Coal's Last Stand: AI Bets on Yesterday

The United States is on track to close half of its coal-fired generation capacity by 2026, just fifteen years after it peaked. On Thursday, the Trump administration announced it would spend $700 million to reverse that trend.

The funding, authorized under the Defense Production Act, will distribute $425 million to support 13 existing coal-fired power plants, $75 million for a new coal export terminal in Oakland, California, and $200 million to build two new coal plants in Alaska and West Virginia , according to CBS News. Trump cited critical national security concerns over ensuring sufficient power capacity for U.S. artificial intelligence data centers , the Department of Energy reported. Both the president and Energy Secretary Chris Wright have argued that coal is essential for meeting growing demand from artificial intelligence , Latitude Media noted.

The timing is striking. Data centers accounted for around 50% of all electricity demand growth in the U.S. last year, according to the IEA, and are expected to continue accounting for half of U.S. electricity demand growth to 2030 . But while AI's appetite for power is real, the fuel being prescribed is a relic. U.S. coal use accounted for only 8 percent of primary energy consumption nationwide in 2024, according to the Congressional Research Service . Coal, responsible for more than half of U.S. electricity generation in 1990, now generates less than one-fifth as utilities shifted toward cheaper natural gas and renewable energy sources , Reuters reported.

Can Coal Actually Power the AI Boom?

The administration's bet faces a fundamental problem: the industry has already moved on. No new coal-fired power plants have been built in the United States since 2013 , Engineering News-Record noted. The two new coal plants funded by the DOE are both explicitly designed to power data centers—the first, a proposed 1.25-gigawatt coal-fired plant in Alaska, would be developed by the Terra Energy Center, an affiliate of Canadian company Flatlands Energy , according to Latitude Media.

Meanwhile, natural gas has emerged as the clear winner in the race to power AI infrastructure. Nearly 75% of the power equipment planned to be used on site at data centers is natural gas, according to a report released by Cleanview, a market intelligence platform . Natural gas demand from data centers in the U.S. may reach 6.1 Bcf/d by 2030, potentially a nearly 20% increase to annual average powerburn in recent years , RBC Capital Markets estimated.

The economics tell the story. From 2017–2022, natural gas interconnection costs averaged $24/kilowatt, more than 10 times lower than solar ($253/kW) and offshore wind ($335/kW) , the American Action Forum found. Natural gas has been one of the only solutions for data centers in the near term, said Andy Cvengros of JLL, as getting energy from a local utility has been getting harder, with up to a five-year wait .

Coal, by contrast, faces a different timeline problem. The AES Warrior Run coal plant, a 229-MW facility in Cumberland, Maryland, was shuttered in June 2024 as Maryland's last operating coal plant, though the utility filed with FERC for a restart due to need for electric capacity to support demand driven by data centers , Engineering News-Record reported. Restarting a mothballed plant is one thing. Building new ones is another. The lead time for required turbines has exploded to as long as 5 or 7 years, said Michael Thomas, Cleanview founder .

Why Is the Administration Doubling Down?

The Defense Production Act invocation frames coal as a national security imperative. The selected projects are intended to strengthen domestic coal mining value chains, support reliable baseload power generation, and enhance the resilience of critical energy infrastructure, with DOE leveraging DPA authorities to ensure the United States maintains the industrial capacity and energy resources needed to strengthen national security , the Department of Energy stated.

But the policy appears to be swimming against a powerful current. Annual retirements of capacity at coal-fired power plants have decreased since 2022 when operators retired 13.7 GW of capacity, or about 6.5% of the coal fleet operating at the end of 2021—in 2025, only four coal-fired power plants retired generating units, representing 2.6 GW of capacity , the EIA reported. That slowdown, however, reflects emergency orders rather than market forces. The Campbell Plant in Michigan operated at over 650 megawatts every day before and during Winter Storm Fern, proving that allowing it to cease operations would needlessly contribute to grid fragility—thanks to President Trump's leadership, coal plants across the country are reversing plans to shut down , the Department of Energy said.

The funding announcement comes in the midst of a national debate over whether the general public should foot the bill for the energy infrastructure needed to power the AI boom—the White House itself orchestrated a "ratepayer protection pledge" signed by hyperscalers in March, which is a non-binding commitment by the tech companies to pay for the energy and associated grid upgrades needed to power their growing number of data centers , Latitude Media noted.

Environmental groups have been blunt in their assessment. Lena Moffitt, executive director of Evergreen Action, wrote: "Spending $700 million to bail out the coal industry is like throwing a lifeline to a ship that has already sunk—Trump is handing out taxpayer money to coal barons and leaving us with nothing but higher energy costs" .

What Changed This Week

The $700 million coal package marks the administration's most aggressive intervention yet in energy markets, using wartime authorities to prop up a fuel source that utilities have been systematically retiring for economic reasons. The move comes as data center developers are overwhelmingly choosing natural gas for new projects, creating a mismatch between policy and market reality. The IEA projects a decade-high of $330 billion in natural gas development for 2026, with much of this growth driven by expanding liquefied natural gas export capacity and rapidly rising electricity demand from the technology sector .

What to Watch

The Oakland coal export terminal faces immediate legal challenges from environmental groups in the San Francisco Bay Area. Trump predicted that with work starting this year, the estimated $231.8 million facility could operate in 2028, but the terminal, pushed by the coal industry since 2010, already faces legal challenges—"The developers should expect an unrelenting uphill battle," said Ben Eichenberg, a senior staff attorney at the San Francisco Baykeeper . Meanwhile, watch whether any major data center operators publicly commit to purchasing power from the new coal plants. So far, none have. Nor have they lined up any data centers who have publicly committed to buy the power—it's not clear how hard it may be to line up that offtake , Latitude Media reported.