Megaproject

Power News

Peabody Signs Long-Term Coal Deal With Missouri Cooperative AeciPeabody Energy, one of the largest producers of thermal coal in the U.S., has signed a major supply agreement with electric cooperative Associated Electric Cooperative Inc. (AECI), committing to deliver between 7 million and 8 million tons of coal annually to fuel two AECI Missouri power plants—the 1.2-GW New Madrid Power Plant and 1.2-GW Thomas Hill Energy Center—for “at least the next seven years.” The new contract, announced April 15, stems from a long-standing relationship between AECI and Peabody’s North Antelope Rochelle Mine (NARM) in Wyoming’s Powder River Basin. But it also points to an upturn for coal deliveries at a time when U.S. power markets are grappling with surging electricity demand and reassessing the reliability role of dispatchable fossil resources. “This substantial agreement demonstrates the ongoing importance of Peabody’s coal in providing reliable, affordable baseload electricity for years to come,” said Peabody President and Chief Executive Officer Jim Grech. “American demand for electricity is growing for the first time in many years given increased power needs from data centers and artificial intelligence. We are pleased to extend our long-term relationship with Associated and look forward to supplying their fuel needs well into the future.” AECI’s Thomas Hill Energy Center, located in Clifton Hill, Missouri, consists of three active coal units: Unit 1 (171.7 MW, commissioned in 1966), Unit 2 (272 MW, 1969), and Unit 3 (738 MW, 1982), with a combined net capacity of 1,181.7 MW. The New Madrid Power Plant in Marston on the Mississippi River comprises two 650-MW units commissioned in 1972 and 1977, respectively. Both facilities burn low-sulfur subbituminous coal from the Powder River Basin and have undergone periodic retrofits to improve efficiency and environmental performance. Combined, the two plants account for more than 40% of AECI’s generating capacity and represent the backbone of its baseload fleet. According to AECI’s 2025 system facts, the cooperative operates 6,469 MW of owned and contracted generation capacity across its three-tiered system, which serves 935,000 meters and more than 2.1 million people in Missouri, northeast Oklahoma, and southeast Iowa. Peabody’s NARM operation—located about 65 miles south of Gillette, Wyoming—is the largest coal mine in North America and among the most productive globally. In 2024, it shipped approximately 60 million tons of coal and has delivered coal to AECI facilities for more than 30 years. The mine produces low-sulfur, high-moisture subbituminous coal averaging 8,800 BTU/lb, well-suited for units designed to accommodate Powder River Basin coals. NARM holds more than 700 million tons in recoverable reserves and is a key asset within Peabody’s U.S. thermal portfolio. Despite broader structural decline in domestic coal use over the past decade, NARM’s scale and rail connections have helped it retain a foothold in baseload utility markets. The AECI contract follows a string of regulatory and market developments that have begun to reframe thermal coal’s role in the U.S. power mix. Earlier this month, President Donald Trump issued a sweeping set of executive orders and invoked the Defense Production Act (DPA) to promote coal production and block further coal plant retirements, explicitly citing the surging electricity needs of artificial intelligence (AI) and data centers as a matter of national priority. The“Reinvigorating America’s Beautiful Clean Coal Industry,” signed on April 8, for example, mobilizes federal agencies to dismantle regulatory and financial barriers to coal, fast-track mine permitting and leasing, and promote coal exports and advanced combustion technologies. By reclassifying coal as a strategic material under the DPA, the administration has sought to unlock up to $200 billion in low-cost financing through the DOE Loan Programs Office and directed the Department of Commerce to elevate U.S. coal as a global export priority. At the grid level, the orders direct the Department of Energy to invoke emergency powers under Section 202(c) of the Federal Power Act to prevent the retirement of coal plants deemed essential to reserve margins and system reliability. Coal units at risk of closure due to environmental compliance costs are granted a two-year reprieve from tightened Environmental Protection Agency (EPA) Mercury and Air Toxics Standards (MATS), while federal agencies are instructed to review—and potentially roll back—regulations that hinder coal production or investment. While the measures mark the most aggressive federal intervention in the coal sector in more than a decade, analysts remain cautious. No major U.S. utilities have announced new coal builds, and coal still faces stiff economic headwinds from low-cost natural gas and renewables. But for older coal plants already on the grid, particularly those tied to industrial demand or regional capacity constraints, the policy shift appears to have reopened discussions about their long-term role in a reliability-constrained, AI-driven power era. Industry observers suggest the shift reflects a broader recalibration already underway among utilities, merchant developers, and fuel suppliers as they confront explosive power demand growth, reliability constraints, and long lead times for replacement capacity. During Peabody Energy’s fourth quarter 2024 earnings call, CEO Grech pointed to mounting deferrals of coal unit closures, saying, “Following multiple years of premature retirements in coal-fueled generation, we’ve now seen deferrals and retirement plans extending the lives of 51 coal units in 17 states, constituting 26 GW of power—enough to power 20 million homes.” That reassessment is being echoed in the contracting behavior of utility buyers. At a CERAWeek 2025 session in March, speakers cited a marked shift toward longer-term coal procurement as utilities hedge against uncertainty. “Looking back five years ago, no utility would do an extended contract,” said Timothy Leyland, senior vice president of sales and marketing at Alliance Resource Partners. “At most three years. But things have changed. We just executed a contract that goes to 2031.” The return of long-term contracting is essential to support capital investment across the coal value chain, particularly for logistics and equipment, he noted. Other panelists described a changed environment in which coal is no longer viewed solely as a legacy resource, but increasingly as a strategic buffer. “People are talking about reopening plants that were already retired,” said Jud Kroh, president of Robindale Energy. “We’re seeing a shift. Not just maintaining what’s there—it’s people actually saying, ‘Maybe we need to go get that back online.’” Kroh stressed that if load from AI and data centers materializes as forecasted, “I think every coal plant is going to have to stay online for the foreseeable future.” Peabody executives have also disclosed growing inbound interest from private equity and data center developers exploring ways to pair long-life coal plants with power-hungry AI workloads. “We have been approached by household name private equity funds that are looking for creative means to match up reliable, low-cost coal plants with growing data center needs,” Grech said on the February earnings call. As a not-for-profit generator, AECI has remained focused on long-term cost stability and system reliability. Its three-tiered structure allows coordinated generation and transmission planning across 51 distribution cooperatives. In addition to its coal units, AECI operates a fleet of combined-cycle and peaking plants fueled by natural gas, as well as 1,240 MW of contracted wind and 492 MW of federal hydropower. But coal remains foundational to its ability to meet baseload needs. “We have a diverse resource mix, but our coal plants remain essential to meeting member demand—especially during extreme conditions,” AECI notes in its 2025 factsheet. —Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).

