Recent federal initiatives to support the US coal industry may initially delay any uptick in coal demand as power plant operators upgrade coal-fired units to reliably meet growing energy needs.
US president Donald Trump on 4 June directed the US Department of Energy (DOE) to provide hundreds of millions of dollars to expand the nation's coal capacity, including $425mn for upgrades at 12 existing coal plants in the US, claiming authority under the Defense Production Act.
DOE had previously committed to providing $175mn to support six other coal plant modernization projects.
The funding, announced earlier this month, was one of the latest efforts under the Trump administration to delay coal plant retirements to maintain the nation's baseload generation.
"With the new trend of US electricity demand increasing rapidly, these actions ensure that rather than eliminate energy sources, the US is maintaining an energy mix that meets the needs of American consumers," Jim Grech, chair of the National Coal Council and chief executive of US producer Peabody Energy, said in remarks to Argus this week. "Our existing coal plants provide essential dispatchable generation, and extending their operation is one of the most cost-effective ways to support reliability and meet incremental demand."
Multiple selected recipients of these grants said DOE's support will help to reduce internal cost pressure to complete projects that were already included in their capital investment plans but were not yet adequately funded.
US utility Tennessee Valley Authority (TVA), for example, was selected to receive up to $46.3mn of the Defense Production Act grants for projects at its Cumberland plant, including previously planned upgrades to turbine and generator systems, the boiler and environmental controls such as a scrubber module, the company told Argus this week. TVA has also committed an additional $69.4mn to the plant.
If awarded, the federal grants could also allow utilities to begin work on these projects, which aim to extend the selected plants' operational life and potentially increase their generation capacity, sooner than initially planned.
Still, multiple market participants confirmed that most of these plant upgrades may require utilities to put units into recurring forced outages. Sources added that many existing coal plants in the last decade or longer have not received the necessary maintenance and funding to ensure their units can reliably operate over an extended period, especially at higher dispatch levels. Without these funded upgrades, certain coal plants would likely break down within a few days if their operators tried to ramp up their capacity factor rates to the levels needed to meet the increase in power demand anticipated within the next few years, one market participant said.
At least some of the coal units set to receive federal funding are currently operating at sub-50pc capacity factor rates, with some operating as low as 30pc, sources said. In order to support the growing energy needs later this decade, market participants claimed capacity rates at these units would need to climb to 60-70pc or higher.
Forced coal plant outage rates have already increased by a meaningful measure in the last year. The North American Electric Reliability Corporation's (NERC) annual weighted equivalent forced outage rate calculation for coal units increased to 14.1pc last year from 11.2pc in 2024, according to its 2026 State of Reliability report published on Wednesday. In addition, NERC estimated the amount of unavailable coal-fired generation as a result of plant outages in 2025 grew by 39,835 GWh from the previous year.
As such, additional units getting taken off line over extended periods of time to complete work on the planned upgrades may further weigh on near-term coal consumption and generation over the next couple years even as overall electricity demand is expected to rise.
Total US coal consumption is projected to fall to 418.8mn short tons (379.9mn metric tonnes) this year and slide again to 403mn st next year, down from 452.4mn st in 2025, according to the US Energy Information Administration's (EIA)latest Short-Term Energy Outlook released on 9 June. Similarly, the agency forecasts domestic coal generation to drop from a year earlier by 6.6pc in 2026 and by 3.2pc in 2027.
This decline over the next two years is also expected to reduce coal's portion of the US' fuel mix, which EIA projects will fall to 16pc in 2026 and 15pc in 2027 from 17pc last year.
On the other hand, after these coal plant upgrades are completed near the end of the decade and into the 2030s, market participants expect coal to account for a larger portion of the nation's total generation, which is projected to rise by 0.9-1.6pc annually over the next few decades, EIA said in April in its 2026 Annual Energy Outlook. While some sources claim coal's market share in the US could potentially climb to 20pc or higher, other sources have a less robust perspective and only expect coal's share to inch back up to its present level following the completion of the projects.
Still, even if only a few larger coal plants were to consistently operate at much higher capacity factor rates in the long-term, that could boost annual coal consumption at each plant by several million short tons, various US utilities and producers estimated.
Because of this potential uptick in coal demand, many buyers are concerned whether coal producers, particularly in the eastern US, will have enough availability later this decade and into the 2030s to supply their contract needs. As a result, even though multiple forced outages expected in the near future may weigh on near-term coal use, several utilities were heard in the last few months seeking greater volumes of coal through the end of 2029 and beyond to secure shipments before supply further tightens. By comparison, many eastern US coal buyers in the last couple years rarely solicited the market for term contracts beyond one to two years.
