Another Bad-News Year Ahead for U.S. Coal?

U.S. coal-burning power plants like the Navajo station in Arizona (above), the West’s largest power-generating facility, have been closing at a rapid pace in the last decade or so, cutting demand for thermal coal. Photo: Myrabella/Wikimedia Commons. Click to enlarge.

Issue Backgrounder: Another Bad-News Year Ahead for U.S. Coal?

By Joseph A. Davis

EDITOR'S NOTE: This story is one in a series of special reports from SEJournal that looks ahead to key issues in the coming year. Visit the full “2020 Journalists’ Guide to Energy & Environment” special report for more.

It’s a safe prediction that 2020 will see a continuation of the “energy transition,” as coal keeps on declining as a fuel in the United States and renewables like wind and solar keep gaining market share.

And President Donald Trump’s 2016 campaign promise to save the coal industry notwithstanding, we’ll see more bankruptcies and more power plant closures. It’s not toughening U.S. Environmental Protection Agency rules; in fact, three full years of energetic deregulation at the EPA have not slowed coal’s slide. 

No, it is the much-vaunted “free market” responding to the fact that natural gas and wind are now just cheaper than coal (the story is told in a January 2019 headline in business-friendly Fortune magazine: “Coal Power Plant Shutdowns Surge Under Trump”).

The decline of U.S. coal may be the easiest part of the story to discern. And because coal-burning is the form of electric generation that emits the most climate-heating carbon dioxide, there will be some net climate benefit.

But on a worldwide basis, coal’s slide is less discernible, while the role of other fossil fuels like natural gas and petroleum leave any overall climate gains in doubt.

 

The United States has quite a few coal reserves, 

especially compared to many other parts of the world. 

… But increasingly, companies are not making 

enough money mining the stuff to survive.

 

Decline of U.S. coal

It’s true that the United States has quite a few coal reserves, especially compared to many other parts of the world. The seams in the Appalachian region, for instance, have been mined for over a century. More recently, the deposits in the Mountain West have become productive. 

But increasingly, companies are not making enough money mining the stuff to survive.

Historically, the high price of transporting coal has been a significant portion of the delivered cost of thermal coal. As a result, coal has tended to be a regional fuel. Case in point: The huge coal-burning power plants of the Midwest were close to mines in Kentucky or Illinois. 

Click to enlarge.

But as power-plant demand for coal declined, the mining industry looked to the export market for its possible salvation.

The problem? The biggest current U.S. coal ports are Norfolk, Baltimore, New Orleans and other Eastern ports close to coalfields in that part of the country. But the biggest and fastest-growing markets that want to import coal are in Asia — China and India. 

It would be easier for U.S. mining companies to serve the Asian markets by shipping Western coal from Pacific ports. But while exports shipped via the Pacific Northwest have increased some in recent years, a slew of proposed new export terminals on the Pacific coast have so far largely been blocked (e.g., the Millennium project near Seattle). 

State and local governments there have opposed them in the permitting process, largely for environmental reasons.

 

Australia chases Asian markets

At the same time, Australia, which is much closer to Asian markets, has been going all out to mine and export coal. The Australian Conservative party currently in power is influenced by the mining industry and is considered weak on climate action (at least by Labor and environmentalists). 

Yet despite a pro-coal government, the outlook for further growth in Australian exports looks dicey. The reason, ironically, is a falling world price for coal.

Still, if any nation is going to feed Asia’s coal hunger, it is far likelier to be Australia or Indonesia than the United States. 

True, U.S. coal exports have gone up in recent years. This is partly a result of increased exports of metallurgical (coking) coal, rather than the stuff burned in power plants. And that is partly a result of a jump in prices for that kind of coal — not Trump policies. 

In fact, the journalistic fact-checkers who look at Trump’s claims to have brought back the coal industry say they are poppycock.

 

Aging U.S. coal plants retire

Meanwhile, U.S. coal-burning power plants have been closing at a rapid pace in the last decade or so. That means less demand for thermal coal in the United States. 

This was already going on during (and before) the Obama administration, but it actually continued at high speed under Trump. 

 

U.S. power companies announced the retirements

of more than 546 power plants totalling

some 102 gigawatts of generating capacity

between 2010 and the first quarter of 2019.

 

U.S. power companies announced the retirements of more than 546 power plants totalling some 102 gigawatts of generating capacity between 2010 and the first quarter of 2019, according to the Energy Information Administration.

The reasons why this has been happening are many — and more complex than many of the players would have the rest of us believe.  

An often-overlooked reason is aging. Many coal plants are approaching the end of their useful life — the 50 years or so for which they were engineered to operate. 

