AI Boom Favors Natural Gas Over Coal

Many U.S. coal-fired power plants will be around producing electricity longer than previously planned—but no thanks to President Donald Trump’s vocal support for the “beautiful, clean” coal. 

After a decade of flat U.S. electricity consumption, surging power demand due to the AI and data center boom has prompted some utilities to prolong the lives of coal plants scheduled for retirement.

The Trump Administration has just signaled it would work to defer coal plant closures and possibly reopen shut plants to ensure stable electricity supply amid rising demand.

Still, it will be natural gas – not coal – that is likely to be the biggest winner of the AI boom, analysts and investment banks say.

President Trump this week said he is authorizing the Administration to work to boost U.S. coal power generation in an effort to counter China’s economic advantage over America due to the constant rise in Chinese coal power plants.

“After years of being held captive by Environmental Extremists, Lunatics, Radicals, and Thugs, allowing other Countries, in particular China, to gain tremendous Economic advantage over us by opening up hundreds of all Coal Fire Power Plants, I am authorizing my Administration to immediately begin producing Energy with BEAUTIFUL, CLEAN COAL,” President Trump wrote on Truth Social.

It wasn’t immediately clear from the social media post what authorizations President Trump is giving the administration “to immediately begin producing” energy from coal.

Coal currently accounts for about 15-16% of U.S. power generation and its share has been consistently falling in recent years as many coal-fired power plants have shut down and wind and solar power have taken over market share from coal. Cheap and abundant natural gas has also played a part in coal’s decline, as have many environmental regulations and fees that have made coal plant operations more expensive.

The Administration is considering emergency authority to resurrect closed coal power plants and to stop others from closing, Interior Secretary Doug Burgum told Bloomberg Television last week.

U.S. Energy Secretary Chris Wright told the same outlet last month that a major renaissance for coal is unlikely.

“The best we can hope for in the short-term is to stop the closure of coal power plants,” Wright told Bloomberg Television. “No one has won by that action.”

Electricity generators plan to retire a total of 12.3 gigawatts (GW) of capacity in 2025, of which coal capacity would have the largest share of planned capacity retirements, 66%, the EIA said in February. Power generators report that they plan to retire 8.1 GW of coal-fired capacity this year, or 4.7% of the total U.S. coal fleet that was in operation at the end of 2024. The retired capacity would be double the 4.0 GW coal generating capacity shut last year, but less than the 9.8 GW of coal capacity retired in each of the last 10 years.

Some generators are delaying coal capacity retirements. Georgia Power, for example, has proposed extended operation of certain coal and natural gas units through at least 2034 to support the state’s expected continued extraordinary growth.

Yet, the super-friendly administration isn’t expected to lead to the construction of new coal plants, analysts say.

“Power-plant owners, operators and developers don’t think of investments in terms of administrations — they think 10, 15, 20 years down the road,” Timothy Fox, an analyst at Washington-based ClearView Energy Partners, told Bloomberg.

Coal is likely to enjoy a short-term rebound in U.S. electricity generation as natural gas prices rise, the EIA said in its latest Short-Term Energy Outlook (STEO).

Increased overall electricity demand, along with higher natural gas prices, could raise U.S. coal generation by 6% in 2025, while natural gas generation would drop by 3% as a result of higher fuel costs. In 2026, the EIA expects coal generation to fall by 8%, while natural gas generation will stay relatively flat.

U.S. electrical power demand is expected to rise by 2.4% per year through 2030, with AI-related demand accounting for about two-thirds of the incremental power demand in the country, Goldman Sachs analysts say.

Natural gas is best positioned to capture most of the growth, according to the investment bank.

“Natural gas will benefit significantly from the rising electricity demand and the requirement for 24/7 uninterrupted supply. It is most flexible among all energy sources and an abundant domestic resource,” Goldman Sachs said in a report last month.