More facts showed up this week telling the same story about coal—the revival isn’t coming.
These new facts (see here for an earlier post about ‘stubborn facts’), courtesy again of the independent Energy Information Administration, show that coal production in the United States totaled 773 million short tons in 2017. This was up 6 percent from 2016, but better keep the champagne corked. The increase was due entirely to exports, a volatile market that is not conducive to long-term growth. To wit, in the five years from 2012-2016, exports swung from a high of 125.7 million short tons to a low of 60.3 million short tons.
In the vastly more important domestic market, particularly the electric power sector, which accounts for 85-90 percent of overall annual coal consumption, demand dropped, falling by a little more than 12 million tons in 2017. And those tons are never coming back: EIA’s latest Short-Term Energy Outlook (available here), its first to include projections through 2019, projects that electric power demand for coal will continue falling, dropping to 629.5 million tons that year, down from 666.4 million tons in 2017.
The reason for the decline is simple, utilities are continuing to close their coal-fired generation facilities—regardless of the rhetoric from the Trump team. Florida Power & Light was first out of the gate this year, announcing Jan. 8 that it had completed the closure of the 1,300 megawatt, coal-fired St. Johns River Power Park it co-owned with the Jacksonville Electric Authority. But FP&L certainly won’t be the last: EIA estimates that 13 gigawatts of coal-fired capacity will be shuttered this year. Additional closures are projected for both 2019 and 2020, but at a much smaller scale (see graphic below).
At the same time, much of the new capacity being added to the U.S. electric system is natural gas-fired, spurred by persistent low prices fueled by the shale gas revolution. All told, EIA said, 20 GW of new natural gas-fired generation, most of it using efficient combined cycle technology, is slated to come online in 2018—the largest increase in gas capacity since 2004.
Given the slow growth prevailing in the electric sector, this ends up as a zero-sum game, one in which coal is decidedly losing. Coal-fired electricity accounted for about 30 percent of overall demand in 2016 and 2017, EIA said, but its market share is expected to drop below 30 percent this year and be just 28 percent by 2019. Natural gas, on the other hand, is expected to account for 33 percent of the electric market this year and 34 percent in 2019.
While most of coal’s current woes can be linked directly to low cost, efficient natural gas generation, the continued decline in the cost of emissions-free wind and solar generation is perhaps the bigger long-term threat. And here, a fascinating transition is taking shape, one that could be just as revolutionary as the shale gas upheaval of the past 10 years.
In a solicitation for new generation resources, Xcel Energy’s Public Service of Colorado subsidiary has received a host of bids combining solar and wind with battery storage that are at price levels essentially unheard-of just months earlier. The chart outlining the various bids and their median price is included below.
What is particularly newsy about the bidding information is the extremely narrow gap between the stand-alone windpower projects and the proposed windpower and battery storage projects—less than $3 per megawatt-hour to add storage to wind, making it in essence a fully dispatchable baseload resource. The gap between the standalone solar PV and PV plus storage is greater, but even here the median price for the solar plus storage projects comes in at $36/MWh.
That $36 figure is significant, since according to EIA’s latest information (available here) it cost a little more than $36 per megawatt-hour just to operate the average fossil fuel steam plant in the U.S. in 2016. In other words, the bidders in Colorado are proposing to build and operate (and presumably profit from) new wind plus storage and solar plus storage for less than what it costs simply to run the average coal-fired plant today.
So, let’s see. Natural gas is cleaner and cheaper than coal today, and the transition of the past decade shows that the utility industry understands this simple business concept. And going forward, wind and solar will be dispatchable, cleaner and cheaper than coal as well.
Trump can talk all he wants about digging coal, but his promised revival isn’t coming, ever.