The Peter Zeihan Podcast Series - Coal Remains Essential for US Electricity || Peter Zeihan

Episode Date: February 12, 2025

Georgia Power (owned by Southern Company) updated its IRP and is sending environmental activists into a tizzy.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/coal-remains-essential-for-us-electricity

Hey, everybody, Peter Zine here coming here from Colorado, and today we're going to talk about electricity in the United States. Specifically, Georgia Power, which is one of the largest components of Southern Company, which is, I believe, is now the second largest electricity producer in the United States, covers the southeastern part of the country. They filed something on Friday, December 31st called an IRP, an integrated resource plan. And basically, it's their more than back-of-enveloped sketches for how they plan to meet power demand over the next three years. They filed an intermediate one last year, and the big difference between last year and this year is they're anticipating demand growth in their region by the end of the decade growing by over two gigawatts more than what they had planned for just 12 months ago. And so in order to meet that demand, they're adding more power by pretty much every type of generation you can imagine. But the biggest change is that they're not going to decommission a couple of coal plants, which of course has some environmental interests off in arms. expect to see a lot more of this.

One of the things to keep in mind when you're talking about this economic transition in the United States is going through is in order to prepare for a post-China world, we need to double the size of the industrial plant in this country. And that's before you consider trade wars. That's before you consider resource conflicts. That's before you consider the green transition, which will move a lot of things from fossil fuel to a more alternative system. We just are going to need more power.

Digitization is great. AI is wonderful. all those good things, but ultimately, if your economy is going to not just be based on services, if it's going to be based on manufacturing, if it's going to be about moving things and stamping things and heating things and smelting things, you're going to use a lot more electricity. And the IRP that Georgia Power just updated reflects that. And you can only add new forms of electrical generation so quickly, and that even assumes that the regulatory picture is very favorable.

Now, in Southern Company's zone of operation, Southern Company gets along great with all of the state legislators and the state regulators, so they face fewer obstacles than most electrical companies in adding new capacity, but there are still upper limits on how fast you can add stuff. One of the biggest restrictions of things like Transformers, which can have a lead time of 36 to 60 months. And until recently, Transformers who had like a two to four year waiting list based on what model you were looking at, and without the Transformers, doesn't really matter if you had the generation or not. So there's a lot of delays that are just kind of hardwired into this sort of problem. But ultimately, it's about generation. If you can't generate the electrons to

run through the system, the rest of it is kind of a moot argument, and Georgia Power is now admitting in their IRP that coal, at least in the midterm, has to be part of the solution. Now, in the long run, coal is definitely going to go away in the United States anyway, because natural gas is so much cheaper. And as we continue to make incremental gains in solar and wind and battery, they are becoming more competitive. But the advantage you have with coal is it provides something called baseload. It's on 24 hours a day, seven days a week, 52 weeks a year. And that matches up very nicely with most manufacturing processes that run 24-7 because a lot of it's automated now. And it lines up very well with things like artificial intelligence and data centers because

those server farms will be running 24 hours a day as well. That doesn't work with solar. When the sun goes down, the electricity stops. And you really can't. can't pair most of these new industries that are coming in, whether it's because of relocation, re-industrialization, or digitization, they just don't pair well with green tech very well, unless you also put in a huge amount of battery. And by huge, I mean massive. The best batteries we have right now can really only discharge four hours of storage, and there is no place in the continental United States, even in the depths of summer, where you only have four hours of dark. So you have to have something else. And regardless of whether you love it or not,

coal is one of those something else's. So a lot of the coal plants that have been slated for decommissioning a replacement over the course of the last decade, expect most of those plants to A, never be decommissioned, and B, if they have been decommissioned but not yet dismantled, expect them to come back because we're going to need every electron we can possibly get. And decarbonization for better or for worse is something that's going to have to wait for at least next decade and maybe the decade after.