President Trump’s coal policies aim to counteract Kentucky’s diminishing energy dominance.

At the beginning of this century Kentucky and other states that relied on burning coal for electricity enjoyed an economic edge, but competition from cheaper energy sources has dulled that advantage. 

On Tuesday, some prominent Kentuckians looked on as President Donald Trump signed executive orders aimed at reviving demand for coal. Coal company executive Joe Craft, a Republican megadonor, and Senate President Robert Stivers were in the East Room for the signing ceremony. And one of the orders Trump signed resembles a 2023 Kentucky law making it harder for utilities to retire coal-fired power plants, reports the nonprofit newsroom NOTUS.

Trump promised in his first term to bring back coal. Whether the president’s actions this time can reverse energy market trends that have spurred the coal industry’s decline  — and at what cost to consumers — remains to be seen. The questions are important in Kentucky not just because it’s a coal-producing state but also because cheap power has been one of Kentucky’s top economic advantages.

In the last 25 years, however, Kentucky has fallen from producing the country’s cheapest power to the 12th cheapest. It’s a gradual trend of rising electricity costs that some experts say is likely to continue unless the state diversifies its power sources beyond coal.

Kentucky had the cheapest power. Not anymore.

In 2001, Kentucky generated about 95% of its electricity from coal. Other coal-reliant states that year including Indiana, West Virginia and Wyoming were also among the top 10 states boasting the cheapest electricity.

Coal was relatively cheap then, and the state’s power plants that burned coal were “largely paid for,” according to a former spokesperson for Kentucky’s utility regulator. 

“It was a window in time when coal had some substantial advantages over other types of fuel,” said Andrew Melnykovych, who served as the public information officer for the Kentucky Public Service Commission (PSC) from 2002 to 2020. 

But a continued reliance on coal to supply aging power plants is driving up the cost of Kentucky’s electricity, according to those who study the energy industry. That trend could impact the state’s ability to attract economic development as well as increase the burden on Kentuckians trying to pay their utility bills. 

According to the federal Energy Information Administration (EIA) as of 2023, Kentucky’s average cost of electricity across industrial, commercial and residential ratepayers (9.96 cents per kilowatt-hour) is still significantly cheaper than the national average (12.63 cents per kilowatt-hour) but has fallen to the 12th cheapest state in the country.

“For decades, Kentucky had an economic advantage of building coal power plants and burning that coal and producing cheap electricity here. That economic advantage has been eroded,” said Kent Chandler, the former chair of the PSC and a resident senior fellow for energy and environmental policy at the think tank R Street Institute. 

Chandler said more factors than fuel source and power plant expenses account for the cost of electricity. Still, the trendline of increasing electricity costs could continue if Kentucky continues to rely on aging coal-fired power plants.

Kentucky generated about 68% of its electricity through coal in 2023, the third-highest percentage of power sourced from coal of all states that year. 

Robin Hartman, a spokesperson for the Kentucky Energy and Environment Cabinet, in a statement last month said Kentucky families “enjoy some of the most competitive utility prices” because of the state’s “diverse energy landscape.” Hartman noted Kentucky has the lowest electricity costs east of the Mississippi River. 

Yet Frank Jemley, the executive director of the Kentucky Manufacturers Association, told the Lantern the state’s rising electricity costs are very concerning because the cost of electricity is a key component of job growth. 

Energy-intensive industries ranging from aluminum smelters to data centers boosting artificial intelligence services look at the cost of electricity when deciding where to expand because higher costs eat into a company’s bottom line. A state report from 2012 found low electricity costs had made Kentucky the single most energy-intensive economy of any state.  

Century Aluminum, which idled its aluminum smelter in Hawesville in 2022, told the Wall Street Journal last year it had no plans to restart its smelter because electricity prices in Kentucky were too high. Century Aluminum is also looking to build a new aluminum smelter with federal support, eyeing Kentucky as a potential landing spot. 

“There is a clear perception in the marketplace that Kentucky has lost its long-standing position as one of the best states for low-cost energy,” Jemley said.  “We’re convinced Kentucky must build a strategy to reestablish our top-five ranking as a low-cost, reliable energy state.” 

Some coal-reliant states have increasingly diversified. Kentucky, not as much

How did Kentucky lose an economic edge in the electricity marketplace? One reason is other states have adapted to a transitioning energy market while Kentucky has remained more static, according to those who focus on energy and utility policy at the Energy and Policy Institute, Energy Innovation Policy and Technology and the Center on Global Energy Policy at Columbia University. 

“Mainly, it’s a story of other technologies becoming cheaper over the last couple decades,” said Noah Kaufman, a senior research scholar and economist with the policy center at Columbia University.

