Federal subsidies for coal plants may not save struggling sector, analysts say

With hundreds of millions of dollars in additional federal subsidies recently announced for coal-fired power plants across the US, questions remain over whether the funding will move the needle for a sector that continues to lose ground to natural gas and renewables. Some analysts said investments in existing and new coal plants may pose risks for developers and electric utilities.

President Donald Trump announced the latest round of grants during a June 4 White House event touting "beautiful, clean coal."

Nine of the 15 existing coal-fired power plants selected to receive funding for upgrades, and one new plant planned for West Virginia, belong to the PJM Interconnection wholesale electricity market, where coal generation is expected to shrink in the coming years.

The S&P Global Market Indicative Power Forecast for the first quarter of 2026 shows coal generation in PJM declining from about 20% of the power mix in 2027 to about 10% by 2031 and dropping further after that. Even with the new federal funding in the picture, the trend is unlikely to change, said Tanya Peevey, a senior principal analyst with S&P Global Energy CERA.

"Gas plants in PJM are forecast to not fully meet debt return requirements on energy revenue alone and rely heavily on capacity revenue to meet debt payment obligations, both to the bank and equity holders," Peevey said in an interview. "Coal power plants, which typically run much less often, are going to meet this same difficultly even in markets where demand is growing, as resources that are cheaper to run — gas and renewables — will be dispatched first."

The infusion of federal funding is unlikely to move future projections of debt payments down far enough to make coal plants more competitive than natural gas-fired generation despite power demand growth, Peevey said.

Ari Peskoe, director of Harvard University's Electricity Law Initiative, agreed.

"The subsidies allow the coal plants to come back online or just barely survive," Peskoe said in an email. "I don't think they will make them competitive in the market or otherwise cost-effective."

$850 million in new DOE subsidies

In addition to the grants for existing coal plants, Trump said 42 coal mines would receive $700 million in federal support for upgrades to boost production. The funding also covered support for a new coal export facility in Oakland, California.

The US Energy Department issued press releases after the June 4 White House announcement saying that up to $500 million would be allocated under the Defense Production Act for projects at existing plants. It also said another $350 million under the DOE's Coal Recommissioning and Modernization initiative would support the construction of the new West Virginia coal plant and one new plant in Alaska — the first major coal generation to be built in the US since 2013.

The DOE did not respond to an email seeking clarification on the funding numbers.

In addition to the grants supporting development of the new plants, the Coal Recommissioning and Modernization initiative provided $78 million to restart the 205-megawatt Warrior Run coal plant in Maryland that retired in 2024, and $164.5 million to retrofit the 510-MW Guayama plant in Puerto Rico. Both plants are owned by AES Corp., which operates power plants worldwide.

The investments come despite the adverse public health impacts from coal-fired generation documented by numerous scientific studies. Coal plants emit about twice as much climate-warming pollution as natural gas-fired generation does, along with fine particulate matter, mercury and other hazardous pollutants.

Markets with little competition

Alaska may have a case for a new coal plant because it does not have any other good options for replacing natural gas wells that are being depleted, said Ian Lange, an associate professor of economics and business at the Colorado School of Mines. The new West Virginia plant will be built in a state with a strong pro-coal history, and Puerto Rico is in a tight spot because it cannot buy natural gas from the US under federal law, he said.

Coal plants operating in states or wholesale markets with robust competition may be in a different situation.

"If you're not competing now, you're not going to compete in the future," Lange said. "You've got to be able to tell a story about a natural gas price spike that allows coal plants back in. As long as the natural gas system can plan and keep drilling to meet that demand, I don't really see those sustained price spikes happening."

Coal plant operators on the receiving end of the federal subsidies had a different view.

"The DOE funding will defray the cost of projects to enhance resilience and flexibility at two of [our] baseload coal plants and ensure the continued reliability of electric service for 1.2 million Kentucky residents and thousands of businesses," said Nick Comer, a spokesman for East Kentucky Power Cooperative Inc.

The cooperative, which in 2025 depended on coal for nearly 90% of its power generation, will get $90 million for "significant upgrades" at its 1.3-GW H.L. Spurlock and 341-MW J. Sherman Cooper plants. Its 16 distribution cooperatives and owners will kick in nearly $272 million as a cost share. Exactly how the funding will be deployed has not yet been decided, Comer said.

Projects that come online in the next year and provide additional years of round-the-clock generation could give grid operators some relief, said Susan Tierney, a senior energy adviser for the Analysis Group consultancy who served as DOE assistant secretary in the Clinton administration. Investors may feel differently, especially when it comes to funding new coal plants, she said.

"I feel like the risk profile of new or retrofitted coal is just inherently highly risky," Tierney said. "There are lots of reasons investors are eager to see movement to market quickly and these will take a while to move through the process, even if the federal government is supportive of them financially and in permitting processes."

Another risk is the durability of federal policy, along with possible litigation over the subsidies, Tierney added.

Carbon capture grants scrutinized

The Trump administration's funding announcement also brought carbon capture projects back in view.

The Alaska project was selected for $89 million to explore whether a 1.3-GW coal plant with a "fully integrated carbon capture system" near Anchorage is viable. The Terra Energy Center project, led by the coal mining company Flatlands Energy, has been in the works for several years and raised some concern locally.

"What we are seeing is a familiar pattern: private interests seeking public subsidies while Alaskans are left carrying the risk," Melis Coady, executive director of the Susitna River Coalition, said in a statement. "Before more public money or public land is committed, Alaskans deserve clear answers about ownership, costs, infrastructure needs, and who actually benefits."

However, Alaska State Representative Kevin McCabe, a Republican, said the new coal plant will bring the region energy security. "A coal plant in the Susitna basin gives [us] dispatchable power made entirely inside Alaska," McCabe said in a June 5 statement. "It does not eliminate gas, hydro, or wind — it backs them up. When global LNG prices spike, Alaska coal stays priced on Alaska terms."

In West Virginia, developer TerraSpark, known legally as TerraPurus, is receiving $18.5 million for scoping and design of a 1.6-GW "next-generation" coal plant, also with carbon capture. The power plant will be part of the planned TerraSpark Energy Campus, a multi-industry site that will also include a coal innovation and training center for rare-earth extraction and advanced materials initiatives, according to a news release.

Project partner Babcock & Wilcox Enterprises said it expects to be responsible for the design and supply of four 400-MW supercritical boilers and advanced emissions-control equipment, as well as for providing construction services. The company will work closely with carbon capture firm Mantel Capture Inc. for the West Virginia project's carbon capture technology.

"TerraSpark will provide affordable, reliable electricity to power America's industrial resurgence, strengthen our nation's energy security, drive down energy prices for West Virginians, and [it] sends a message that America's future is coal-fired," US Representative Riley Moore, Republican-West Virginia, said in a June 5 statement.

But the DOE's Coal Recommissioning and Modernization program funding the projects has come under scrutiny after it repurposed unobligated funding that Congress allocated to commercialize carbon capture under the 2021 Infrastructure Investment and Jobs Act. The grants announced June 4 require carbon capture to be installed at a "later stage," for which there is no guarantee.

In February, Democratic Senators Martin Heinrich of New Mexico, ranking member of the US Senate Committee on Natural Resources, and Patty Murray of Washington sent a letter to Energy Secretary Chris Wright, saying the DOE may have misused the funds.