Most of the coal plants in the United States were built before 1990. The Clean Air Act of 1970 grandfathered existing coal plants: They did not have to install important pollution controls unless and until they were modified in ways that would increase air pollution. 

 

‘New Source Review’ a political football

As plants aged, operators wanted to update them, if only to save money by extending their lives. The changes had to undergo a “New Source Review,” or NSR, to determine whether costly new pollution controls were required. 

Click to enlarge.

NSR, often loosely enforced, has become a highly contested political football. Efforts to tighten enforcement began as early as the Clinton administration and continued through the Obama White House. 

Most recently, the Trump administration has moved once again to cut aging coal-burners some slack. As recently as 2017, some 30 percent of U.S. coal-burning plants lacked modern pollution controls such as scrubbers, which remove the sulfur dioxide that causes acid rain.

Another reason coal plants are closing is politics. Coal burning causes many kinds of pollution — especially carbon dioxide, the primary greenhouse gas. That’s politically unpopular.

 

‘Beyond Coal’ campaign hits industry

For an understanding of coal’s current state, turn the clock back to 2001. That’s when the recently installed Bush administration set up an Energy Task Force under Vice President Dick Cheney to set America straight on energy (it was stacked with energy industry advocates). 

The task force proposed building some 200 new coal plants. 

That was also when the Sierra Club began organizing against coal plants — opposing new coal facilities and seeking to close existing ones across the country — in what eventually became known as the “Beyond Coal” campaign.

At the time, many feared Bush and Cheney could get those new plants built. It was not to be. Since then, instead, hundreds of existing coal plants have been closed or scheduled for closure. 

The numbers tell the story. In the year 2000, there were 1,024 U.S. coal units with a nominal 278 GW capacity. By 2017, there were just 359 units rated at 256 GW. In the year 1997, 52.8 percent of the electricity in the United States was generated from coal. By 2018, coal’s share had dropped to 27.4 percent.

 

The Beyond Coal campaign was certainly 

one of the most effective and successful 

organizing efforts in the history of environmentalism.

 

Natural gas deals the fatal blow

The Beyond Coal campaign was certainly one of the most effective and successful organizing efforts in the history of environmentalism. It was, in effect, the “war on coal” that the industry built up as a bogeyman (along with regulatory efforts). 

It served the industry’s rhetorical purpose of finding a supposed malicious force to blame. But, in truth, it wasn’t the main cause of coal’s decline.

No. More than anything, it was natural gas that dealt the fatal blow to coal. The price of natural gas has fallen so low that it is now just a more economical, and profitable, fuel for generating electricity. 

Some old plants can be fueled by gas with limited modifications. So-called “combined cycle” plants, which use both gas turbines and steam turbines, have higher efficiency, converting more heat into electricity. 

Not only are the carbon dioxide emissions per unit of heat about half as much, but other pollution is mostly eliminated as well.

Electric utilities are switching from coal to gas. Today, natural gas fuels about 35 percent of all electricity generation, compared to 27 percent for coal.

Right now, natural gas is cheap, and likely to stay cheap for quite a while. The reason is fracking  — the technique of drilling horizontally into shale formation and then injecting fluids at high pressure, which fractures the rock and releases trapped gas. 

The increase in fracking in recent years has raised supply and driven prices down. The price of gas for utilities in 2008 was $9.26 per thousand cubic feet; in 2018 it was $3.68.

 

Whither coal?

That is hardly all of the bad news (past and future) for coal. 

 

Today, renewables like wind and solar, 

as well as alternatives like efficiency, 

are also outcompeting coal on the “free market.”

 

Today, renewables like wind and solar, as well as alternatives like efficiency, are also outcompeting coal on the “free market.” Of course, the fate of these energy alternatives is also somewhat dependent on policy choices that governments make. Wind, for example, could lose much of its edge if tax breaks are allowed to expire. 

But the biggest variable, in the long run, is likely to be U.S. climate policy. That, in turn, depends on elections at all levels and branches of government. 

A shift toward climate-action candidates in 2020 elections could augur an end to efforts to prop up the sagging coal industry. Stay tuned!

Joseph A. Davis is a freelance writer/editor in Washington, D.C. who has been writing about the environment since 1976. He writes SEJournal Online's TipSheet and Reporter's Toolbox columns. Davis also directs SEJ's WatchDog Project and writes WatchDog Tipsheet, and compiles SEJ's daily news headlines, EJToday.

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* From the weekly news magazine SEJournal Online, Vol. 4, No. 39. Content from each new issue of SEJournal Online is available to the public via the SEJournal Online main page. Subscribe to the e-newsletter here. And see past issues of the SEJournal archived here.