Natural gas already won the battle with coal on America’s Atlantic coast. Now it’s about to move west and take Ohio — and President Donald Trump’s new rollback of environmental regulations won’t stop the rout.
At least six gas-fired plants are planned in the Ohio River Valley over the next four years. That’s enough to supply more than 4 million homes, and topple coal as the state’s main source of electricity.
Because gas is cleaner, its displacement of coal was cheered by the Obama administration. Still, it was the economics of shale drilling, not the government’s environmental rules, that drove the change. Gas prices have fallen almost 80 percent since mid-2008 as production surged across the country.
That’s what makes it so hard for Trump to bring back mining jobs in states like Ohio where the coal vote helped put him in the White House. It’s one thing to scrap his predecessor’s green agenda, as Trump did today with an executive order that cancels various carbon-cutting policies. Taking on the market is another matter.
“Ohio coal is already feeling the pressure,” said John Bartlett, who helps manage about $2.5 billion of energy and utility stocks at W.H. Reaves & Co. Inc. in Jersey City. “It’s going to be more and more intense as the decade wears on.”
Historically, gas prices have been volatile. The risk is that by the time they swing up again, other producers — nuclear, as well as coal — could have been driven out of business.
Toby Shea, senior credit officer at Moody’s Investors Service Inc., said that coal closures in places like Ohio will have a “rippling effect” across markets, pushing already-low electricity prices even lower. It could turn the world’s single biggest competitive power market — the one operated by PJM Interconnection LLC across 13 states from the mid-Atlantic to the Midwest — into a “distressed market” where generators struggle to turn a profit, he said.
In Ohio, collapsing prices forced FirstEnergy to book a $9.2 billion charge in February. Its Akron-based neighbor American Electric Power Corp. had a $2.3 billion writedown, and also sold four plants last year. They were performing fine, but “the problem was, what are they going to do next year and 10 years from now,” said Mark McCullough, executive vice-president of its generation unit.
In a cheap-gas world, its rivals are pushing for government aid to survive. Exelon Corp. won nuclear subsidies in Illinois and New York, with other states expected to follow. In Ohio, FirstEnergy is pushing for “legislation that recognizes the value of nuclear power,” spokeswoman Jennifer Young said.
But the same company’s efforts to get coal subsidies in Ohio failed.
Without state or federal support, “it’s a question of how long these coal plants hang around,” said Prajit Ghosh, an analyst at Wood Mackenzie Ltd. “The economics are more and more strained.”