AI boom lifts hopes of a new future for coal power

Upton Sinclair’s novel ‘King Coal’, depicting the grim realities of the American mining industry in the 1910s, talks about “a vision of a future, great and wonderful” when miners would no longer be needed.

As it turned out, the decline of the US coal industry was less than wonderful for the communities that depended on it. President Donald Trump, in both his administrations, has attempted to reverse that decline, but with little success so far. There were 41,300 people working in coal mining in the US in August, down from 51,000 at the beginning of President Trump’s first term in January 2017.

Now the surge in US electricity demand, driven principally by new data centres for AI, is reviving hopes of at least a slightly brighter future for coal. Several planned retirements of coal-fired power plants have been delayed, as utilities look to secure whatever generation capacity might be available. Building new coal plants looks like a much tougher challenge. But one company is making progress on a commercial project that would be the first new large coal-fired plant in the US for more than 20 years.

8 Rivers, a developer working on carbon capture and storage (CCS) and low-carbon hydrogen, has this year announced two deals to assess the potential for a new coal-fired plant with CCS: one in Wyoming and one in New Mexico. It is close to announcing another such agreement with a partner in North Dakota. It plans to select one of those three possible projects to be its first commercial development.

The plan has been made possible by the alignment of circumstances created by the data centre boom. Big tech companies want to secure new power supplies, and they have also set demanding targets for cutting greenhouse gas emissions. They have been big backers of wind and solar power, but are increasingly looking at other technologies including nuclear and carbon capture.

Microsoft has described CCS as “among the most promising technologies that paves the way towards CO2 neutrality”. It has announced a series of deals with companies working on carbon capture, and is a partner in the Northern Lights CCS project in Norway, which is also backed by the country’s government, Equinor, Shell and TotalEnergies.

This week, Google announced its first carbon capture deal, supporting the construction of a new 400-MW gas-fired plant in Illinois that will capture roughly 90% of its carbon dioxide emissions and sequester them in a nearby storage facility. The project is the first to come out of Google’s partnership with developer Low Carbon Infrastructure, which is working on deploying commercial-scale CCS for power generation.

Google says its aim is to help accelerate technical and operational improvements in CCS, including raising carbon dioxide capture rates and improving system performance and economics.

8 Rivers’ proposed plant would use conventional gasification technology to produce syngas from coal. The gas is then burned in pure oxygen to create two by-products: water, and a high-concentration stream of carbon dioxide, which together turn a turbine to generate power.

One of the great advantages of the process, known as the Allam-Fetvedt Cycle, is that the exhaust gas is nearly pure carbon dioxide, making  processing for storage easier. The exhaust gas from a conventional coal plant might be only 12% to 15% carbon dioxide.

Turning coal into gas to enable carbon capture has an image problem in the US, as a result of the failure of Southern Company’s Integrated Gasification Combined Cycle (IGCC) project in Mississippi’s Kemper County, launched in 2006. The technology never properly worked as intended, and in 2017 the decision was taken to run the plant solely on natural gas.

8 Rivers is using different technology, and should not face the same issues that dogged the Kemper plant. But to help avoid the pitfalls that faced that project, the 8 Rivers team has been working with some of the engineers and commercial leaders who worked on Kemper, to learn lessons from the problems that were encountered there.

Government support will still clearly be very important for this first-of-a-kind project. The 45Q tax credit for carbon capture is critical, and there may also be additional grants and other backing from the Trump administration, following the US$625 million for the US coal industry announced by the Department of Energy last month.

With the benefit of that support, 8 Rivers is aiming to deliver power at a price of about US$100 to US$120 per megawatt hour. That would be highly competitive against even unabated natural gas generation at today’s prices, following significant cost inflation in that sector. And the emissions from 8 Rivers’ coal plant would be much lower.

It is estimated that the carbon intensity of the power from 8 Rivers’ plants could be about 9 kilogrammes per MWh. For comparison, the average carbon intensity of gas-fired generation in the US is about 450 kg/MWh.

No big tech companies have yet announced a deal to buy power from one of 8 Rivers’ plants. But as they explore every possibility for adding new electricity supply while cutting emissions, coal with carbon capture certainly looks like an option worth them considering.

The Wood Mackenzie view

There is no doubt that the boom in data centre investment is helping to slow the decline of coal in the US, by prolonging the operational lives of some coal-fired power plants. Two years ago, Wood Mackenzie’s base case expectation was that US coal-fired generation would drop about 60% between 2025 and 2032. Now we expect it to drop about 39%.

But giving some ageing coal plants a few more years of life is very different from supporting investment in brand-new generation capacity. Peter Findlay, Wood Mackenzie’s director of CCUS economics, says that while 8 Rivers’ plans are promising, the company still has significant challenges to overcome to make its first coal project a success.

The coal gasification unit is well-established, proven and commercially available technology, and so should not present too many difficulties, he says. The bigger potential issues are with the turbine used to generate the power.

Turbines typically use natural gas, for power generation, or jet fuel, for aircraft. Converting a design to handle water and carbon dioxide is not a trivial exercise. 8 Rivers has been working with Siemens Energy since 2023 to develop the new zero emissions turbines it needs.

The full life-cycle emissions of the plants will also be affected by methane leakage from the mines where the coal is produced.

But if those technical challenges can be solved at an acceptable cost, there is a huge potential market for greenfield coal plants with carbon capture, not only in North America but in Asia and Europe, too.

“If 8 Rivers can find a turbine manufacturer to develop an affordable turbine to perform reliably, over the lifecycle of the plant with affordable maintenance and overhaul cycles, then the proposed technology could be game-changing,” Findlay says.

