By Frank Clemente and Fred Palmer; Coal is the Cornerstone LLC.

Fred Palmer

July 26, 2025 - Note: This is Part 2 of a piece describing how natural gas has demonstrated limitations and coal-based electricity will be necessary for the AI revolution to proceed at scale.

Data center developers cavalierly relying on natural gas generation (almost all of them) would be wise to remember four key concepts in power system planning: (1) Reliability, (2) Availability, (3) Accessibility and (4) Affordability. All these are part of an overriding rule that has guided utility commissions for decades – Prudence. This once widely accepted doctrine dismisses decisions based on chronologically constrained data, untested hypotheses, and wishful thinking and strives to base policies on caution, probability, experience and empirical reality. In many states, prudence has clearly fallen by the wayside and monolithic dependence is emerging. In Texas, for example, 91% of proposed data centers would rely on natural gas (NG) generation. Numerous other states are following the same narrow path. Solar and wind are intermittent and of diminished utility to 24/7 data centers. Nuclear is prohibitively expensive and remains a fuel of the “future”.  And the DOE recently admitted: “China has a major role at each stage of the global battery supply chain and dominates interregional trade of minerals”. The United States has at least 23% of the world’s coal.

In Part One we described how Pennsylvania is moving toward a power supply system that will decrease reliability and make electricity more expensive. In July, politicians, energy suppliers and technology experts convened in Pittsburgh and announced $92 billion in commitments to a vast array of data centers and NG power plants to support Artificial Intelligence.  Meanwhile, there are plans in Pennsylvania to close all coal plants. Ironically, a day after our article was published, MorningStar Analytics, the official designated watchdog of the PJM Interconnection, warned: “There is simply no new capacity to meet new loads.” Nevertheless, Maryland and New Jersey have also taken steps to eliminate coal and significantly reduce baseload capacity. All this despite Joseph Stanek, the PJM Director of Government Services, stating that the majority of coal plant closures have been for political reasons, not for economics.

But Pennsylvania is only a microcosm of what is happening throughout the US. In just a little more than a decade, over 300 coal power plants have been closed, many prematurely. Coal production has been cut in half and coal’s share of electricity generation has declined from 45% to 16%. These declines are taking place in the context of what will surely be an unprecedented increase in electricity demand over the next two decades. The US Energy Information Administration projects power generation will increase from about 4,175 Terawatt Hours (TWh) in 2025 to over 5,600 TWh in 2044. This rise of over 1,400 TWh in the next 20 years is more than six times the growth  over the 20-year period 2004 to 2023. To give a further idea of scale, this increase alone exceeds the current electricity generation of Germany, France and the UK combined.

Growing demand for electricity is invariably tied to the rise of AI and its associated data centers. According to Berkeley Labs, electricity demand from the AI sector could  account for an unprecedented 12 percent of total US consumption by 2029—just 4 years from now.

The list of commitments to support AI with NG-based electricity is long and growing. The Carolina, Georgia, and Virginia markets have announced plans to add 20 GW of NG capacity to power data centers. In Pennsylvania, Blackrock has committed $25 billion for AI, including building NG power plants jointly with the utility PPL, where over 40 GW of new demand is being discussed in that service area alone. In Texas, the velocity of data center plans is staggering. Power demand is projected to double in 5 years and the “Large Load” interconnection queue for new power projects increased from about 5 GW in 2023 to a projected 56 GW by 2030. To meet this demand the Texas Energy Fund has set aside $10 billion in low-cost loans for NG power plants. This reliance on NG to meet data center load is being reenacted throughout the nation- Illinois, Arizona, New England, on and on. Yet, and at the same time, these states are planning on reducing or even eliminating baseload coal generation.

In essence, hundreds of data centers are being built under the untested hypothesis that electricity from NG will be readily available and affordable to support their operation. Since data centers are totally dependent upon adequate electricity, here are four realities AI developers cannot afford to ignore:

1. Reliability-- actual events have demonstrated that NG generation is not reliable in times of crisis, especially in widespread cold events. In fact, during a Polar Vortex in Pennsylvania, NG generation decreased 6% when it was needed most. Alternative sources beyond NG were not helpful. Solar was irrelevant, wind increased only 9% and nuclear 7%.  Coal provided the majority of electricity and increased 92% YOY to meet the load. 

2. Availability-- the demand for NG has grown far beyond the construction of power plants. Air conditioning, re-industrialization, electric vehicles, electrolyzers, fuel cells, crypto currency are continuing and growing sources of demand.   In fact, Karen Harbert, CEO of the American Gas Association has boasted that “a new natural gas customer signs up every minute”.  And, perhaps most importantly, LNG exports are will almost double in just five years and reach upwards of 25 bcf/day – a whopping 22% of expected US production. It is increasingly clear that NG demand will far outstrip supply in the coming decade, potentially stranding hundreds of data centers who have blithely assumed a Cornucopia of NG supply. Something will have to give.

3. Accessibility— even if NG is available will it be accessible to power plants to generate electricity? Actual experience during polar vortexes has indicated that NG is an underperformer as supplies are routinely diverted to residential, institutional and commercial space heating. Consider New England, where fuel diversity has fallen by the wayside and a monolithic NG fuel structure has developed. Research by Housley Carr, of RBN Energy, demonstrated both electricity and NG prices peak during the winter months. Much of the NG flowing into New England is used for space heating, so some utilities resorted to burning jet fuel. Data Center developers should familiarize themselves with the percentage of homes heated by NG by state: MD 50%, PA 52%, NJ 75%, NY 61%, MI 77%, Il 78%, CO 75% are only examples.

4. Affordability—There is wide recognition that NG prices are the most volatile of all fuels. An example: in February 2024, the Henry Hub Spot Price per million Btu was $1.72.  By February 2025 the cost was $4.19, an increase of almost 145% in just 12 months. In this year’s polar vortex, just last January, NG prices in the MISO service area (15 states)  reached $30/MMBtu compared to coal’s $2.50, saving customers up to $1,4 billion. 

Virtually none of these constraints on NG are being discussed in the literature and the glowing AI reports in the media remain at 30,000 feet. But one state has at least seen some of the light. To support planned data centers, Georgia has authorized continued operation of the Scherer and Bowen coal plants, which combine for 4,000 MW. Perhaps, beyond the hyperbole, the first seeds of doubt are beginning to show up in system planning for AI.

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Note: Coal is the Cornerstone seeks to give a voice to supporters of coal in its many dimensions and contributions. But we need help and ask like-minded individuals and companies supporting coal to make a financial contribution to the effort. Visit us and donate at http://www.coaliscornerstone.com.

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Frank Clemente PhD Is Professor Emeritus at Penn State University. He specializes in research on the socioeconomic impact of energy policy and is the author of The Global Value of Coal, published by the International Energy Agency (2012). Professor Clemente has extensive experience in speaking, writing and presenting data on the value of coal to the United States and the world. All opinions expressed here are presented independently from the University.

Fred Palmer Esq. served as CEO of Western Fuels before he joined Peabody Energy as Senior Vice President for Government Affairs. Palmer was Chair of the World Coal Association Board and a member of the National Coal Council. He received the American Institute of Mining, Metallurgical and Petroleum Engineers Award for “Distinguished Achievement in Coal Technology”.  He also received a Statement of Appreciation from the National Coal Council in 2015 with a plaque for “Guidance since 1990”.