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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Every tragedy requires a villain, sometimes more than one. The tragic story of the collapse of the U.S. coal industry has three main villains--natural gas, energy efficiency and renewable energy--according to a recent study from Columbia University's Center on Global Energy Policy. In that study, environmental regulations are a distinctly second-tier villain, accounting for less than 10% of coal's troubles.
"What, or who, is to blame for the American coal industry's currently dismal state? Contrary to the way the issue is often characterized in political discourse, there is no single villain," write Trevor Houser, Jason Bordoff and Peter Marsters in "Can Coal Make a Comeback?" The coal industry "has a mix of enemies, both foreign and domestic, that are responsible for the production declines, bankruptcies and layoffs of the past few years."
The study estimated low-priced natural gas accounted for about 49% of coal's hard times, according to Houser, Bordoff and Marsters. Lower-than-expected demand for electricity, largely due to installation of energy-efficiency measures in businesses and homes, is responsible for 26% of coal's woes. And the authors pin 18% of the blame on falling prices for renewable energy like wind and solar. President Barack Obama's environmental regulations accounts for about 7% of coal's downfall, they write.
"Six years ago," the authors write, "the U.S. coal industry was thriving, with demand recovering from the Great Recession, and global coal prices at record highs along with the stock prices of U.S. coal companies. By the end of 2015, however, the industry had collapsed, with three of the four largest U.S. miners filing for bankruptcy along with many other smaller companies."
The authors note that coal-mining employment has been on the decline for decades--falling to about 130,000 in 2011 from over 800,000 in the 1920s--the pace of job loss since 2011 "has been particularly dramatic. After campaigning on a promise to end what he called his predecessor's 'War on Coal,' President Donald Trump signed an Executive Order in March 2017 ordering agencies to review or rescind a raft of Obama-era environmental regulations, telling coal miners they would be 'going back to work.' "
Click on the image at right to see the historical employment levels of coal miners.
Houser, Bordoff and Marsters cast serious doubt on the president's prediction. "If natural gas prices remain at or near current levels, or renewable costs fall more quickly than expected, U.S. coal consumption will continue its decline despite Trump's aggressive rollback of Obama-era regulations," they write. "Implementing all the actions in President Trump's executive order to roll back Obama-era environmental regulations could stem the recent decline in U.S. coal consumption, but only if natural gas prices increase going forward."
Natural gas' ascendency has been driven by market forces: increased demand from power companies, chemical processors and other industries, coupled with advances in horizontal drilling and hydraulic fracturing that have dramatically expanded supply while lowering prices. By comparing the Energy Information Administration's (EIA) "Annual Energy Outlook" predictive reports with after-the-fact measurements of what actually happened in energy markets, the authors place 49% of the blame for coal's troubles on the natural gas industry.
The authors note that U.S. natural gas production grew 37% between 2007 and 2016, and it is now 26% higher than the EIA projected it would be in its 2006 "Annual Energy Outlook." The EIA has revised upward its projections almost every year since U.S. drillers improved productivity and proved up additional gas reserves. The 2016 Annual Energy Outlook projects a further 40% increase in production between now and 2030, the authors note. This particular villain is not going to go away anytime soon unless a "black swan" event occurs, like a scientific consensus develops that hydraulic fracturing poisons groundwater, renders land toxic or causes cancer.
More than a quarter of coal's troubles have come from falling electric demand, even as the economy, as measured by the gross national product (GNP), has risen. Falling electric demand for electricity means less demand for all fuels, but coal has been especially hard hit.
The Power Industry accounts for more than 90% of the coal consumption in the U.S. each year. "After decades of growth, U.S. electricity demand has essentially flat-lined," write Houser, Bordoff and Marsters. "The Great Recession certainly took a toll on electricity usage. U.S. power demand fell by 4% year-on-year in 2009. While the economy has largely recovered since then, electricity demand hasn't. In 2016, the United States consumed less electricity than it did in 2007, even though the economy was 12% larger (adjusted for inflation). In 2016, the U.S. economy expanded by 1.6%, but electricity consumption fell by 1.2%."
A flattening of electric demand, or a decoupling of electric growth and economic growth, is a result of numerous state and federal initiatives over many years to transform the nation's energy markets by replacing older, less-efficient equipment with new, more efficient equipment, aided by financial incentives.
The authors further ascribe 18% of the blame for coal's woes to competing electric-generation technologies like wind and solar power. Solar's costs fell 85% between 2008 and 2016, while wind's costs fell 36% during that time, the study noted. Wind and solar power have benefitted from years of federal and state government support in the form of tax credits, which have largely achieved their purpose--to take a fledgling technology out of the lab and into the market. Whether those tax credits die a premature death during the Trump administration, it is clear that rapid cost declines have made wind and solar competitive with traditional fossil-fueled electric generation in many settings.
