Can coal compete?

Steven Winberg, the Energy Department’s assistant secretary for fossil energy, told the Washington Examiner that coal could compete in wholesale power markets that reward the lowest cost resource if gas prices more than double in the future, from their current level of below $3 per million British thermal units, or BTU.

“Looking through a crystal ball is always a dangerous thing to do, but it is our job at DOE to look out over the horizon and say, ‘What if?’” Winberg said. “What happens if natural gas prices go back up to the $6 or $7 per million [BTU] range, where they have been off and on for the last 40 years? Coal might compete handily in that market, where if the price is down around $3, coal won’t compete.”

Yet energy experts and research agencies, not to mention utilities themselves, consider the prospect of significantly higher gas prices unlikely, with the shale boom showing no signs of slowing and gas now America’s top electricity source.

Utilities planning futures without coal are unconvinced by the Energy Department’s latest argument, which is part of the Trump administration’s multipronged effort to help the fading fuel source.

Utilities increasingly prefer natural gas and renewables, not only because they are cheaper, but also because they are easier to approve as the public demands cleaner energy.

“There would have to be a very significant change in the long-term outlook for natural gas — supply or price — to support construction of new coal-fueled generation,” Melissa McHenry, a spokeswoman for Ohio-based American Electric Power, one of the nation’s largest utilities, told the Washington Examiner.

Southwestern Electric Power Company, a subsidiary of American Electric Power, built the last new coal plant in the U.S., which went online in 2012.

The 600-megawatt Turk Plant, based in Fulton, Ark., is the first “ultra-supercritical” coal plant in the U.S., meaning it runs more efficiently and uses less energy, producing fewer emissions. But McHenry said American Electric Power has “no current plans” to build any future coal plants.

Other utilities are planning without coal.

Asked about the outlook for coal if natural gas prices rise, Schuyler Baehman, a spokesman for Atlanta-based utility Southern Company, touted a recent proposal by one of its subsidiaries, Georgia Power, to shutdown one gigawatt of coal generation, swapping it out with a more than equal amount of renewable energy.

“The pathway for new coal construction is difficult to make out,” Scott Segal, an attorney with the firm Bracewell who represents utilities that run coal plants, told the Washington Examiner.

Still, the Energy Department’s warning that gas prices could soar cannot be totally discounted.

The Energy Information Administration, in its annual outlook released last month, projected that gas prices will rise slowly due to increased domestic demand and new export markets for liquefied natural gas.

However, the projected rise is modest, with EIA predicting prices will remain lower than $4 per million BTU through 2035 and less than $5 per million BTU through 2050 because of a continued increase in U.S. production, especially in the Permian Basin, which straddles Texas and New Mexico.

The price stability of natural gas was demonstrated during the deep freeze that overtook the Midwest and East Coast in late January. Despite record demand for natural gas during the cold stretch, prices stayed low.

“There is no feasible constraint to the amount of natural gas available in the market,” Dean Foreman, chief economist of the American Petroleum Institute, told the Washington Examiner. “That has taken the air out of arguments against gas’ resilience.”

There is a higher potential for gas prices to rise in areas such as the Northeast, where there is a shortage of pipelines to deliver it, experts say. But politicians in those regions, especially Democrats in New York, are hostile to fossil fuels — having moved to block pipelines — and unlikely to support new coal development.

“There is no reason to believe that, having opposed gas pipelines largely for environmental reasons, politics in those places would be in any respect more open to coal,” said Travis Kavulla, director of energy and environment at R Street Institute.

Some in the energy market worry about a different risk, that the booming demand for natural gas abroad could increase domestic prices.

The Industrial Energy Consumers of America, which represents electricity users such as DuPont and Dow Chemical, released a report in January warning LNG exports will double in a year.

LNG is the chilled, liquid form to which gas must be converted for shipment in giant tanker vessels across the sea.

Investment in U.S. LNG export terminals has skyrocketed in recent years, with more than a dozen proposed facilities slated to be reviewed by the Federal Energy Regulatory Commission.

“LNG exports create winners and losers,” the Industrial Energy Consumers of America report said. “The winners are the producers and exporters of natural gas. The losers are consumers and the economy.”

Foreman of the American Petroleum Institute argues the U.S. is producing so much gas it can’t consume it all alone.

“Everyone is sensitive to that argument, but the gas being exported is new, incremental production that is not needed domestically,” he said. “That is not cannibalizing the domestic market.”

The Trump administration is not leaving it to markets to revive coal.

Trump’s Environmental Protection Agency has moved to weaken regulations on emissions of existing and new coal plants, reducing burdens to keep old plants running and lowering the costs to build new ones.

The Energy Department is funding research into a “next generation” of coal plants that would be smaller and more efficient. It is supporting technology to capture and store carbon emissions from coal plants, aiming to help reduce its cost.

The administration has also pushed for reforms in energy markets so resources such as coal and nuclear can be paid more, and kept alive, because of their ability to store fuel on site, which the administration sees as crucial backup for disruptive extreme weather events because gas is dependent on pipelines and wind and solar vary depending on conditions.

The coal industry is more hopeful about electricity market reforms than rising natural gas prices.

“If there was a floor on how many fuel-secure resources a market must have, that would dictate the reason to build a new coal plant more so than natural gas prices,” Michelle Bloodworth, president and CEO of American Coalition for Clean Coal Electricity, told the Washington Examiner. “The decision to build a coal plant could change in the future because of these discussions around reliability, resilience, and fuel security.”