New emissions rules for shipping deferred for at least a year

The International Maritime Organisation (IMO) has voted to postpone for a year a decision on whether to adopt its Net Zero Framework, which includes a global emissions pricing system. The proposed plan was strongly opposed by the US administration, which said it would “not tolerate any action that increases costs for our citizens, energy providers, shipping companies and their customers, or tourists.”

The US said any nation that voted to support the framework faced actions including having its vessels blocked from US ports, additional port fees, new visa restrictions, commercial penalties under US government contracts, and sanctions on government officials. Administration officials described the plan as a “European-led neocolonial export of global climate regulations”.

At a meeting in London last week, IMO member countries voted 57-49 to postpone a vote on adopting the framework. Countries supporting the US call for a delay included China and India, as well as big oil and gas producers such as Saudi Arabia, Kuwait, Qatar and Russia. Countries voting against included most members of the EU, the UK, Singapore and South Africa. Among the abstentions were Japan, South Korea, Indonesia and Greece.

What happens next is unclear. Some observers have suggested that the Net Zero Framework could now be abandoned. But Arsenio Dominguez, secretary-general of the IMO, said this week that while the outcome of last week’s vote was “not the ideal scenario”, work on the plan would continue. He aims to provide more clarity on issues including governance, certification and distribution of revenues.

“This extra year gives us the chance to connect with all the stakeholders and parties in order to address the questions that were raised,” he added. “Shipping continues to be a global industry, and as such needs global regulations.”

The delay in the adoption of the framework casts a cloud of uncertainty over plans to reduce emissions from shipping through, for example, the production of low-carbon fuels.

In brief

The US has announced new sanctions on Russia’s two largest oil companies, as it attempts to increase the pressure to end the war in Ukraine. Rosneft and Lukoil have been designated as sanctioned, meaning that all their property and interests that are in the US or controlled by Americans are blocked and must be reported to the Treasury’s Office of Foreign Asset Control. Foreign financial institutions that do business with Rosneft and Lukoil could themselves face secondary sanctions.

Wood Mackenzie analysts said the new measures meant that companies buying Russian oil would risk losing access to the dollar-based financial system. The main consumers of Russian crude oil, led by China and India, are expected to continue purchases from other non-sanctioned Russian suppliers. But there is likely to be a scramble for workarounds in response to the more stringent sanctions regime. Oil prices strengthened after the US announcement, with Brent crude trading at over US$66 a barrel on Friday morning.

The energy secretary of the US and the energy minister of Qatar sent a joint letter to the EU, warning about the potential impact of the new European Corporate Sustainability Due Diligence Directive (CSDDD) on the LNG industry. The directive creates new responsibilities for companies operating in Europe to address their impacts on human rights and the environment, including the climate. The US and Qatar said the proposals could jeopardise the affordability and reliability of energy in the EU, and posed “an existential threat” to European industry. The European Parliament on Wednesday agreed to consider further changes to the proposed directive, with the aim of approving a final version by the end of the year.

The Greenhouse Gas Protocol, which sets global standards for measuring and managing carbon emissions, has opened public consultations on two proposed changes in its guidance. One change covers standards for Scope 2 emissions, which come from purchased energy, and the other covers estimates of avoided emissions from deploying lower-carbon electricity. The Clean Energy Buyers’ Association, which represents companies including Amazon, Google, Meta, General Motors and Walmart, said it had “deep concerns” about some of the requirements in the new proposed Scope 2 guidance, and said it could unintentionally chill voluntary clean energy procurement.

GE Vernova is spending US$5.275 billion to build up its presence in the transformer market. It is buying out the 50% share it does not already own in Prolec GE, a transformer manufacturer with plants in the US, Mexico and Brazil. The company, a joint venture between GE Vernova and Xignux of Mexico, recently invested US$300 million in the US and Mexico to increase capacity and add new technology.

Other views

NOCs begin a new phase of upstream internationalisation – Simon Flowers, Gavin Thompson, Neivan Boroujerdi and Andrew Harwood

At the crossroads: a reality check on trends in copper supply and demand

Discover the data behind the Anglo-Teck copper merger – Kate Abernethy

Renewable levelized cost of electricity competitiveness reaches new milestone across global markets in 2025

Tariffs and supply chain dislocation hamper US power projects – Benjamin Boucher

Coordinated buildout of charging infrastructure will enable US medium and heavy-duty trucking electrification momentum – Emil Koenig

Maintaining standards: why climate reporting matters amid policy turbulence – Stephen Vogado

Thoughts on the AI buildout – Dwarkesh Patel and Romeo Dean

Factors influencing recent trends in retail electricity prices in the United States – Ryan Wiser and others

Quote of the week

“Families across Missouri are struggling to pay their bills. But I am concerned Ameren is seeking dramatic rate increases in order to supply massive data centers and industrial users. Recent reporting indicates that Ameren cut electricity to thousands of Missouri households in September while simultaneously pursuing lucrative arrangements with corporate users. ​Missourians deserve affordable and reliable electricity. They should not be forced to subsidize corporate projects while struggling to keep their lights on.”

Senator Josh Hawley of Missouri became the latest Republican politician to sound the alarm about the potential impact of data centre development on residential customers’ electricity bills, in a letter to the CEO of Ameren. The senator asked whether Ameren had analysed the impact of agreements to supply new large load customers, and whether it had acted to ensure that the cost of new infrastructure for serving those large users would not be passed on to residential ratepayers.

Chart of the week

This comes from Wood Mackenzie’s new note on the outlook for copper supply and demand, based on a presentation that our analysts gave at the recent London Metals Exchange Forum 2025. Demand for copper is expected to grow steadily, driven by global industrialisation, the electrification of transport and heating, and new power demand to support AI. Supply seems unable to keep up, because of constraints in the supply chain: not just in mining, but in refining and smelting and the manufacture of semi-finished products. For more details, and discussion of how we think this mismatch will play out, download the full note.

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