The once dominant U.S. coal industry appears to be in the end-of-life stage. But digging up the dusky diamonds* is still significant in the U.S. Coal’s problem is a vanishing electric generation market.
According to the Department of Energy’s Energy Information Administration, “The amount of coal received by power plants in the United States has largely declined over the past decade as coal-fired electricity generation has fallen and many coal-fired power plants have closed. However, slightly more coal was shipped to U.S. power plants in 2022 than in 2021 even though coal-fired generation fell by nearly 8% in 2022. The 8-million-ton increase in coal shipments came as power plants replenished their coal stocks, which had been drawn down in 2021.”
For the U.S. industry, the market for steam coal has largely become a political game tied to economic triage. A lot of it centers around Ohio-based First Energy, perhaps the nation’s most corrupt public utility. In West Virginia, for instance, the state Public Service Commission has bought some time for a far-from-hands-off deal for two First Energy subsidiaries for buy the two-unit, 1,300-MW Point Pleasant plant.
It’s a complicated political fandango, entirely about preserving jobs, as the Morgantown Dominion Post described it. At the behest of the Republican dominated state legislature and Republican Gov. Jim Justice, the PSC approved a $3 million rate increase for up to a year so two jurisdictional utilities – Monongahela Power Co. and Potomac Edison Co. – can wrangle a deal to buy the uneconomic plant from Houston-based Energy Transition and Environmental Management (ETEM), which bought the plan from First Energy unregulated spinoff Energy Harbor in order to demolish it starting May 31. In the meantime, Energy Harbor leased the plant back from ETEM and is operating it.
The Institute for Energy Economics and Financial Analysis (IEEFA) described the deal as “a money-losing plant that has been on the edge of closure for years, was first slated to be shut down in 2019, but was saved at the time by a $12.5 million annual tax break passed by the legislature. As with the earlier deal, the current effort flies in the face of basic economics.” The power from the plant is bid into the PJM Interconnection’s wholesale competitive market, where is it uncompetitive.
IEEFA commented, “It is difficult to overstate the unusualness of the Pleasants deal.” Neither of the jurisdictional utilities want it. The plant, if put on life support, is unlikely to survive long because it lacks necessary, and expensive, new pollution controls. If First Energy ends up owning it, the utility holding company is likely to shut down its 1,100-MW Fort Martin coal-fired plant in West Virginia. IEEFA concluded, “Rather than trying to find the lowest-cost power solution that would protect ratepayers from higher bills, the PSC is demanding electric customers subsidize a study on the purchase of Pleasants that would provide no benefits to them for as long as a year, and could easily lead to higher rates for years to come.”
In terms of coal production, the U.S. is fourth in the world. The top three are China, India, and Indonesia. U.S. production has plummeted over the past decade as natural gas has replaced coal as the dominant source of electricity. According to EIA, in 2010, U.S. steam coal production totaled over 900 million tons. Last year, the figure had fallen to 459 million tons. China’s coal production has consistently topped 3 billion tons annually.
The U.S. has by far the world’s largest coal reserves, at 250 billion tons, followed by Russia (160 billion tons), Australia (147 billion tons), China (139 billion tons), and India (101 billion tons).
Moving the U.S. away from coal as a climate strategy has been largely successful so far, as coal, once responsible for more than 50% of power generation, has fallen dramatically. According to an analysis by the American Public Power Association, “As of February 2022, America has more than 1.2 million megawatts of generation capacity. The largest fuel source for this capacity is natural gas (43.9%), followed by coal (18.5%). Wind, nuclear, and hydro together account for about 27% of capacity. Solar constitutes about 5% of all capacity and has increased dramatically — with more than 25,000 MW gained since 2020, a 60% increase.”
The major factor in the U.S. decline in coal generation has been the rise of natural gas fracking, not government policies or programs. Fracking led to natural gas prices so low that retiring elderly coal plants became not only possible but a smart move.
Getting the rest of the world to eschew coal has been less successful. Although China has professed that it will become carbon neutral by 2060, its actions belie the pledge. The Guardian last month reported, “Local governments in China approved more new coal power in the first three months of 2023 than in the whole of 2021, according to official documents.
The story is much the same for India, according to a Guardian article last November: “India’s energy conundrum: committed to renewables but still expanding coal.” India’s coal production rose 7.7% this April.
*Irish folk song “Down in the Coal Mine” includes this verse:
“Down in the coalmine, underneath the ground
Where a gleam of sunshine never can be found
Digging up the dusky diamonds all the season round
Deep down in the coalmine, underneath the ground”
–Kennedy Maize
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