Markets aren't hurting Coal

Previously, we talked about how coal was getting older, and new stuff wasn't being built. Then, we talked about how some companies are retiring their coal more aggressively than others. This led to some puzzling questions, though; most specifically, why? Why would one company push hard to retire their coal generation while another doesn't?

One possible explanation is market participation. The argument goes something like this: wholesale power markets result in the price of power fluctuating, which can impact profits. In principle, power markets should result in the lowering of power costs at least some of the time, and thus it should favor power systems which are flexible, and can scale their power more dynamically. Because coal is inflexible, it is being driven out of the markets.

This should be relatively easy to see: we just open up Hyaline and look at our coal capacity for power markets and compare it to non-market coal, and see what's happening.

Our Non-market capacity is our baseline. In theory, one of the power markets should display a sharper downward line, and should be losing more capacity on average. Let's start with the largest power market in the US, PJM:

That is not exactly compellingly different. Let's try MISO, it's famous for having a lot of wind power:

Uh oh. MISO, if anything, is holding on to its coal better.

PJM, MISO, and non-market participants total up to 397 generators (out of 478 active in 2023), so there's not much point in looking at the other market trends. We'll just group them all up in a table for convenience:

In every case, wholesale power markets lose coal capacity at a slower rate than non-market participants do¹ . The theory does not hold water: coal is not being driven out of markets, it's being driven out of everything, and it's doing so at a consistent rate.

Unfortunately, this doesn't do much to explain why some companies are retiring coal faster than others, because it's a failed hypothesis. We can be confident saying that markets aren't the reason Berkshire Hathaway has announced a functionally complete coal exit while Duke Energy is slow-walking their assets.

Notes

1. Although to be fair, there are only 2 power markets that actually engage with significant amounts of coal anyway: MISO and PJM. So the fact that CAISO(for example) is losing coal at a slower rate is pretty meaningless.