Why Coal May Outlast Natural Gas in the Electricity Market

Why It Matters

A shift toward coal could reshape energy‑infrastructure investment and safeguard grid reliability during peak winter demand, challenging decarbonization timelines.

Key Takeaways

• Coal plants can store months of fuel on‑site.
• Gas pipelines risk freeze‑offs during winter peaks.
• Two fossil supply chains strain under shrinking demand.
• Mine‑mouth plants need less logistics than gas facilities.
• Renewables' growth may force fossil infrastructure consolidation.

Pulse Analysis

The concept of minimum viable scale is reshaping the economics of U.S. power generation. As solar and wind capture larger market share, the revenue base that once sustained two distinct fossil‑fuel supply chains—coal rail‑to‑mine and gas pipelines—is eroding. This mirrors a classic "death spiral" where declining utilization squeezes cash flow, threatening the upkeep of both infrastructures. Analysts warn that without a strategic response, utilities may face higher operating costs and reliability gaps as legacy assets sit idle.

Coal’s inherent logistical advantages are gaining renewed attention. Mine‑mouth facilities can stockpile several months of coal directly beside the turbine, eliminating the need for long‑haul rail or volatile spot‑market purchases. In contrast, natural‑gas delivery hinges on pipelines that are vulnerable to winter freeze‑offs, a risk amplified during short, low‑wind days when grid stress peaks. The United States, unlike China, possesses abundant coal reserves and extensive rail networks, positioning coal as a more resilient fallback for seasonal reliability.

Policy makers and investors must now weigh a nuanced transition path. Encouraging a managed consolidation of fossil infrastructure could preserve winter reliability while still advancing renewable integration. Strategic incentives for flexible coal plants, combined with targeted upgrades to gas‑system resilience, may prevent a chaotic market exit. For capital markets, the prospect of a modest coal resurgence signals potential value in assets that can pivot between baseload and intermittent operation, underscoring the importance of adaptable, low‑carbon‑compatible generation portfolios.

Why Coal May Outlast Natural Gas in the Electricity Market

By Leonard Hyman & William Tilles · Feb 17, 2026, 2:00 PM CST

As renewables expand, reduced run‑times for coal and gas plants may undermine the revenue base needed to sustain two separate fossil‑fuel supply chains. Coal‑fired plants—especially mine‑mouth facilities—could gain a late‑stage advantage due to fuel storage, winter reliability, and reduced infrastructure complexity. Without careful policy management, the U.S. risks a disorderly contraction of fossil‑energy infrastructure even as it remains necessary for seasonal grid reliability.

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The Core Question

What happens when renewables are acknowledged as the superior technology for electric power generation? We see a process of displacement (renewables displacing fossil fuels), leading to the issue of minimum viable scale in connection with the energy transition.

Minimum viable scale means the minimum throughput needed to keep a system running and economically viable. Imagine a toll road that charges fees to all vehicles to pay for maintenance. If traffic declines significantly, revenues are impaired, maintenance funds are lacking, dysfunction sets in, and eventual collapse or abandonment is likely. This is similar to the older concept called the “death spiral,” where a continuously shrinking number of utility customers are responsible for ever‑increasing expenses.

As lower‑cost renewables continue to displace fossil fuels in power generation, a similar dynamic could affect the fossil‑fuel industry infrastructure. In the U.S., we have two distinct fossil‑fuel infrastructures: railcars plus mines for coal, and drilling rigs plus pipelines for gas. The concern raised by minimum viable scale is that if fossil‑fuel output drops low enough (as renewables penetration increases) and as the run times of coal and gas‑fired generators are reduced, the industry may not generate enough revenues to adequately support two competing fossil‑fuel infrastructures in a market experiencing permanent decline.

Lessons from China

Coal‑plant operators in China are already adjusting to the “new reality” of cheap renewables. They are retrofitting their fleet so that plants originally built to operate as baseload units can more efficiently cycle—i.e., run more intermittently—because their output is being increasingly displaced by cheaper renewables. These formerly baseload fossil‑fired power plants have to run more intermittently in order to survive economically. That’s the issue we may soon face here, but with an interesting twist. China has far less domestic gas reserves than the U.S., so shaping its coal‑plant output around renewables makes perfect sense. The U.S., however, has two fossil fuels for electric power generation that want that job. Our view? “Let them fight,” as the shogun in the movie said.

Minimum Viable Scale for Domestic Producers

Renewables are cannibalizing energy production, and as in the toll‑road example, there may no longer be adequate revenues to support two parallel fossil‑fuel infrastructures for electricity production. Coal‑fired power generation requires extensive mining operations and rail connections, while gas‑fired plants require drilling, processing, and pipelines. In a weakening pricing environment with shrinking demand, we won’t need both, at least not for electricity production.

A Possible Coal Resurgence

Our conclusion, which frankly surprised us, is that coal‑fired power generation may experience a minor resurgence. A mine‑mouth coal‑fired power plant, where the plant sits adjacent to a working coal mine, requires far less infrastructure for its fuel than a comparable gas‑fired facility.

Renewables in places like Australia are, for increasing periods, totally eliminating fossil‑fuel usage for electricity while dramatically reducing consumer prices. This shrinks revenues for fossil fuels and their infrastructure: longer and longer periods where the assets sit idle. We will continue to need fossil‑fired power‑generating facilities, especially in winter, when days are shorter and wind power is often light, but we will need far fewer of them. We anticipate vicious competition for pieces of a rapidly shrinking pie.

Two Compelling Reasons for Coal’s Potential Dominance

1. Storage – Several months of coal inventory can be stored right next to the power plant, eliminating delivery or price‑volatility concerns.

2. Winter Reliability – Gas well‑head freeze‑offs are a big problem in winter and consistently pose serious reliability issues. Every recent severe cold wave has exposed weaknesses in this area. As reliance on fossil fuels for power generation peaks during winter, the relatively poor performance of the gas delivery system may become more of an issue, whereas coal’s supply chain is less vulnerable.

The article continues beyond this point, but the excerpt above captures the core arguments and analysis.