/US coal output forecast to fall despite Trump revival efforts

US coal output forecast to fall despite Trump revival efforts

US coal production is expected to fall even faster than if the Obama administration’s climate policy had taken effect, according to official projections, underlining the difficulties facing President Donald Trump in his aspirations to revive the industry.

The government’s Energy Information Administration projected in its latest annual outlook that US coal production would drop 21 per cent over the next 20 years. That is an even steeper decline than the 18 per cent drop that it forecast two years ago, under the assumption that Barack Obama’s Clean Power Plan would come into force.

Concerns about the long-term outlook for coal have added to the financial pressures on US mining companies. Westmoreland Coal filed for Chapter 11 bankruptcy protection last October, and shares in Cloud Peak Energy have lost more than 90 per cent of their value over the past year.

The coal producers that have been through bankruptcy in the past five years, shedding most of their debts and re-emerging on to the stock market, have fared better. But since August shares in Peabody Energy have fallen by 15 per cent and in Contura Energy by 16 per cent.

Implementation of the Clean Power Plan — which imposed curbs on carbon dioxide emissions from electricity generation — was suspended by the Supreme Court, and the Trump administration has been working to scrap it. The White House issued a statement last week saying the president had “ended the ended the war on coal” and was “replacing the Clean Power Plan, a flawed Obama-era regulation”.

Market forces have been driving electricity generators away from coal and towards natural gas and renewable energy, however, and those trends are expected to continue.

Alex Gilbert of SparkLibrary, an energy consulting firm, said: “The coal sector in the US has declined a lot more swiftly than people thought. Natural gas is really out-competing coal, and replacing it as a baseload resource.”

Employment in US coal mining has risen from 51,000 two years ago to 54,000 last month, thanks mainly to strong exports. US coal exports rose by 61 per cent in 2017 and about 20 per cent last year. They are expected to fall back again this year, however, and the longer-term outlook for the domestic market looks challenging.

The surge of additional gas production released by the shale revolution has made it a very competitive fuel for power generation in the US, and new gas-fired plants are typically much more efficient than their older coal-fired rivals.

Saturday, 26 January, 2019

Last year was a near-record for closures of coal-fired power plants in the US, with about 14.3 gigawatts of capacity shut down, according to S&P Global Market Intelligence, not far short of the 14.8GW retired in 2015.

The EIA projected this week that coal would drop from providing 29 per cent of US electricity last year to 21 per cent by 2035. Over the same period, gas is expected to rise from 30 per cent to 37 per cent of power generation, and renewables from 17 per cent to 24 per cent.

However, like other forecasters, the EIA has consistently underestimated the growth of renewable energy and overestimated the persistence of coal, and some analysts believe it is doing so again.

Dan Cohan, a professor at Rice University in Houston, said the fact that the decline in coal now seemed set to exceed expectations under the Clean Power Plan, even though the regulations were not in force, showed that the EIA’s projections underestimated the change that was possible.

“These misguided forecasts create an aura of inevitability around a fossil-heavy future,” he said.

If states continued to set more ambitious goals for renewable energy, and more companies followed the example of Xcel Energy, the Minneapolis-based utility, which plans to close coal-fired capacity in Colorado to replace it with wind, solar and battery storage, then coal could decline faster than the EIA projected, Mr Cohan said.