powerplant

Apr 17, 2025

Power News

Addressing Data Center Growth Constraints Key To U.S. Innovation, Leadership In AiAs the artificial intelligence (AI) boom drives exponential demand for data centers, the United States’ position as an AI leader is at risk without immediate action to address growth constraints. The “transition toward cloud-based services and generative AI applications [is forecast to drive] a 37% compound annual increase in AI spending out to 2032,” according to Bloomberg. The significant growth comes at a time when supply chain constraints are limiting revenue growth among the largest U.S. data center developers—known as hyperscalers. In the past year, hyperscalers have been flagging the data center supply chain as a headwind in their growth during quarterly earnings calls. If left unchecked, the U.S.’s progress and position as the world leader in AI innovation could be at risk. The U.S. has 45% of all data centers globally by count, according to Bloomberg, but the products that fill these centers are often sourced from outside the U.S. Data centers require a complex mix of chips, servers, networking equipment, storage, cooling and power, and many other components to run. The four primary limitations on data center growth are the supply of chips and other production goods, tariffs, land availability, and reliable electricity. With the increased focus of reshoring of production across the globe, countries are allocating significant resources in an effort overtake the U.S. in AI and data center infrastructure. Nimble scaling with flexibility to solve the supply chain constraints is crucial for future growth. Supply chain bottlenecks for semiconductor chips—most of which are manufactured in Asia—play a large role in the squeeze on data centers, because such chips are central to meet data center redundancy needs. The U.S. CHIPS and Science Act in 2022 allocated $280 billion in funding to stimulate domestic chip production (Figure 1). But as it takes several years to stand-up new semiconductor manufacturing facilities; those funded by the CHIPS Act likely won’t be operational until 2028 or 2029. The U.S. is leading its peers in the onshoring movement for chip production. The next largest government chip stimulus was the European Union’s European Chips Act in 2023, which allocated €43 billion ($47 billion) to the sector. 1. Source: Bloomberg Intelligence, Peterson Institute of Economics, analysis of U.S. Census Bureau data by Martin Chorzempa, RSM US LLP Current regulations are also changing the landscape daily. The Trump administration has signaled an appetite to repeal or scale back the CHIPS Act. Further, escalating tariffs threaten to upend the data center supply chain with significant price increases. Primarily, China is a large provider of chips, servers and networking equipment that are crucial for U.S. data center capacity and Canada is the primary foreign supplier to the U.S. of steel and aluminum, used in racking and data center buildouts. Some of the hyperscalers’ data center operations across the U.S. also are located in areas that are known to import some Canadian power, including in—but not limited to—Oregon, Washington, New York, Massachusetts, Ohio, and Illinois. Want to learn more about how power demand from data centers is impacting the power generation sector? Register to attend POWER’s Data Center POWER eXchange event in Denver, Colorado, on Oct. 28. The summit is associated with POWER’s Experience POWER event in Denver scheduled Oct. 29-31. The Trump administration has also suggested additional tariffs, including a new tariff of 25% on semiconductors from Taiwan. This tariff would be devastating to the U.S. technology industry, given the centralized production of the most advanced chips within Taiwan. As costs increase to operate in the U.S., multinational companies have an incentive to bolster the data center capacity in other locations. In June of 2024, TD Cowen predicted that “U.S. data centers will represent 6.6% of all U.S. electricity consumption” by 2028. Their research went further, citing vital data center regions that were on the brink of running out of reliability-rated power. The estimates included