Over the weekend, American Electric Power — a utility that produces more coal electricity than any other U.S. power company — strongly affirmed the clean energy transition.
Coal's market share is changing for several reasons, AEP President and CEO Nicholas Akins told NPR this weekend.
“Our investors certainly expect us to really focus on sustainability and de-risk our business,” he said. “So we continue to focus on that. Secondly, from a customer standpoint, there's an expectation that we move to that cleaner energy economy.”
After years of market dominance, coal is facing a bevy of new competitors. Any new coal generation must be weighed against cheaper natural-gas generation and the declining costs of renewables, Akins noted.
Faced with that competition, 89 gigawatts of coal capacity — a quarter of the U.S. coal fleet — has either shut down or been slated for retirement since 2010.
AEP's resource plan for the next few years calls for new wind and solar generation backed up by flexible natural gas.
“We still believe that coal should remain a part of the portfolio, but certainly, a smaller part of the portfolio, so that we can manage risk and have multiple sets of solutions available to us,” Akins explained.
Risk management is crucial to understanding Akins' approach to fuel mix. He's not opposed to using coal as a fuel. It just carries certain risks that competing fuels don't.
Coal plants are getting more expensive to build, whereas renewables keep getting cheaper. A new coal plant today would cost upward of $4 billion, Akins said.
“That's a lot of capital, because you're not only building the generation facility itself, but you're building all of the environmental equipment attached to it, which is substantial,” he said. “It actually is a chemical factory that happens to produce electricity.”
AEP was ranked as the largest emitter of carbon dioxide among U.S. power companies in a 2016 report by environmentalist and utility industry groups. Akins is not coming at this as an idealist. His reasoning for predicting a continued decline in coal investment draws entirely on market data: consumer and investor sentiment, fuel costs and pricing trends.
Pulling out of the nonbinding Paris accord does not change the basic cost structure of modern coal plants, or the competitive dynamics of today's energy markets.
Trump has argued that removing environmental restrictions put in place by President Barack Obama will allow increased development of the nation's coal reserves, as well as increased employment and wealth in coal-heavy regions.
When asked if the president's actions will help those coal miners, Akins didn't say no, exactly.
Instead, he suggested that the key to creating new prosperity in coal country lies in recognizing the workforce's competitive advantages. AEP studies have found mechanical aptitude in coal mining areas to be eight times the national average, due to the long history of mechanical experience in the mining industry.
“That really lends itself well to other forms of manufacturing like defense, aerospace engineering — that kind of thing,” Akins said. “And so we're trying to locate facilities at these regions to not necessarily put coal miners back to work in the coal mines, but make manufacturing incentives to put people back to work.”
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