Another Leg Down for the Coal Industry in 2020

2020 will mark another milestone in the steep decline of the U.S. coal industry. Many plants have already shut down because of environmental or economic pressures, and U.S. coal consumption has been mostly shrinking for over a decade now. So the industry’s woes are old news. But consider: In 2020, the U.S. will likely see coal use fall to a 45-year low.

2019 is not yet over, and government statistics on coal consumption get reported with a lag of several months. But the Energy Department has reported on the first eight months of the year, which gives us a reasonably good estimate of how the year as a whole will end up. During that period, coal consumption fell by about 12% from the same period in 2018. Assuming that pattern holds – and given the low price of natural gas, coal’s chief competitor in the power sector, the pattern probably will hold – total coal consumption in 2019 will come in near 600 million tons. For reference, the U.S. burned a billion tons per year as recently as 2011.

What happened? A combination of factors. Under President Obama, the Environmental Protection Agency tightened air quality regulations that made many older coal plants uneconomical to keep in operation. At the same time, the fracking revolution unleashed huge reserves of cleaner-burning natural gas, driving down its price to the point where gas became competitive with coal. What’s more, a host of federal and state policies incentivized utilities to ramp up wind and solar power, even as the cost of solar panels and wind turbines was falling. For coal, it was a triple whammy. The fuel that once supplied half of the nation’s power has since seen its share of the generation mix drop to a quarter.

The declines will continue. With more plants slated to shut down in 2020, I expect U.S. coal consumption to drop to between 550 million and 570 million tons. According to government records, the last time the nation burned so little coal was 1975. That’s roughly half of the peak hit in 2007, when demand came in at more than 1.1 billion tons.

For coal miners and regions tied to mining, this collapse has been devastating. Back in 2011, when the nation burned a billion tons of coal, employment in the industry stood at more than 90,000. By last year, that figure had shrunk to a bit over 53,000. According to the Department of Energy, just 16 mines in the Powder River Basin of Wyoming and Montana now account for 43% of total U.S. production, whereas the traditional mining regions of southern Appalachia have fallen to about 15%. And even in the prolific Powder River Basin, some of the major producers have filed for bankruptcy.

What about the export market? Can overseas demand make up for falling consumption at home? Probably not. Exports jumped in 2017 but peaked in 2018 and have since started to pull back. And the long-term outlook for U.S. coal exports isn’t bright. The International Energy Agency expects global coal demand to either stagnate or drop sharply, depending on what actions countries take to reduce carbon emissions in their power sectors. Either way, the rest of the world does not look like a growth market that can easily take up the slack left by shuttered American coal plants.