing them with natural gas-fired plants, wind farms, and/or solar arrays.

American Electric Power Company Inc (NYSE:AEP), one of the country’s biggest coal-burning utilities, announced plans to build a $4.5-billion wind farm in Oklahoma. PacifiCorp is slowly pulling back on coal-fired power plants and upgrading its wind fleet. DTE Energy Co (NYSE:DTE) announced plans to reduce the company’s carbon emissions by more than 80% by 2015, but to get there, the company will need to retire all of its coal-fired plants and switch to natural gas and wind. The list goes on and on.

President Trump and Scott Pruitt, Administrator of the Environmental Protection Agency, may be proclaiming the end of the attack on coal, but their timing is a little off, and history could show that the Trump administration is, no matter how well-intentioned, on the wrong side of history.

 

Sources

Luminant Announces Decision to Retire Its Monticello Power Plant,” Luminant, October 6, 2017.

Texas’ Monticello Coal Plant Announces Plans To Close,” Sierra Club, October 6, 2017.

Preliminary Monthly Electric Generator Inventory,” U.S. Energy Information Administration, October11, 2017.

Natural gas-fired generating capacity likely to increase over next two years,” U.S. Energy Information Administration, January 30, 2017.

In 2017 alone, enough US coal plants to power Qatar have announced closures,” Quartz, May 21, 2017.

Coal plant pumps $51 million into Page economy,” Arizona Daily Sun, October 1, 2017.

AEP Announces $4.5 Billion Investment In 2,000-Megawatt Wind Farm And Dedicated Power Line To Benefit Customers In Four States,” American Electric Power Company Inc, July 26, 2017.

PacifiCorp Plans Significant New Clean Energy Investments,” PacifiCorp, April 4, 2017.

DTE Energy announces plan to reduce carbon emissions by 80 percent,” DTE Energy, Inc., May 16, 2017.

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