Maguire: Key reasons why Trump’s efforts to save the US coal industry may fail.

The U.S. president's efforts to revive coal in the United States tap into a powerful mix of energy security, industrial policy, and electoral politics. The data shows that structural factors are driving coal's decline.

Even if the government directs tens or hundreds of millions to coal producers and utilities the result will be a misallocation, increased emissions, and higher electricity costs.

There are four reasons that efforts to support coal could ultimately fail.

1. ECONOMICS ARE STUBBORNLY UNFAVORABLE

This could be a bad idea: subsidizing coal runs counter to the fundamentals of the market, leaving taxpayers with an uncompetitive sector while driving up electricity costs.

The share of coal in the U.S. electric generation fell from 60% in 2000 to 16% by 2025. Natural gas has become more popular, cheaper and easier to transport.

The market tells a different story. Since the early 2000s, no U.S. utilities have attempted to build any new coal-fired plants.

During the same time period, many gas-fired power plants were built, reflecting a much stronger economics as well as operational advantages.

The difference is apparent in the levelized costs of energy. Lazard data shows that the cost of power from a coal plant is approximately $115 per megawatt-hour (MWh), while a gas plant costs about $64/MWh.

When utilities are focused on minimizing customer costs, they have little incentive to select coal.

The economics of existing coal plants are even worse due to their age, high maintenance costs and inefficiency. Government subsidies are able to prolong the operation of coal plants, but only by extending their life.

2. CONSTRUCTION COMPLEX AND RISKY

This could be a bad idea: Because coal plants are slower and harder to build, they're more likely to experience delays and overruns in cost even with government support.

Construction of modern combined-cycle gas turbines (CCGT) is relatively simple and quick. In contrast, coal plants require large boilers, fuel handling systems and specialized infrastructure.

Gas plants can burn fuel without any preprocessing. Coal plants must handle large volumes of solid fuels, which require transport, crushing and storage yards. They also need elaborate combustion systems.

These systems also require expensive emissions-control technology and ash disposal system, which adds to capital costs and regulatory complexity. The land requirements are also typically larger.

The industry has lost a lot of knowledge. Few utilities or contractors are familiar with building coal-fired plants after decades of focusing on gas. The resulting?execution risk increases the possibility of unexpected costs and delays.

These factors together make coal projects more costly, slower and less predictable. This is true even when the environment is favorable.

3. LOGISTICAL BURDENS

The heavy transport and handling of coal can cause local opposition and increase costs.

Gas is much easier to transport than coal. Gas can be transported continuously and cheaply via pipelines, while coal is hauled either by rail, truck or barge.

According to the U.S. Energy Information Administration (EIA), approximately 1.14 pounds coal is needed to produce one kilowatt hour of electricity. One gigawatt of coal can be used to generate around 9,000 metric tonnes of coal each day. This is the equivalent of 90 freight cars in a freight train.

A gas plant of the same size, on the other hand, would consume approximately 170 million cubic foot of natural gas per day, a volume which can be easily pumped through existing infrastructure.

In order to expand coal power, it would be necessary not only to build new plants, but also make significant investments in storage, handling, and rail systems. These extra requirements increase costs and can create bottlenecks.

Local challenges are also posed by these projects. The increased rail traffic, noise and dust can cause opposition in communities. This makes it harder for projects to be approved and sustained.

The coal industry's competitiveness is further undermined by these logistical and social constraints.

4. Limited Export Upside

This could be a disaster: Key overseas markets may not export coal because they produce it themselves or are moving away from it.

The coal revival strategy includes a boost in export capacity. This could include proposals for a "gateway" linking Wyoming production with ports on the U.S. West Coast that are aimed at supplying Asia.

Asia dominates the global coal industry. China, India and Indonesia account for collectively more than 80% global coal supply. This region is also the leader in coal exports, which indicates a structural preference for supplying coal rather than importing it.

?U.S. While?U.S.

India is heavily dependent on coal and investing in alternative sources of energy.

If demand does not materialize, then large-scale infrastructure for export could be underutilized or stranded. Projects backed by the public could generate limited returns and lock in significant upfront costs.

COAL CRUX

These factors, when taken together, point out a fundamental mismatch in policy ambition and economic reality.

Government intervention can slow down coal's decline on the margins but it cannot change the structural forces which have made it less attractive than alternatives.

Subsidies instead risk prolonging the life of an aging infrastructure and encouraging expensive new projects that have uncertain returns. They also support export strategies which are unlikely to be sustained over time.

What appears politically appealing in the short-term could prove to be economically counterproductive.

These are the opinions of the columnist, an author for.

You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn, X and X.

Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets 7 days a weeks.

(source: Reuters)