The Decline of Coal: Competition or Collusion?

Has the decline of coal as a fuel for electric power been driven by collusion? That’s the allegation made by eleven states, led by Texas, in a new lawsuit against BlackRock, State Street, and The Vanguard Group – three of the largest investment firms in the world, each of which has large ownership stakes in the largest U.S. coal companies.

The suit alleges that these three firms, through their stock holdings in the nation’s largest coal producers, such as Peabody Coal and Arch Coal, have colluded to force those companies to reduce production and raise the price of coal used to generate electricity. The lawsuit alleges this has been done under the guise of promises made by the three firms to reduce greenhouse gas emissions and to force companies they invest in to adopt environmental, social, and governance (ESG) policies, including reductions in carbon emissions, rather than maximizing profits.

Regardless of the merits of the allegations, the decline in coal’s share of electricity generation is an inevitable consequence of two forces: government regulations and market competition from more efficient natural gas generators. For example, the newest natural gas generating plants are twice as energy efficient as many older coal plants. In other words, new gas plants can generate twice as much electricity for the same amount of energy input as a coal plant.

Coal consumption by electricity generators peaked in 2007, the same year that the U.S. Supreme Court held that carbon dioxide emissions could be regulated by the Environmental Protection Agency (EPA) under the Clean Air Act. Although the number of coal-fired power plants had already been falling, that “endangerment finding” by the EPA hastened coal’s demise.

Although a few coal plants were built after 2007, none have been built in the United States since 2013. Most existing coal plants were built between 1950 and 1990. Typically, as plants age, they become less efficient and more costly to maintain. Consequently, many US coal plants are approaching the end of their useful economic and physical lives.

Coal’s dominance for generating electricity – 633 plants that accounted for half of all U.S. electricity generation in 2002 – has been supplanted by natural gas, along with heavily-subsidized wind and solar power. In 2023, only 227 coal plants were still operating, providing just 16% of all electricity generated. More plants are scheduled to be retired in the next few years.

In contrast, natural gas generation has soared. Between 2002 and 2023, the number of gas-fired plants increased by almost 25% to 2,084. In that same year, natural gas provided 43% of all generation. Ironically, the state with the most natural gas-fired generating capacity is Texas.

Modern civilization would not have been possible without coal. Coal made the industrial revolution possible by displacing wood, which for thousands of years had been the world’s primary energy resource. For decades, coal-fired generation provided the electricity this country needed. But just as coal displaced wood, natural gas is now displacing coal because it is cleaner, more efficient, and cheaper.

Eventually, natural gas will be displaced, most likely by nuclear power, which is emissions-free. And after that, who knows? Perhaps fusion power or something even more exotic that has yet to be discovered.

This lawsuit, whatever its merits, won’t change that inexorable path of technological advancement.

Opinion By Jonathan Lesser

Jonathan Lesser is a senior fellow with the National Center for Energy Analytics and the president of Continental Economics. The views expressed are solely those of the author.