Episode Summary
Executive Summary: Joe Daniel of RMI explains how coal still persists on U.S. grids through “non-economic dispatch,” where coal plants keep running even when cheaper resources like wind, solar, and gas are available. The episode breaks down merit order, grid market structures, fuel cost recovery, transmission congestion, and why regulatory action and better market design are needed to stop coal from cutting the line.
Main Topics: Coal’s decline, but continued grid relevance (Priority: 5/5): Coal has fallen sharply from its historic dominance due to cheap gas, renewables growth, regulation, and advocacy, yet still supplies a significant share of U.S. electricity and remains operational in many regions. How electricity dispatch and merit order are supposed to work (Priority: 5/5): The conversation explains short-run marginal cost, merit order dispatch, and how grid operators decide which resources run first based on cost, constraints, and reliability needs. Why coal keeps running uneconomically (Priority: 5/5): Utilities often keep coal plants online because of sunk fuel contracts, inertia, weak incentives, fuel cost recovery, and legacy operating practices that prioritize individual plant economics over systemwide economics. Market structure differences across U.S. regions (Priority: 4/5): The transcript contrasts fully restructured wholesale markets, vertically integrated utilities, and hybrid systems, showing how transparency and competition affect dispatch behavior and accountability. Economic and grid impacts of non-economic coal dispatch (Priority: 5/5): Uneconomic coal operation increases costs for customers, worsens congestion, and can force wind curtailment; market monitors and RMI estimate large avoidable losses. Policy and advocacy levers to change behavior (Priority: 4/5): Participants discuss public utility commissions, market rules, consumer advocates, and toolkits that can help regulators and citizens challenge uneconomic coal dispatch and accelerate coal retirements. The transition path to cleaner grids (Priority: 4/5): Rather than abrupt shutdowns, Joe argues for gradually reducing coal utilization, then retiring plants with replacement resources in place to smooth the energy transition.
Key Arguments: Coal plants often operate when they are not the cheapest option, violating merit order and raising system costs. The main driver of non-economic dispatch is not engineering necessity but incentives: fuel cost recovery, inertia, and plant-level cost accounting. Markets with transparent wholesale prices make uneconomic coal easier to detect, but the issue exists in both market and regulated utility systems. Reliability is frequently cited as a defense, but prices typically rise during true reliability events, meaning many uneconomic coal runs are not justified by reliability needs. Coal’s fuel cost may be sunk in the short term, but continued burning creates long-run losses that ultimately fall on ratepayers. Transmission congestion from inflexible coal can displace wind generation, meaning coal not only costs more but also crowds out cleaner resources. A gradual move from year-round coal to seasonal or partial dispatch can reduce costs, improve grid management, and ease the transition to zero-coal operation. State public utility commissions are the key venue for change because they approve cost recovery and set the rules that shape utility behavior.
Data Points: U.S. coal share of electricity generation: under 20% - Latest annual share cited by Joe after decades when coal was above 50%. Historical coal share of electricity generation: well over 50% - Coal was described as “king” through the 1980s, 1990s, and early 2000s. Natural gas surpassing coal: 2016 - Milestone year when gas generation overtook coal in the U.S. Wind surpassing coal: April (latest cited month) - Joe noted wind alone surpassed coal in April. Coal physical minimum operating level: generally thought of as 50% - Typical minimum operating level for coal plants, though some can go lower. Coal low-load operation in Germany: 30% or even 20% - Examples of coal plants successfully cycling to lower output levels. Battery response time: seconds to milliseconds - Used as a contrast to gas peaker startup times and grid support services. Gas plant startup time: minutes to hours; up to 3 days for a cold start - Illustrates why gas is more flexible than coal, but still slower than batteries. Coal fleet with fuel cost recovery: roughly 75% - These plants account for most uneconomic coal operations. Uneconomic coal operations represented by fuel cost recovery plants: 96% - Shows that plants with guaranteed fuel recovery drive nearly all losses. Coal fleet without fuel cost recovery: 25% - A smaller share of the fleet with much lower operational losses. Operational losses from plants without fuel cost recovery: 5% - These plants account for only a small fraction of losses. Typical annual coal losses from non-economic dispatch: $1–2 billion - Estimated annual cost of uneconomic coal generation in a typical year. 2020 losses: almost $3 billion - At the beginning of the pandemic, losses increased sharply. 2023 preliminary losses: close to $1 billion - Latest annual estimate cited for the prior year. January-February current-year losses: already $1 billion - Early-year losses were already very large, especially in coal-heavy Rust Belt regions. MISO congestion cost: roughly $1.8 billion a year - Market monitor estimate of transmission congestion costs linked to coal staying online. Louisiana coal plant excess costs: $160 million - Cost attributed to the Dole Hills plant’s final years of uneconomic operation. Recovered from Louisiana utility litigation: roughly $125 million - Amount clawed back after the utility’s excessive costs were challenged.
Pivotal Quotes: "you have the merit order line, and essentially these coal plants are cutting in line." — Joe Daniel: Joe’s closing analogy for non-economic dispatch. "baseload was never meant to be a term related to reliability. It was an economics term" — Joe Daniel: Explaining how the original meaning of baseload differs from how it is often used today. "if you just want to go purely on what's going to win economically, renewables win." — Joe Daniel: Summarizing the core market signal behind the shift to clean electricity.
Implications: Coal’s persistence is increasingly a regulatory and market-design problem, not a cost problem. Listeners should focus on utility commissions, market rules, and advocacy tools that can force dispatch decisions to reflect real system costs and speed the clean transition.