First Energy last week announced plans to build a new natural gas–fired power plant at a yet-to-be-determined location in West Virginia. Newsman Mike Nolting filed a complete story.
That decision comes despite a legislative push – led by state senators Brian Helton, Rollan Roberts, and Chris Rose – to force coal-fired power plants in the state to run at least 69% of the time, regardless of market economics. Under that proposal, companies that don’t comply could lose the ability to file rate cases for cost recovery, not just for generation but potentially for transmission and distribution as well.
So Why Gas, Not Coal?
If coal-fired electricity truly drove down power bills, why wouldn’t First Energy simply build a coal plant? Either way, the company expands its rate base and earns a return on the investment. The cost of fuel itself – coal or gas – is a pass-through; utilities don’t make money on it.
So again, why not coal? Certainly, First Energy doesn’t need state senators on its back. Because it’s not in customers’ best interest, and FirstEnergy knows it.
The Economics Don’t Lie
Utilities can’t just build plants on a whim. They must prove to regulators, like the Public Service Commission, that the investment makes economic sense. One of the main tools used is the levelized cost of energy (LCOE)—essentially a long-term economic test of whether a project pencils out.
According to analysis of the 2024 State of the Market Report from PJM’s independent market monitor, Monitoring Analytics, LLC, the 20-year annualized cost for a new plant is roughly:
- Combined-Cycle Gas (CC): $184,198 per MW-year
- Combustion Turbine Gas (CT): $185,198 per MW-year
- Coal Steam Plant (CP): $742,650 per MW-year
That means a new 1 MW gas plant needs about $184,000 per year to cover fixed costs, while a comparable coal unit would need $743,000 per year – four times as much. The proposed First Energy gas plant has a capacity of 1,200 MW. The math: 1200 MW (plant capacity) X $559,000 (delta in CP vs CC) = $671 million more for a new coal plant compared to a natural gas plant.
Those costs flow straight to ratepayers.
Key Question: Would you rather pay $671 million a year more in order to use coal instead of gas at a single plant? Of course not. You only care that the lights come on when you flip the switch.
Market Reality
At typical capacity factors (gas CC 78%, new coal 25%), PJM estimates the LCOE for a new combined-cycle gas plant around $46/MWh, compared with $378/MWh for a new coal unit.
PJM’s average wholesale energy price in 2024 was only $33–34/MWh. A coal plant that needs $378/MWh to break even has no chance of recovering its costs. A gas plant at $46/MWh is at least in the ballpark – and can supplement revenue with capacity and ancillary-service payments.
That’s why no rational investor builds coal anymore. The last new coal-fired power plant in the United States came online in 2013 – in Texas.
What the Market Is Telling Us
PJM’s generation mix makes the point clearer. In 2024, natural gas produced 44.3% of PJM’s electricity – the highest share ever – while coal fell to 14.5%, its lowest on record. In 2008, those numbers were reversed: coal 55%, gas 7%.
Coal generation barely rose 1.4% last year; gas rose 3.5%. PJM’s monitor identified 34.7 GW of capacity at risk of retirement by 2030 – most of it coal, with 13.3 GW expected to retire strictly for economic reasons.
The trend isn’t ideology. It’s arithmetic.
Politics vs. Economics
Lawmakers clinging to the past will talk about jobs, blame renewables (whose share remains small), invoke China, or slap the “liberal” label on anyone citing numbers. But markets don’t care about slogans. They don’t care about picking one commodity over another for arbitrary reasons. They respond to cost, efficiency, and return on investment.
Reality? This is business, not politics. It’s economics, not ideology.
If the so-called “Make Electricity More Expensive Act” passes, that new First Energy gas plant could be forced to sit idle so older, less efficient coal units can run instead.
Who pays for that distortion – the higher costs of running the less efficient plant?
Not PJM. Not the utilities. You do. Are you ok with that?
Editor’s Note: Meadows is a former federal policy director for American Electric Power and previously held business development positions in the downstream natural gas industry. He does not own active investments of any kind in these sectors. His views are his own and do not reflect those of any other entity.
