Economics and Markets, Not Enviros, Killing Coal

February 10, 2021


The U.S. coal industry isn’t likely to prosper under the Biden administration, but it wasn’t exactly gangbusters under the previous one either, despite all those promises.

“There’s a real gap between rhetoric and reality in the coal industry,” said Clark Williams-Derry, an energy analyst at the Institute for Energy Economics and Financial Analysis. “The rhetoric was that the administration was going to help the coal industry. The reality was that by pursuing what you might call an all-of-the-above energy strategy, in particular one focused on oil and gas, that actually hurt the coal industry.”

In the last few years, the industry’s decline continued, with power generation from coal dropping significantly.

Williams-Derry said many utilities switched from producing electricity with coal to doing it with natural gas because, thanks to fracking, gas has become dirt cheap and readily available.

“Coal had built its reputation as the cheap way to generate power,” he said. “And over the course of the past, let’s say eight to 12 years, it has become the most expensive way to generate power.”

On top of natural gas, the price of wind and solar power continues to drop.

“So that dynamic has made it so that the price now — it becomes a no-brainer where you actually save money if you build renewables,” said Alex Wang, who teaches environmental law at UCLA.

Terrible news for coal because, according to the Energy Information Administration, power generation accounts for more than 92% of U.S. coal demand.

But Betsy Monseu, CEO of the American Coal Council, warns of skyrocketing energy prices, like what happened last summer in California during a heat wave, if the Biden administration tosses coal by the wayside.

“It’s important to fuel diversity, and fuel diversity is important to competitive energy markets,” she said.

While the coal industry isn’t counting on favorable policy from the Biden administration, it’s just hoping to at least remain part of the conversation. 

President Joe Biden has said that coal workers would not be forgotten, that his administration would help the industry transition from the mines to new jobs, whether those jobs are in a completely different industry or cleaning up the hundreds of abandoned coal mines across the country. But Williams-Derry said coal’s fundamental problems are technological, rather than political.

“The reality is that the marketplace is attacking coal,” he said. “Coal is essentially a 19th-century technology competing in a 21st-century world that’s very different.”

One Response to “Economics and Markets, Not Enviros, Killing Coal”

  1. mboli Says:

    Prairie State Energy Campus, east of St. Louis, is a 1,600 MW coal-powered generating station that was commissioned in 2012.
    Peabody coal company persuaded lot of municipal utilities and small co-ops to pick up the investment cost. Also it promised that mining local Illinois coal (and scrubbing the sulfur) would be cheaper.
    Here is the thing: U.S. coal usage was close to its peak when the project was proposed in 2004. By the time it was commissioned in 2012 coal use had declined 15% from its 2005-08 peak.
    At the other end of Illinois Crawford, Fisk, and State Line generating stations closed the same year Prairie State opened. A number of other coal-fired generating stations throughout the state closed as PSEC was being built.
    At the same time PSEC was under construction the FutureGen project, elsewhere in Illinois, was supposed to be a demonstration of how to build a coal plant with carbon capture and storage. PSEC’s designers rejected using generators that could be retrofitted for carbon capture. They didn’t expect regulation of GHGs to show up soon enough to apply to PSEC.
    Now PSEC is an albatross. It is uneconomical. It is one of the 10 biggest emitters of greenhouse gasses in the country, with many decades of expected lifetime remaining.
    Peabody divested itself of its 5% stake four years after commissioning. Public utilities and co-ops are stuck with the albatross.

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