The Return of Coal

Coal Power’s Uneasy Revival Amid Rising Demand

For more than a decade, the U.S. coal industry has been in steady decline, marked by dwindling investment, shrinking capacity, and the rapid rise of natural gas and renewable energy. Coal-fired power plants produced 15% of U.S. electricity in 2024 — down from 50% in 2000. Advances in fracking and other drilling technologies have flooded the market with inexpensive natural gas, further displacing coal. Today, the nation’s remaining coal plants run at roughly 40% capacity, providing power to the grid less than half the time.

Throughout the past decade, most coal plants have operated in “maintenance-only mode.” Faced with low wholesale power prices and high regulatory uncertainty, utilities deferred major investments, allowing units to deteriorate and run at lower efficiency levels. Chronic slagging and fouling became routine. Although retirements of aging coal-fired units continue, some plants once slated for closure remain online under Department of Energy (DOE) Emergency Orders, kept running at significant cost to meet surging electricity demand. One example is the J.H. Campbell Complex, which costs roughly $615,000 per day to keep operational. Shutting it down would now require a new emergency order. Recent DOE actions have granted nearly 70 coal-fired plants extensions beyond their planned closure dates in the name of national security, effectively overriding state and local efforts to promote cleaner, healthier energy systems. Many of these plants are being used to supply power for the rapidly expanding network of artificial intelligence (AI) and data centers, tethering modern technologies to outdated, high-emission infrastructure.

Since the mid-2000s, hundreds of coal plants have retired as utilities transitioned to natural gas, wind, and solar generation. Stricter federal air and water pollution standards have also made coal more costly, while mining itself — linked to water contamination, air pollution, and black lung disease — has faced tighter restrictions.

Now, utilities are being asked to do more, operate more efficiently, and run cleaner without significant capital upgrades. The surge in electricity demand from AI and data center growth has led utilities to keep more than 40 coal units open past their scheduled retirement dates. With the Trump administration moving to relax pollution limits on coal power, more plants could remain in service longer, or run more often, extending the industry’s footprint even as the clean energy transition advances.

Trump Administration Executive Actions 

President Donald Trump has signed Executive Orders (EO) that place coal at the center of the administration's efforts to enhance national and economic security, power the AI-driven economy and revitalize domestic industry by setting a national policy for federal agencies to support the coal sector. Key Provisions of the EO include:

• Ending the Coal Leasing Moratorium: The Department of Interior (DOI) will officially end its moratorium on federal coal leasing by reducing regulatory barriers and promoting energy independence. In further support of coal leasing, the Bureau of Land Management (BLM) will pursue the amendment process to the Buffalo and Miles City resource management plans in Wyoming and Montana. This would create a path forward to accessing untapped federal coal reserves, especially in high-production areas like the Powder River Basin in Wyoming.
  
  
  • Lease sales under the One Big Beautiful Bill Act (OBBBA) are already underway, including projects at Freedom Mine and Falkirk Mine in North Dakota and major expansions at Warrior Met, Skyline, Spring Creek, and West Antelope III. Together, these sales stand for hundreds of millions of tons of coal and decades of energy production. At the same time, a reduced 7% royalty rate will help ensure producers can compete in global markets while sustaining revenues for taxpayers. 

• Unlocking Coal on Federal Lands: The EO launches an aggressive federal land strategy to accelerate access to coal resources. These land-access measures lay the groundwork for a potential resurgence of federal coal production, positioning coal as both a stabilizing force for the grid and a critical part of industrial revival.
  
  
  • In June 2025, DOI announced availability of more than $119 million in fee-based grants for eligible states and tribes for abandoned mine land This funding is intended to revitalize coal communities by ending dangerous mine hazards and restoring polluted lands. For the fiscal year 2025, 24 coal-producing states and two tribal programs are eligible for grants. A mandatory 5.7% sequestration applies to the total, resulting in a final amount of $112.9 million.
    
    
  • On September 30, 2025, DOI announced the auctioning of 13.1 million acres of federal land for new coal leasing and lowering royalty rates to strengthen competitiveness, and streamlining approvals for projects in Alabama, Montana, Utah, and Wyoming. These actions follow passage of the OBBBA, which directs the DOI to make other acres of coal available for development and provide regulatory certainty for produce
    
    
• Aligning Coal with Emerging Industrial Demand: The EO reflects a broader realignment of coal policy to meet the needs of emerging industries. It directs the DOE & DOI to explore coal potential to power AI data centers.
  
  
  • On September 29, 2025, DOE announced a $625 million investment in America’s coal industry, with the stated intent to increase energy production and “support coal communities nationwide.” Within this budget allocation, $350M will be provided for coal recommissioning and retrofit, $175M for rural capacity and energy affordability projects, $50M to support the development and implementation of advanced wastewater management systems, $25M for engineering and implementation of dual firing retrofits, and $25M for development and testing of natural gas cofiring systems.
    
    
  • On September 29, 2025, DOE also issued a Notice of Funding Opportunity (NOFO) for up to $100 million in federal funding to refurbish and modernize the nation’s existing coal power plants. This effort will support practical, high-impact projects that improve efficiency, plant lifetimes, and performance of coal and natural gas use.

Effects of a coal resurgence on retail energy providers

A resurgence in coal usage, primarily driven by high natural gas prices and increased overall electricity demand presents a mixed and complex picture for retail energy providers (REPs). While a coal resurgence offers short-term relief from high natural gas prices and helps meet increased demand, it worsens long-term price volatility and poses a significant economic, regulatory, and competitive risk for retail energy providers in the transitioning energy market.

• Upward Pressure on Retail Prices: A reliance on coal, which is an aging resource with volatile fuel costs, results in higher and more volatile retail electricity prices for consumers over the long term. This can make it more challenging for REPs to offer stable, competitive rates unless they have effectively hedged their costs through forward contracts.
  
  
• Price Volatility and Risk Management Challenges: Fossil fuels like coal and natural gas are subject to the volatility of global commodity markets. While a current price advantage compared to natural gas has prompted higher coal use in the short term, this can reverse. REPs heavily dependent on spot market purchases during these volatile periods face increased financial risk and uncertainty, which is often passed on to consumers in the form of price spikes.
  
  
• Competitive Disadvantage Against Renewables: The long-term economic trend shows that new renewable energy sources (wind and solar) have significantly lower operational costs and are more insulated from commodity price volatility than fossil fuels. REPs that do not diversify their portfolios risk becoming less competitive compared to those investing heavily in lower-cost, stable-price renewable capacity.
  
  
• Regulatory and Reputational Risks: Increased coal usage runs counter to broader environmental goals and can lead to heightened regulatory scrutiny (e.g., carbon pollution standards) and potential legal challenges. REPs may face reputational risks and pressure from customers and investors who prefer cleaner, more sustainable energy options.
  
  
• Infrastructure and Reliability: The existing coal fleet helps address immediate concerns about grid reliability and the capacity crunch caused by surging demand from new industries like AI data centers. This continued availability of dispatchable power can be a critical operational benefit for REPs needing to ensure an uninterrupted supply.
  
  
• Opportunities for Coal-Heavy REPs: For REPs and utilities with existing coal plants, the resurgence offers a chance to maximize the use of these "existing assets" to meet surging demand and function as a price "shock absorber" when natural gas prices are high. This can provide an immediate operational advantage and boost profitability during peak demand periods.