Northern Virginia by 2027; New Albany, Ohio by summer 2028; Silicon Valley by 2034; and noted that Dallas, Texas, already exceeds its supply. According to a December 2024 report from the U.S. Department of Energy, data centers in the U.S. consumed 176 terawatt-hours in 2023, or 4.2% of U.S. electricity consumptions. To put that in perspective, our data centers are consuming more than 54% of the total energy consumed by the entirety of Mexico and its 130 million citizens during that year. Also significant is the rate of demand growth (Figure 2). In the last 15 years, the U.S. electricity demand growth was nearly flat at just 0.1% annually. Now looking at 2% to 3% per year of growth—higher in data center-heavy regions—those growth rates feel staggering for an ecosystem that is simply not used to it. 2. Source: RSM US LLP, U.S. Energy Information Administration The need for reliable power has led many hyperscalers to explore a “behind-the-meter” model, where they own and operate their own power sources. While they still need to connect to the grid for resiliency against outages, this model offers more control and easier forecasting for future scaling. The main challenge with this strategy, however, is the construction time required. Nuclear power plants, favored by technology companies for being both highly reliable and having carbon-free emissions, can take more than a decade to build and often face public pushback. Renewable sources such as solar and wind—when paired with battery storage—can be a viable option to bring large amounts of power online in as little as 12 to 18 months. Natural gas would be a viable source, but the longer timeline of four to five years to bring a new natural gas plant online makes that reality more challenging. Power isn’t the only source of data center energy consumption. As of 2023, McKinsey estimated that 40% of all data center energy goes towards cooling. Cooling is a central part of data center management to prevent damage, equipment failure and maintain performance. In an industry expected to provide uptimes of 99.999% (or the equivalent of 5.25 minutes of downtime per year), overheating can have dire affects. In 2023, a data center in Singapore overheated, resulting in 2.5 million bank transactions to fail across two multinational banks. Water-based methods to cool chip facilities are becoming increasingly popular solutions, which will have implications for local water utility capacity, expansion and efficiency. U.S. data centers have historically been huddled around major internet exchanges that also meet the energy needs noted above, while being shielded from major environmental risks such as natural disasters. However, as regions such as Northern Virginia, Oregon, Phoenix, and Dallas/Fort Worth become saturated, developers are looking to alternative locations for data centers. The state regulatory landscape is evolving, with legislators in several states planning and proposing bills aimed at ensuring data centers pay their fair share of energy bills and in some cases setting renewable energy use goals for data center customers. Data center demand is expected to increase exponentially, turbocharged by AI. The growth provides an opportunity for the entire ecosystem from production of racks for servers to energy sources to power and cool the data centers. With the shifting regulatory landscape, winners in the U.S. are likely to be those with less exposure to foreign supply chains. Agility will also be important as AI continues to evolve at a rapid clip and reshapes the broader data center ecosystem. Organizations can take numerous routes to prepare for this growth. These might include assessing scaling abilities, understanding the impact of the interest rate environment on future plans, identifying potential alternative suppliers and tapping into incentive programs that can support growth. —Andrew Fedele is a director in RSM US LLP’s transaction advisory services practice. David Carter is a director in RSM US LLP’s security and privacy risk consulting practice. Mac Carroll is a senior manager of tax services at RSM US LLP.

powerplant

Apr 04, 2025

Advertise your business here! 🚀

PN Publishers' Articles