That leaves less than 10% of the blame for coal's woes on policies enacted by the Obama administration, according to "Can Coal Make a Comeback?" Two of the authors of that study work at the consulting firm Rhodium Group, while the third, Jason Bordhoff, currently a professor at Columbia, had served on Obama's National Security Council.
To assess the impact of Obama-era environmental regulations on coal consumption by the U.S. Power Industry, the authors performed the following analysis: "Between 2012 and 2015, a combined 238 coal boiler units in power plants across the country were retired, taking a combined 34 gigawatts (GW) of power generation capacity offline. Using plant-level survey data from the EIA, we quantified the average coal consumption and generation from these plants by using an average from the 3-year period prior to their closures. We estimate that these retirements were responsible for a 5% decline in U.S. coal-fired generation and a 3.9% decline in U.S. coal production in 2016 (relative to 2011 levels)."
"Compared to a total coal generation decline of 28% and coal production decline of 33% during that period," they continue, "the impact of coal plant retirements was relatively modest. Much more important were the reduction in overall electricity demand and the reduction in generating hours by operating coal plants because of increasingly competitive natural gas and renewable options."
The authors acknowledge some of the 10 Obama-era environmental regulations they reviewed "might have modestly increased the operating costs of those coal plants still running, and thus contributed to lower dispatch." But low natural gas prices, declining demand and falling renewable power costs all played a more important role in coal retirements.
"Can Coal Make a Comeback?" is doubtful Trump's pro-coal actions will bring about a renaissance in U.S. coal production and employment. "Given the outlook for coal demand, both in the United States and around the world, the best-case scenario for U.S. coal production may be a modest recovery to 2013 levels at just under 1 billion tons a year," the authors write. "In the worst-case scenario, it could fall to 600 million tons due to cheaper natural gas and lower renewable energy costs.
The modeling in their report suggests a plausible range of national coal mining employment between 70,000 and 90,000 in 2020, 64,000 in 2025 and 94,000 in 2030. "That's still lower than anything the United States experienced before 2015 and a far cry from what's needed to provide America's coal communities the future they have earned and deserve," write the authors.
Click on the images at right to see projections of U.S. coal miner employment and U.S. coal demand.
Rather than passively managing a long-term decline or rolling the dice for a resurgence of coal mining that is unlikely to arrive, the authors write, "it makes more sense for coal communities, government, and other private and public sector organizations to come together or leverage the other assets--both human capital and natural resources--that exist in coal country to attract investment in new sources of job creation and economic growth."
That's not an easy path, but the authors conclude by shining a light on some redevelopment efforts in West Virginia's Mingo and McDowell counties, and another in Kentucky, that are showing promise.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
"What, or who, is to blame for the American coal industry's currently dismal state? Contrary to the way the issue is often characterized in political discourse, there is no single villain," write Trevor Houser, Jason Bordoff and Peter Marsters in "Can Coal Make a Comeback?" The coal industry "has a mix of enemies, both foreign and domestic, that are responsible for the production declines, bankruptcies and layoffs of the past few years."
The study estimated low-priced natural gas accounted for about 49% of coal's hard times, according to Houser, Bordoff and Marsters. Lower-than-expected demand for electricity, largely due to installation of energy-efficiency measures in businesses and homes, is responsible for 26% of coal's woes. And the authors pin 18% of the blame on falling prices for renewable energy like wind and solar. President Barack Obama's environmental regulations accounts for about 7% of coal's downfall, they write.
"Six years ago," the authors write, "the U.S. coal industry was thriving, with demand recovering from the Great Recession, and global coal prices at record highs along with the stock prices of U.S. coal companies. By the end of 2015, however, the industry had collapsed, with three of the four largest U.S. miners filing for bankruptcy along with many other smaller companies."
The authors note that coal-mining employment has been on the decline for decades--falling to about 130,000 in 2011 from over 800,000 in the 1920s--the pace of job loss since 2011 "has been particularly dramatic. After campaigning on a promise to end what he called his predecessor's 'War on Coal,' President Donald Trump signed an Executive Order in March 2017 ordering agencies to review or rescind a raft of Obama-era environmental regulations, telling coal miners they would be 'going back to work.' "
Houser, Bordoff and Marsters cast serious doubt on the president's prediction. "If natural gas prices remain at or near current levels, or renewable costs fall more quickly than expected, U.S. coal consumption will continue its decline despite Trump's aggressive rollback of Obama-era regulations," they write. "Implementing all the actions in President Trump's executive order to roll back Obama-era environmental regulations could stem the recent decline in U.S. coal consumption, but only if natural gas prices increase going forward."
Natural gas' ascendency has been driven by market forces: increased demand from power companies, chemical processors and other industries, coupled with advances in horizontal drilling and hydraulic fracturing that have dramatically expanded supply while lowering prices. By comparing the Energy Information Administration's (EIA) "Annual Energy Outlook" predictive reports with after-the-fact measurements of what actually happened in energy markets, the authors place 49% of the blame for coal's troubles on the natural gas industry.
