Coal Is on Its Way to Extinction
There are four main reasons coal is on the way out. Investor sentiment and policies favoring clean energy are two of them.
Most young investors are in favor of clean energy. They are swaying many fund managers’ decisions on what to invest in.
As a result, many large funds are steering clear of fossil fuel companies. And the current administration will likely enact stronger environmental regulations.
The third reason coal is on the way out is one of simple economics. Renewable power plants are cheaper to install and maintain, the “fuel” is free, and there’s no pollution.
But there’s another economic nail in coal’s coffin. The best coal is getting more expensive to produce.
Replaced With Renewables
The most productive coal reserves in central Appalachia are depleted. And the coal still available is expensive to get out of the ground.
Coal supporters tout the fact that coal is still used in some industrial processes like steelmaking. That’s true… and we’ll always need some coal.
But we don’t need anywhere near as much as we used to. More than two-thirds of the coal mined today is thermal coal that’s burned in power plant boilers.
Those boilers make steam to spin turbine-generator pairs and generate baseload electricity.
However, other fuels can replace coal here. Most coal-fired boilers can easily be retrofitted to burn natural gas.
Although natural gas is a fossil fuel, it generates only half as much pollution as coal when it is burned.
Economists initially thought that the COVID-19 pandemic’s effect on the fossil fuel sector would be temporary. But that doesn’t appear to be the case.
For example, there’s a classic coal-fired power plant in New Mexico’s Zuni Mountains. It was designed to generate 250 MW of power running on coal.
But it’s been shut down since last August. And it will probably never be restarted.
There are other examples like this here in the U.S. and around the world. The global economic slump hit electric demand everywhere.
The pandemic is speeding up the collapse of the coal industry. The demand for thermal coal in 2020 dropped nearly 40% from 2019’s.
During most of 2020 and into 2021, many large businesses have allowed employees to work from home. That has reduced overall electric demand.
But many of those employees will continue to work remotely even after the pandemic ends. That will put a permanent dent in the demand for electricity.
And this will have a damaging effect on coal-fired power plants.
Most of these are the oldest plants in the country. So it makes sense that utilities would retire them first anyway. The pandemic is just accelerating things.
On Its Way Out
Last year saw a major clean energy milestone. It was the first year that coal-fired power plants generated less electricity than renewable sources did.
I’m not surprised. Renewables have been on an upward trend for years.
And there have been no new coal plants added in the U.S. since 2013. In fact, the U.S. has retired 126,363 MW worth of coal generation over the last 20 years.
It’s clear that coal is on its way to extinction. And there are plenty of renewable sources and technologies taking its place.
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