Beware the delusions of Coal Country

The industry is under assault and in decline. Coal Country has struggled to read the writing on the wall.

The U.S. energy system has transformed several times over the past two hundred years. First coal took off in the mid-nineteenth century, overtaking wood as the country’s main source of energy of all kinds. Around 1900, petroleum began a decades long ascent, surging past coal around World War II and remaining our single largest source of energy since then. Natural gas rose more gradually at first and then quickly in the post-war period, and has dueled with coal for the number two spot until recently.

The most recent decade has brought more turbulence than at any time in half a century, but most people aren’t talking about it yet. The fracking revolution has led to explosive growth in domestic gas production (note: the graph above shows consumption), displacing imports and making the US a net exporter of gas.

This stunning reversal has brought low gas prices just as utility-scale solar and wind have begun their steep ascent. While still fairly small as a share of total electricity production – wind is about 7% and solar still below 2% – they are the fastest-growing sources of new electricity generation. Most important, they are the lowest-cost new resources on much of the electric grid, including all of the southwest and plains states and most of the upper midwest. Simultaneously, total electricity demand has stagnated for several years, in large part due to widespread improvements end-use efficiency in households and throughout industrial and commercial settings. Summer electricity demand for 2019 – when flexible fossil resources for peaking can be most valuable – is projected to be the lowest in five years.

The result for coal has been deadly. Coal plant retirements have accelerated and consumption has plunged, falling to its lowest level in half a century. In fact, new solar and new wind – that is, plants built from scratch – can compete with existing coal in some settings. Unsurprisingly, 14% of the country’s coal-fired capacity is scheduled for retirement by 2024, and several states have even made plans to retire coal plants early. As Axios reports, this is about markets rather than politics and policy, as most of these retirements are “moving ahead without political pressure and in states that lack renewable energy mandates.

And yet these changes have taken the industry largely by surprise. The Casper Star-Tribune recently lamented:

The idea that coal would slowly decline, partly buoyed up by the results of carbon research, and just maybe an export avenue to buyers in the Pacific Rim, took hold. Wyoming made its peace with the idea that coal’s best years were likely behind her, but that a more modest future for Wyoming coal, with manageable losses over time, was also likely.

The Star-Tribune appears to deliver a dose of reality, but the voices on the issue speak in a way that repeatedly dodges the bare facts of coal’s lack of competitiveness. A small sample, with emphasis added:

• “Within 10 years, demand for Powder River Basin coal could fall to 176 million tons… That figure includes Montana’s production and presumes that coal plants in the U.S. are taken offline as soon as they hit 60 years of age. If Wyoming is lucky and gas prices are high, that count could hold closer to 224 million. Or it could be even worse.”
• “Cloud Peak [a coal-mining company in the Powder River Basin] appears to be failing for economic reasons.”
• “What happened in the last downturn had so much to do with companies like Arch Coal and Peabody Energy making bad business decisions, [Wyoming state Senator Mike] Greear said, referring to the debt the companies took on prior to the downturn that made them unwieldy.”
• “We know that coal is not king anymore.”

With explanations that are riddled with weasel-words, hedging, and understatements, observers on the ground clearly struggle to see the inevitability of the shift in market forces. Perhaps most surprising, almost no one the Star-Tribune interviewed mentions wind or solar.

The lack of attention can be reciprocal. In many cases, massive new renewable energy projects don’t bother to mention the competition they are displacing. An article in the Montana Standard recently described a proposed solar development that would be the state’s largest. The reporting notes the tension with ranching, but also focuses on the increased revenues to the county and the jobs the project would create, even suggesting that the revenues “could cause county residents’ taxes to go down.” There is no mention of coal, though Montana is the nation’s sixth largest producer.

Not everyone is delusional, but it’s clearly difficult to speak bluntly about the impending doom. Montana Senator Michael von Flatern told the Star-Tribune: “While [the worst possible consequences] may never happen, we can’t hide from the reality that every day it looks more and more like they will.” That’s probably the most dire warning that Coal Country will get from one of its own.