The long-awaited (by some people) death of the coal industry has been postponed for a year or two.
By piecing together several research papers and news stories last week, it appears the demand for thermal coal — the kind used to burn in power plants to produce electricity — could be on a slight upswing. It’s not a signal the industry is recovering for the long term, but it can be interpreted as at least temporary good news for coal-producing regions.
According to the federal Energy Information Administration, coal stockpiles at U.S. power plants decreased significantly from December 2020 to February 2021, mostly because of cold weather. February’s drawdown of 16 million tons was the largest monthly coal inventory decrease since July 2011, when stocks were drawn down by 18 million tons, according to the EIA. Stockpiles went from 139 days’ supply (a record high) in January to 113 days in March.
The growth of low-cost natural gas has been a major reason for coal’s decline, but the EIA expects the price of natural gas is expected to increase from now through the end of next year because of growth in both domestic consumption and exports. The EIA predicts that gas prices will average about 50% higher than their record lows of last year. The power industry will likely use less gas this year and next than it did last year, the EIA says. That could make coal-fired electricity more competitive in the short term.
While that’s going on in the United States, thermal coal prices on the global market are rising. According to an article in the Wall Street Journal last week, coal prices on international markets have doubled in the past year and have climbed to their highest level in a decade. The reasons: mine problems in Indonesia, Australia and Colombia combined with a trade dispute between Australia and China.
While governments attempt to move energy production away from fossil fuels — coal and natural gas — and toward renewables, many regions still need fossil fuels to supply their energy demands. Among them is the PJM Interconnection power grid that stretches from New Jersey to Cincinnati and from Lake Erie to the Virginia-North Carolina border.
At 6 a.m. Friday, when demand typically is low, fossil fuels accounted for more than half of electricity production. As the day wore on and demand increased, both coal and gas were called on for more power. Renewables also increased production, but not to the extent that fossil fuels did. Just the increase in power from natural gas from 6 a.m. to 8 a.m. exceeded the total output of renewables.
So does this mean a rebound for the coal industry? Probably not. There’s no need to expect coal trucks to swarm on the Tolsia Highway again as docks idled long ago return to life. It could mean a temporary bump, but in the long term it serves to buy Appalachian coal-producing regions time to prepare for the days to come when more coal-fired plants shut down and more mines close.