Good morning and welcome back to Energy Source, coming to you from New York.
ExxonMobil easily rebuffed an attempted shareholder revolt against its board of directors yesterday, with investors overwhelmingly voting to re-elect all 12 members. The attempted revolt was in protest over the oil major’s lawsuit against two climate-focused investors.
“Today our investors sent a powerful message that rules and value-creation matter,” Exxon said in a statement following the results. “We expect the activist crowd will try and claim victory on today’s vote, but common sense should tell you otherwise in light of the large margin of the loss.”
Meanwhile, the wave of consolidation continues to wash across the US oil patch. ConocoPhillips, one of the world’s biggest independent oil and gas producers, agreed to buy rival Marathon Oil in an all-stock deal yesterday that values the Houston-based company at $22.5bn, a merger first reported by the FT.
Today’s newsletter looks at the US power sector. Plans to retire ageing coal plants are getting pushed back as power demand is expected to surge across the country.
Thanks for reading,
Amanda
AI’s thirst for electricity means running US coal plants for longer
The US is delaying shutdowns of its ageing coal fleet amid expectations of soaring power demand from artificial intelligence and concerns over grid reliability.
Last Thursday, US utility Alliant Energy said it was pushing back plans to convert its coal plant in Wisconsin to gas from 2025 to 2028. The announcement marks the latest in a series of coal plant retirement delays this year, including grid operator PJM’s request to keep Talen Energy’s Maryland coal units running for longer, and FirstEnergy’s decision to forgo its 2030 target to phase out coal, citing the need to keep two plants running due to “resource adequacy concerns”.
The retirement delays have driven analysts to lower forecasts for coal’s phaseout. S&P Global Commodity Insights estimates 54GW of US coal capacity will retire by the end of the decade, a 40 per cent downward revision from its forecast last year. The consultancy expects coal shutdowns to average 7.5GW per year over the next decade, down from an average of 10GW annually from the previous decade.
“The existing fleet is struggling to meet the demands of all this power growth,” said Brent Bilsland, chief executive of Hallador Energy, which operates a 1GW coal plant in Indiana.
The slowdown in retirements highlights a confrontation emerging between US electricity-intensive initiatives to lead in AI and manufacturing and the country’s decarbonisation targets.
Grid Strategies, a consultancy, forecasts US electricity demand growth of 4.7 per cent over the next five years, nearly doubling its projection from a year earlier. A study released yesterday by the Electric Power Research Institute found that data centres will make up 9 per cent of US power demand by 2030, more than double current levels.
Meanwhile, a shortage of power equipment, lack of transmission and the bureaucratic hurdles for grid connection are creating multiyear wait times for renewable projects to come online to replace existing fossil capacity.
“It’s going to take a lot of thermal generation to meet this growing demand. I don’t know how we’re going to do that and then also increase our clean energy percentages at the same time,” said Patrick Finn, a senior analyst at Wood Mackenzie.
The delays are evidence to critics of the Biden administration’s energy strategy that the US Environmental Protection Agency’s guidelines to phase out unabated coal plants starting in 2032 are premature and will only exacerbate the reliability problems.
“We have a perfect reliability storm that’s brewing,” said Bill Scherman, partner at Vinson & Elkins. Randall Atkins, the former chair of the now-defunct National Coal Council and chief of Ramaco Resources, called the Biden administration’s policies “shortsighted” and warned they risked creating a shortfall in reliable power to manage the intermittent nature of renewables.
“If EPA’s [greenhouse gas] standards drive dispatchable coal and natural gas resources to retire before enough replacement capacity is built with the attributes the system needs, reliability will be compromised,” said a Midcontinent Independent System Operator spokesperson. The grid operator recorded 3.2GW of coal plant retirement delays this year.
![Line chart of Annual power demand from data centres (TWh) showing US power demand from data centres expected to surge](https://www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fd6c748xw2pzm8.cloudfront.net%2Fprod%2Fa7b2ecc0-1db2-11ef-b114-b50ef5903c84-standard.png?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1)
Members of the coal industry hope that a Donald Trump victory in November and successful court challenges to the EPA rules will create a more favourable environment for coal generation.
“We think that another [Trump] administration could bring forth sensical environmental regulations and make sure we take advantage of all of our domestic resources,” said Michelle Bloodworth, head of America’s Power, a coal industry association, which filed a motion last week to stop the EPA rules.
An EPA spokesperson said the power plant rules are on “firm legal ground” and that cumulative impact analyses of the rules show the sector can meet electricity demand while maintaining reliability and affordability and reducing pollution.
The Biden administration has set a target to reach a carbon-free power sector by 2035. US power generation from coal, the most polluting source of fuel, has fallen dramatically over the past decade as cheap gas from the shale revolution became the more economical choice and ageing coal plants went offline.
Last year, coal made up 16 per cent of the country’s electricity supply, down from nearly 40 per cent in 2014, according to the US Energy Information Administration.
![Column chart of Share of US utility-scale electricity generation by year and fuel showing Coal's share of power mix continues to fall](https://www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fd6c748xw2pzm8.cloudfront.net%2Fprod%2F68e9db50-1db4-11ef-ba99-65a1205c2956-standard.png?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1)
Environmental campaigners warned that delays to retirements should not be a long-term solution to addressing growing power demand and pushed back against industry claims that EPA rules set unrealistic timelines for phaseout.
“A number of these coal plants that have retirement dates at the moment in the late 2030s or 2040s are going to have to actually come to the table and think about how do we meet energy load growth in a cost-effective manner that also accounts for and recognises the environmental and public health costs of these facilities,” said Amanda Levin, director of policy analysis at the Natural Resources Defense Council, an environmental advocacy group.
Seth Feaster, a data analyst at the Institute for Energy Economics and Financial Analysis, told Energy Source that a slowdown in coal retirements did not change the trajectory for coal.
US coal generation is predicted to fall another 4 per cent this year as plant utilisation rates remain low, according to the EIA. Data from Argus Media shows that coal prices in the Powder River Basin, the source of most US production, are down 5 per cent year over year.
While roughly 70GW of the country’s coal generation capacity has no retirement date, IEEFA estimates the bulk of the plants are too old to consider installing carbon capture systems to comply with EPA rules and were already facing the question of retirement.
“EPA rules are really, in many ways, simply putting down on paper a reality that was already out there on the ground,” Feaster said.
![Column chart of Monthly capacity factor* showing US coal plants are operating at low utilisation rates](https://www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fd6c748xw2pzm8.cloudfront.net%2Fprod%2F54df4860-1db5-11ef-8e5d-a572fb71d1bf-standard.png?source=next-article&fit=scale-down&quality=highest&width=700&dpr=1)
Job moves
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Climate scientist Susan Avery is retiring from the board of ExxonMobil, the company announced at its annual meeting yesterday. Avery served as chair of the oil major’s environment, safety and public policy committee since 2021.
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Enverus, a US energy consultancy, promoted Manu Nikhanj to chief executive, succeeding Jeff Hughes, who will serve as executive chair.
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Brice Morlot will join BW Energy, an oil and gas company, as chief financial officer, succeeding Knut Sæthre. Morlot joins from Assala Energy.
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Petrobras has elected Magda Chambriard as its new chief executive officer after the Brazilian government fired Jean Paul Prates.
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Ipieca, an oil and gas industry association focused on environmental and social issues, appointed Paul Krishna as chair. Krishna previously worked for 30 years at ExxonMobil.
Power Points
Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.
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