The boom of hydraulic fracking in the 2010s to reach supplies of natural gas in shale deposits significantly boosted the supply of natural gas and drove down its price. Natural gas was cheaper than coal as a power source as of last year. Utilities, including in Kentucky, have moved to gas-fired turbines as a replacement for coal-fired power plants because of the economics and environmental considerations. Burning natural gas, which is mostly methane, emits roughly half the heat-trapping greenhouse gas emissions contributing to climate change as burning coal. 

According to EIA data, the country produced about 51% of its electricity from burning coal and 17% of its electricity from burning natural gas in 2001. As of 2023, coal produced only about 16% of the country’s electricity; natural gas produced 43%.

Wind and solar costs have also significantly fallen over the past 15 years, spurring an acceleration of renewable energy development across the country. Other coal-reliant states that have leapfrogged Kentucky in the competition to hold down power costs have taken advantage of the boom of both natural gas and renewables that are now generally cheaper than burning coal. 

Daniel Tait, a research and communications policy director with the pro-clean energy utility watchdog organization Energy and Policy Institute, says North Dakota and Wyoming — the two states with the cheapest electricity across all types of ratepayers as of 2023 — exemplify that trend. 

Tait told the Lantern that North Dakota, Wyoming and Kentucky are all big producers and consumers of coal, but Wyoming and North Dakota have been able to develop a significant amount of wind energy.

In 2001, North Dakota generated about 95% of its electricity through coal, according to the EIA. In 2023, the state still generated about 54% of its electricity through coal, but now more than a third of its power comes from wind. Wyoming has more than doubled its wind energy capacity since 2019; wind delivered about 20% of its electricity in 2023.

“They have a lot of coal in North Dakota and Wyoming, but they have so much more wind that the costs are declining because renewable energy is a very, very cheap energy source,” Tait said. 

Tait said that low-cost renewable energy can act as a buffer against higher coal prices or volatility of natural gas prices. 

Renewable energy is among the cheapest electricity sources for a few reasons. As the industries have grown, economies of scale have driven down costs, and there aren’t fuel costs associated with energy sourced from the wind and sun. A 2024 report from the financial services firm Lazard says on-shore wind and solar energy have a lower cost, on average, than fossil fuel sources. Even without government subsidies to lower the upfront costs for solar installations or wind turbines, renewables are generally still cheaper than fossil fuels, according to Lazard. 

Some others among the 10 states with the cheapest electricity still have nuclear power plants contributing to the energy mix. Such traditional nuclear power plants are expensive to build but produce relatively cheap electricity once they’re operating. Idaho and Washington benefit from inexpensive hydropower contributing large shares of their electricity. 

Kentucky, however, has lagged in diversifying its energy mix.

Tait likened Kentucky to Louisiana: Both rely on and are vulnerable to price increases from a fuel source they produce in large quantities — coal and natural gas, respectively. 

Kentucky has reduced its reliance on coal by replacing some generation with natural gas — about 24% of the state’s electricity in 2023 came from gas-fired power compared to just under 1% in 2001. But some industry and consumer rights groups warn natural gas exports could cause gas prices and electricity prices to rise in the future, concerns that the gas industry disputes. 

“Almost all the other states have something that is acting as a hedge that’s helping to keep prices down if coal or gas are expensive that year. And Kentucky doesn’t have as much of that as the other states do,” Tait said.

What Kentucky has: aging coal-fired power plants

Kentucky’s reliance on coal leaves the state with aging coal-fired power plants that carry increasing maintenance costs and recurring costs to keep the plants compliant with environmental regulations. Maintenance and environmental compliance costs are driving up Kentucky’s power costs, something that could continue. Chandler compared utilities’ choices to deciding whether to spend money to keep an older car running versus buying a newer car. 

“If money isn’t an issue you can always keep it going, but you lose a lot of efficiency. The new cars that get built replace them and are more efficient,” Chandler said. “Does it make sense to just cut losses or cut time with this investment — with this facility — and instead move over and buy a new, efficient one that should have lower recurring costs?”

Coal-fired power plants must follow a number of federal environmental regulations, ranging from scrubbing the sulfur oxide emissions that create smog to controlling toxic metals emitted through wastewater.

When these regulations are reviewed and made more stringent by the U.S. Environmental Protection Agency, utilities come before the state PSC seeking approval to upgrade their plant’s pollution control systems to remain compliant with the regulations. Ratepayers pay for those upgrades through their utility bills. 

During his time at the PSC, Chandler said, Kentucky utilities did not adequately analyze the future costs of environmental compliance. He said that could leave consumers at risk of bearing increased costs for aging plants when it could be cheaper over the long term to replace them with a lower-cost alternative.

A 2023 report from Energy Innovation Policy and Technology, a nonpartisan think tank supporting policy that “reduces emissions at the speed and scale required for a safe climate future,” found the installation of new solar power was cheaper for ratepayers than running existing coal-fired power plants in Kentucky. 

