Coal as power source hits 40-year low
The volume of coal burned in the U.S. to generate electricity hasn’t been this low in almost 40 years — and it’s getting lower.
After decades with coal at No. 1, natural gas took away the nation’s top spot for power generation in 2016 and hasn’t looked back. Coal-fueled power generation was at 48 percent of the U.S. electricity supply in 2008, down slightly from 50 percent in 1968, but it’s been in a steep downhill run the past decade.
Coal’s share of the power mix plunged to 28 percent in 2018, according to the U.S. Energy Information Administration. The EIA projects coal’s share of electricity generation to fall to 25 percent in 2019 and 22 percent in 2020.
And it’s not just low-cost natural gas that’s eating away at coal. It’s renewable energy.
Electricity from renewables passed coal-fired power in April for the first time ever, the EIA reported. Renewable sources — which the EIA defines as hydroelectric, wind, solar, geothermal and biomass — provided 23 percent of total electricity generation to coal’s 20 percent for the month.
It was a little bit of a seasonal anomaly, the agency explained, as overall U.S. power consumption is the lowest in the spring, with coal- and gas-fired power plants often undergoing maintenance during the slow period. Record generation from wind and near-record generation from solar contributed to the overall rise in renewables this spring, the EIA reported.
Regardless of the asterisk on renewables passing up coal for one month, the EIA expects coal to remain ahead of renewables on an annual basis in 2019 and 2020. Renewables, however, will be the nation’s fastest-growing power source for at least the next two years, the agency said in January, on their way toward someday passing coal for an entire year.
The cost for wind and solar power is dropping, making renewables more attractive as utilities, industries and states strive to reach emission-reduction targets.
Northern Indiana Public Service Co. wants to be coal-free in 2028. Working toward that goal last year, it accepted bids from energy developers and learned that a mix of wind, solar and batteries would be cheaper than building a new gas plant to replace its retiring coal units, The New York Times reported.
“Renewables in our particular situation were far more competitive than we realized,” said Joe Hamrock, chief executive of the company that owns the utility.
“It’s hard to see any scenario where coal rebounds,” Joe Aldina, manager of coal research at S&P Global Platts Analytics, was quoted by CNN Business in September.
Just since the January 2017 inauguration of President Donald Trump, who pledged during his winning campaign to bring back coal-mining jobs, approximately 15 percent of U.S. coal-fired power plants have retired, according to Platts.
The energy reporting and analytics firm expects an additional 10 percent of the nation’s coal fleet will close down in 2019-20.
“Coal is going to get phased out over the long term,” Aldina told CNN.
Duke Energy, one of America’s largest utilities, announced in September its goal to achieve net-zero carbon emissions by 2050.
“Retiring coal plants is an important part of achieving this objective,” said Lynn Good, Duke Energy’s CEO.
Duke Energy plans to retire seven coal-fired units by 2024. That’s on top of the 49 coal units that have been shuttered since 2010, CNN reported.
Besides losing power plants and coal-mining jobs, the industry is losing money and finding itself in bankruptcy court a lot more. More than half a dozen large U.S. coal companies have filed for bankruptcy in the past year, The Wall Street Journal reported Oct. 13, predicting that more companies are headed that way.
The bankruptcies follow an even higher number of filings in 2015 and 2016, with the increasingly bad news hitting miners in Appalachia and the Powder River Basin of Wyoming and Montana.
“Even if you have a totally clean balance sheet, if you can’t get the coal out of the ground at a price that works you’re going to have a problem,” Fredrick Vescio, a director at investment bank Houlihan Lokey, told the Journal.
It’s not just small companies going under as demand for coal heads lower. Murray Energy, the nation’s largest private coal company, reported Oct. 2 it has entered into forbearance agreements on interest payments due on its debt. The move buys time to look at restructuring options.
The closed power plants, closed mines and bankruptcies come as the coal market continues to get smaller, regardless of President Trump’s decisions to roll back environmental restrictions on coal-fired plants. The president cannot change the economics of cheap natural gas to generate electricity.
Gas prices hit 20-year lows for the electricity-heavy air conditioning months of June and July this summer, averaging $2.40 and $2.37 per million Btu, respectively, according to EIA numbers.
Next year could be even lower. Global energy consultancy IHS Markit reported Sept. 12 that the oversupply of gas in the United States could drive average prices in real terms at the Henry Hub benchmark to a level not seen since the 1970s. The analysts are predicting U.S. prices will average $1.92 per million Btu in 2020.
At that price, it’s becoming increasingly difficult for power generators to pass up cleaner-burning gas.
“I think that a lot of the management and boards of the coal-mining companies were unwilling to admit that this was really going to happen,” Karla Kimrey, a former vice president at Cloud Peak, which had roughly 1,235 employees when it filed for bankruptcy in May, told The Wall Street Journal.
“Clearly, President Trump is an advocate for coal, but the ones who really matter are the senior utility executives who are deciding where electricity generation will come from in the future,” the Journal quoted Mark Levin, a managing director and senior analyst at Seaport Global Securities.
Generating companies have plans to add more than 150 new gas-fired power plants across the country, the U.S. Environmental Protection Agency reported earlier this year.
Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.