Texas plants shuttering in spite of Trump’s policies

Source: Benjamin Storrow, E&E News reporter • Posted: Wednesday, October 18, 2017

Coal plants are shuttering in Texas, despite the Trump administration’s promises to revive the ailing industry.

A series of coal plant retirements in the Lone Star State marks a new chapter in the industry’s struggles, analysts say, hinting at the wider challenges facing the administration as it embarks on a rescue effort to stem the wave of plant closures nationwide.

Texas is America’s top coal-burning state, meaning it plays a disproportionate role in the industry’s fortunes. In 2016, the state consumed almost 80 million tons of coal, or more than twice that of Illinois, the second-largest coal-burning state in the country. Texas has also avoided the coal plant closures seen in other parts of the country in recent years, making it something of a bright spot for the ailing industry.

But no longer.

The combination of cheap natural gas prices, an oversupplied power market and tepid demand growth is changing the equation in Texas, where producers have struggled for years to navigate a period of low wholesale power prices. Luminant, one of Texas’ largest power companies, announced plans this month to retire three massive coal facilities. They join another large plant near San Antonio on the list of facilities to retire next year.

Together, the four plants scheduled to retire next year burned about 19 million tons of coal in 2016, according to preliminary federal figures, representing almost a quarter of total Texas coal demand, or more than all the coal burned in Wisconsin last year.

“Big Brown and Monticello are workhorse coal plants in this country,” said Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis, referring to two of the retiring Luminant plants. “At their peak, they were [consuming] 10 to 15 million tons a year, but they have dropped down considerably in recent years.”

The retirements come amid a concerted effort from President Trump to boost the flagging industry. U.S. EPA under Administrator Scott Pruitt has repealed the Clean Power Plan — a rule to limit power plants’ greenhouse gas emissions — and a series of other environmental regulations that he argues disadvantage coal facilities versus other energy sources.

Energy Secretary Rick Perry has proposed paying coal and nuclear plant owners to store large reserves of fuel at their facilities. He maintains that subsidies are needed to keep the plans online and ensure the resilience of the American power sector.

The problem is that those plans make marginal improvements in coal’s position without changing the fundamental economic challenges facing the industry, analysts said.

Many Texas coal plant operators have idled their facilities and put off investments in hopes they could survive until higher power prices arrive, said Aneesh Prabhu, a senior director who tracks the utility industry at S&P Global.

Instead, natural gas prices have remained low and a rising supply of wind power has depressed prices further.

“Now there is some capital spending required to keep them on, and that’s not what they’re willing to do,” Prabhu said, noting that it is far cheaper to invest in a new natural gas facility than to upgrade an aging coal plant.

Another problem for coal: renewables.

Wind and solar offer a higher degree of investment certainty because they don’t require spending on fuel and Texas has invested in the infrastructure to serve renewable generators, said Joshua Rhodes, a research fellow at the Energy Institute at the University of Texas. He estimates the state is on track to boast 24,000 megawatts of wind generation by the end of 2018.

Coal, by contrast, could be looking at 14,700 MW of capacity by the time the year is out.