“Doubling down on coal is not going to help the situation,” said Michelle Solomon, one of the report’s authors. “Diversifying the electricity mix with the cheapest available sources of energy, which are wind and solar, is really kind of the only avenue to reduce electricity prices.”

Kentucky legislators in recent years have taken steps to keep Kentucky more reliant on coal. The GOP-controlled legislature created additional bureaucracy and hurdles before the PSC can grant requests from utilities to retire fossil fuel-fired power generation. Backers of the new laws argued fossil fuel-fired power plants are needed to ensure reliability of the power grid.

Investor-owned utilities, including Louisville Gas & Electric and Kentucky Utilities, pushed back, arguing that one of the laws would threaten Kentucky’s economic advantage in attracting manufacturing. LG&E and KU President and CEO John Crockett in a 2023 op-ed in the Lexington Herald-Leader wrote that “some of our oldest coal plants need to be retired.”

Last year, the Kentucky legislature created a new board called the Energy Planning and Inventory Commission, or EPIC, that reviews requests from utilities to retire fossil fuel-fired power plant generation before those requests can reach the PSC. Crockett opposed the creation of EPIC but now is a commission member. 

Chandler is concerned those legislative moves could exacerbate the “sunk cost fallacy” — a reluctance to move away from something that one has heavily invested in, even when there’s evidence it’s time to move on — that helps explain why the state’s utilities and regulators have stuck with aging coal-fired power plants. 

“I think it will affect economic development in the future,” Chandler said. “Sticking with things, even after you lost your economic advantage, just means you’re perpetuating the negative economic harm that has already occurred to you by virtue of the markets.” 

What are Kentucky’s options?

Kentucky’s paths forward beyond its existing coal-fired power plant fleet will likely take years to develop.

Kaufman, the economist at Columbia University, and Solomon, the energy analyst at the climate-focused think tank, both argue Kentucky adopting more renewables would likely lower electricity costs and can be built relatively quickly. But adopting renewable energy on a large scale poses challenges. 

Renewables are intermittent, meaning that they only produce power during a portion of the day — such as when the sun is shining or the wind is blowing — and aren’t available on command like fossil fuel-fired power plants. Renewable energy advocates argue pairing wind and solar power to charge utility-scale batteries, which have also seen a significant drop in cost in the past 15 years, can make the resources more readily available around the clock. 

Chandler in a co-authored blog post for the R Street Institute, a think tank “solving complex public policy challenges through free markets and limited, effective government,” noted the potentially expensive cost for more transmission lines and infrastructure to connect renewable energy to the grid is a barrier to wider renewable adoption and noted fossil fuel-fired power plants have historically served a role of “balancing” the electric grid. 

State lawmakers have also increasingly seen nuclear energy — which doesn’t emit greenhouse gasses — as a power source of the future, and lawmakers last year established a nuclear energy research authority housed at the University of Kentucky. 

But some energy analysts, including the leader of an energy research center at the University of Kentucky, question how quickly nuclear energy can be built in Kentucky to meet projected growth of future energy needs. The availability of natural gas-fired turbines is also limited in the future because of a backlog of turbine orders from utilities.

Stivers, who has advocated an all of the above approach and touted the state laws that make it harder to retire fossil fuel-fired power plants, told reporters at the end of the legislative session last month he was “all for creating new energy sources — cheaper, more efficient, environmentally friendly — but you got to make sure that grandma Lula on a fixed income doesn’t get the jacked up utility bill every month.” 

Affordability is especially relevant in a state like Kentucky where incomes are low. A 2022 report found electricity bills take a bigger bite out of Kentuckians’ wallets even though the average bill in Kentucky is lower than in the rest of the nation. A state-by-state analysis by the Citizens Board of Illinois found Kentucky’s average household electricity expenditures were below the national average but higher in percentage of household income going to pay electric bills.

Stivers, in an interview with the Lantern in early February, said he wanted Gov. Andy Beshear’s administration to incentivize “more generation here” and to look at “more clean coal, clean gas technologies in conjunction with other forms of generation such as nuclear.” 

“It’s kind of tragic when you think that one of your greatest assets now is not as strong an asset as it used to be,” he said. 

Kaufman, responding to the Lantern’s question about the economic viability of building a new coal-fired power plant, said “they haven’t really been built anywhere in the country for a long time” — in part because of environmental regulations, but largely because of economics. 

Politico on Tuesday reported Trump’s executive orders would likely only help keep existing coal-fired power plants afloat without expanding the market for coal, or, as an  energy executive told the outlet, changing the long-term outlook against coal-fired power.

The last large coal-fired power plant built in the country was in 2013, and no energy developer has floated a plan for a new plant since. 

https://kentuckylantern.com/2025/04/10/heavy-reliance-on-coal-has-eroded-a-ky-economic-advantage-can-trump-reverse-the-trend/