Has the American Coal Industry run its Course? Ageing coal plants and “Coal Cost Crossover” from Cleaner Alternatives

Time has not been favorable to the American coal industry. Despite efforts to save the industry by the current Trump administration, the coal industry is phasing out. Coal has powered America for decades; from Wyoming to West Virginia, coal is burned in hundreds of power plants to generate electricity. Most of the coal plants in the US were built between 1950 and 1990. Based on capacity-weighted, the average age of operating coal facilities is 39 years. At the start of this decade alone, burning coal produced approximately 42% of US electricity, but today, most of the coal-fired power plants in that country have outlived their life span, and around 17 % have existed for more than half a century. A record amount of coal capacity retired last year. Meanwhile, there are projections of continued retirement this year and beyond. As per requirements, Coal industries develop their retirement schedule based on its operating cost and system value.

Concurrently, the market for coal plants has also been diminishing due to the Fracking revolution, which made extraction of oil and natural gas reserves from rock formations accessible and readily available at a low-cost baseload generation resource. Secondly, the prices for the renewables have been persistently decreasingly, especially in the wind and solar sector. The varying costs for wind energy have reached as low as $13 to $88 per megawatt-hour (MWh), and for solar energy between $28 to $52 (MWh). On the other hand, coal plants encounter an astonishing variation from $33 to $111/MWh in marginal costs. These figures rise even higher for plants with a low capacity factor. Thirdly, aging of the coal fleet has added to create a significant negative impact on operating performance and costs. There is no doubt that the Market forces are transitioning away from coal toward cleaner and cheaper fuels.

In the last couple of years, the renewable energy industries have been fighting to beat the cost margin of the coal-powered industry. Today, local wind and solar could replace approximately 74% of the US coal fleet at immediate savings to customers, and by 2025, this number is expected to grow to 86%. Recent studies conducted by Energy Innovation partnered with Vibrant Clean Energy (VCE), found that in 2018, 211 gigawatts US coal capacity, or 74% of the national fleet, was at risk from local wind or solar that could provide the same amount of electricity, albeit in a more cost-effective manner. “Coal cost crossover,” suggests that the existing coal is increasingly more expensive than cleaner alternatives. A study of 35 miles’ radius was taken into account to see the potentiality of the plant and whether cheaper renewables within the zone can replace it. The analysis shows that it is cheaper to replace most coal plants with renewables than to keep them open, and correlates to the existing research that the American coal industry is rapidly in decline.

The Energy Information Administration is projecting that coal’s share of the electric generation sector will drop below 25%, the lowest level since 1949. The swift decline coincides with the rise of solar and wind energy, and both considered widely as economically appealing than coal. Nevertheless, there is an alarming question regarding the successful transition from coal plants, to be seen in a more holistic approach, and taking into account a variety of factors. A complete inconsiderate shutting down of power plants all over the country would mean a complete departure from 53,000 mining-related jobs in the US. Although cheap and clean alternatives are desirable for apparent reasons,  the concern currently is the long-term effects on the communities associated with the mining industry, which could harm them for generations. It is unlikely that renewable jobs could fill the gap, as the coal miners will face challenges of uprooting themselves to move in areas with renewable energy jobs.

While no longer is coal projected as affordable and efficient energy for the Americans, however, the demand from the other side of the globe shows it is still an affordable and abundant resource. In 2018, the US coal export was approximately 15% of its total production and received by at least 52 countries. The top five destinations for the US coal exports were India, the Netherlands, Japan, South Korea, and Brazil. However, the coal-fired generation assets in the US are limited, as no new plants are being built. The blissful picture of coal export is likely to diminish in 2019. As forecast by the Energy Information Agency, the US coal production will decline by 9%, projecting 684 millions of short tons (MMst), which would be less than 700MMst in more than 40 years. Since the global market for coal is significantly on the rise, especially in Asia, it is noteworthy to see changes in the coming years between demands for renewables and abundant and cheap coal.