Why Donald Trump Can't Save the Coal Industry

Trump coal
Delegates from West Virginia hold pro-coal signs on the second day of the Republican National Convention in Cleveland on July 19, 2016. REUTERS/Aaron P. Bernstein

With a stroke of a pen on Tuesday, President Donald Trump set off a panic among environmentalists and celebrations in coal country in an executive order he proclaimed would lead to a "new era in American energy."

Everybody needs to calm down. The terror and revelry are not only premature but also based on projections for a future that will never arrive. Trump's executive order reversing the Obama administration's Clean Power Plan designed to cut carbon pollution from power plants is meaningless. Washington has far less ability to change the direction of economic forces than politicians and the public seem to believe. Laws could be passed providing new federal support for the buggy whip industry, but that business is not coming back. The same goes for coal; the world has simply changed too much. Coal, by any reasonable measure, is on life support and won't be recovering no matter what Trump and Congress do. A revitalization of the industry—which would push up the pollution generated by this dirty fuel—is not going to happen.

Related: Trump can't bring back mining jobs, coal CEO warns

A large part of the blame—or credit, depending on your politics—can be traced to the Enron Corp., the scandal-torn company that collapsed into bankruptcy in 2001. Enron produced a lot more than accounting fraud; beginning around 1990, it was at the forefront of developing fixed-price contracts for the natural gas industry. Until then, electrical power plants fueled by natural gas were subject to the vagaries of what is called the "spot market"—the price for the commodity at any particular instant. Prices for clean-burning natural gas experienced wide swings, leaving utilities incapable of projecting their future costs. Enron took advantage of that problem by creating fixed-price contracts. In simple terms, the company purchased gas still in the ground and then sold the fuel to power plants at a price guaranteed not to change for a year or longer. The result was that the gas went from a variable cost (unpredictable, moving day to day), which left the utilities open to crushing price changes, to a fixed cost. As a result, natural gas power plants became much more economically viable.

The impact of this change in the economics of gas hit fast. From the late 1970s to about 1990, the total share of electricity generated by burning coal was in excess of 50 percent, according to the U.S. Energy Information Administration. Between 1989 and 1990, natural gas made up less than 10 percent. Then, with the advent of fixed-price contracts for gas—and the knowledge in the power industry that coal was a long-term loser because its environmental effects would not be ignored by regulators forever—the switch began. The percentage of power from coal collapsed, while the amount from natural gas steadily rose. Last year, for the first time, more power was generated by gas-fired plants than by coal. According to the EIA's most recent annual coal report, production dropped by 10 percent in 2015, and the number of employees at coal mines dropped to about 65,000 people, the lowest level on record.

Another important fact here: Power plants take a long time to build, and refitting them to use another type of fuel is an economically and technically ridiculous idea. No industry is going to start tossing out plans for a multiyear building project based on something done by a president who could be replaced in four years (or four months). And at this point, there is no turning back from the direction of plant construction.

Coal plants have been closing year after year. In 2005, there were 619 coal-fired power plants in the United States; that number dropped to 427 by 2015—long before the Obama administration announced the Clean Power Plan. In fact, since Trump won the presidency, six more coal-fired power plants have closed or announced they will. Over the same time, the number of natural gas plants climbed from 1,664 to 1,779. (And don't forget the many non-hydroelectric plants running on renewable energy like solar. Those climbed from 781 to 3,043. Such renewables, which generated next to nothing in 1990, now account for almost 10 percent of total power generated in the U.S.)

Given the length of time it takes to build a power plant, the future for natural gas over the next few years is already predictable. Another 19 gigawatts of electricity generation capacity is scheduled to come online by the end of next year, with Texas having the most under construction. And what is the probability that Republicans will move to cripple a huge business in a must-win, deeply conservative state in a futile attempt to bring back a dying industry?

Then there is the issue of technology development on employment in coal. No longer is this a dig-deep-into-the-ground, pickax, haul-it-out business. Even if the coal industry starts booming—which it won't—the jobs are gone forever. Technology is taking the place of miners. Digging deep mines in the Appalachians is more expensive than strip mining with machines out West or blowing up mountain tops; handfuls of explosives experts are more likely to get jobs from any expansion than thousands of miners.

In other words, when Republicans rage about a "war on coal" or "bringing back coal," they're lying to win votes. So, rather than worrying about elections, perhaps it's time for politicians to start worrying about jobs and improving the lives of people in the mining states. One way to do that is for Washington to recognize that renewables are one of the fastest growing businesses out there and one that will not be stopped.

A study published last year in the peer-reviewed journal Energy Economics says coal miners could cheaply and easily be retrained for jobs in the solar energy industry. The solar industry is experiencing employment growth 12 times that of the entire economy. With the Bureau of Labor Statistics estimating jobs in solar energy will increase by as much as 24 percent by 2022 from a decade before, the employment opportunities for solar panel installers and other jobs in that industry are enormous. And unlike wind and hydroelectric, solar is not geographically limited and so could absorb the vast supply of coal miners with modest relocation costs—if any—for miners and their families.

"A relatively minor investment in retraining would allow the vast majority of coal workers to switch to [solar]-related positions even in the event of the elimination of the coal industry,'' according to the study, which was written by Joshua Pearce, associate professor in the department of electrical and computer engineering at Michigan Technological University, and Edward Louie, a doctoral student at the School of Public Policy at Oregon State University. "Even if completely subsidized by the federal government, [the cost], ranging from $180 million to $1.87 billion, would only amount to 0.0052 percent and 0.0543 percent of the U.S. federal budget, respectfully."

Even for a deficit hawk, the highest estimated cost for retraining is a great deal. In 2016 alone, the price tag for the federal fund to aid miners disabled by black lung disease was almost $1.4 billion—$500 million less than the highest projected cost for retraining. And retraining is a onetime cost; the black lung fund is an expense every year. Between 2014 and 2016, the price for the disability fund was more than $3 billion. If the fantasy that coal made a resurgence and somehow companies abandoned advanced cutting-edge technology to hire miners came true, the budget for black lung disease would go up.

Now notice, I have not mentioned climate change once. When it comes to this issue, it doesn't matter if Republicans deny the science about that long-term threat. The issues here are markets and jobs. In other words, there is no war on coal. But there is a war on coal workers, and the only way to end it is to put up the money to shift them into the modern world.