The authors note that U.S. natural gas production grew 37% between 2007 and 2016, and it is now 26% higher than the EIA projected it would be in its 2006 "Annual Energy Outlook." The EIA has revised upward its projections almost every year since U.S. drillers improved productivity and proved up additional gas reserves. The 2016 Annual Energy Outlook projects a further 40% increase in production between now and 2030, the authors note. This particular villain is not going to go away anytime soon unless a "black swan" event occurs, like a scientific consensus develops that hydraulic fracturing poisons groundwater, renders land toxic or causes cancer.
More than a quarter of coal's troubles have come from falling electric demand, even as the economy, as measured by the gross national product (GNP), has risen. Falling electric demand for electricity means less demand for all fuels, but coal has been especially hard hit.
The Power Industry accounts for more than 90% of the coal consumption in the U.S. each year. "After decades of growth, U.S. electricity demand has essentially flat-lined," write Houser, Bordoff and Marsters. "The Great Recession certainly took a toll on electricity usage. U.S. power demand fell by 4% year-on-year in 2009. While the economy has largely recovered since then, electricity demand hasn't. In 2016, the United States consumed less electricity than it did in 2007, even though the economy was 12% larger (adjusted for inflation). In 2016, the U.S. economy expanded by 1.6%, but electricity consumption fell by 1.2%."
A flattening of electric demand, or a decoupling of electric growth and economic growth, is a result of numerous state and federal initiatives over many years to transform the nation's energy markets by replacing older, less-efficient equipment with new, more efficient equipment, aided by financial incentives.
The authors further ascribe 18% of the blame for coal's woes to competing electric-generation technologies like wind and solar power. Solar's costs fell 85% between 2008 and 2016, while wind's costs fell 36% during that time, the study noted. Wind and solar power have benefitted from years of federal and state government support in the form of tax credits, which have largely achieved their purpose--to take a fledgling technology out of the lab and into the market. Whether those tax credits die a premature death during the Trump administration, it is clear that rapid cost declines have made wind and solar competitive with traditional fossil-fueled electric generation in many settings.
That leaves less than 10% of the blame for coal's woes on policies enacted by the Obama administration, according to "Can Coal Make a Comeback?" Two of the authors of that study work at the consulting firm Rhodium Group, while the third, Jason Bordhoff, currently a professor at Columbia, had served on Obama's National Security Council.
To assess the impact of Obama-era environmental regulations on coal consumption by the U.S. Power Industry, the authors performed the following analysis: "Between 2012 and 2015, a combined 238 coal boiler units in power plants across the country were retired, taking a combined 34 gigawatts (GW) of power generation capacity offline. Using plant-level survey data from the EIA, we quantified the average coal consumption and generation from these plants by using an average from the 3-year period prior to their closures. We estimate that these retirements were responsible for a 5% decline in U.S. coal-fired generation and a 3.9% decline in U.S. coal production in 2016 (relative to 2011 levels)."
"Compared to a total coal generation decline of 28% and coal production decline of 33% during that period," they continue, "the impact of coal plant retirements was relatively modest. Much more important were the reduction in overall electricity demand and the reduction in generating hours by operating coal plants because of increasingly competitive natural gas and renewable options."
The authors acknowledge some of the 10 Obama-era environmental regulations they reviewed "might have modestly increased the operating costs of those coal plants still running, and thus contributed to lower dispatch." But low natural gas prices, declining demand and falling renewable power costs all played a more important role in coal retirements.
"Can Coal Make a Comeback?" is doubtful Trump's pro-coal actions will bring about a renaissance in U.S. coal production and employment. "Given the outlook for coal demand, both in the United States and around the world, the best-case scenario for U.S. coal production may be a modest recovery to 2013 levels at just under 1 billion tons a year," the authors write. "In the worst-case scenario, it could fall to 600 million tons due to cheaper natural gas and lower renewable energy costs.
The modeling in their report suggests a plausible range of national coal mining employment between 70,000 and 90,000 in 2020, 64,000 in 2025 and 94,000 in 2030. "That's still lower than anything the United States experienced before 2015 and a far cry from what's needed to provide America's coal communities the future they have earned and deserve," write the authors.
Rather than passively managing a long-term decline or rolling the dice for a resurgence of coal mining that is unlikely to arrive, the authors write, "it makes more sense for coal communities, government, and other private and public sector organizations to come together or leverage the other assets--both human capital and natural resources--that exist in coal country to attract investment in new sources of job creation and economic growth."
That's not an easy path, but the authors conclude by shining a light on some redevelopment efforts in West Virginia's Mingo and McDowell counties, and another in Kentucky, that are showing promise.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
