Buoyed by high natural gas prices and Europe's grab for any and all power generation fuel sources after the Russian invasion of Ukraine, coal prices surged in 2022, making any holder of coal cheerful
With data through November, U.S. coal generation appears set to drop by about 8% in 2022 versus 2021
The last 3-4 years have been choppy for coal generation in the U.S.
Global coal generation continues to grow
Public Enemy Number One
As the largest source of CO2 power emissions, coal power has a target on its back for replacement by cleaner renewable energy. Until battery storage at scale becomes a reality, however, intermittent wind & solar generation will produce challenges for grid operators, leaving a window of opportunity for coal to hang around longer than expected.
We have modeled U.S. power markets out to 2030 and beyond and expect significant solar and wind capacity growth to pressure coal and natural gas share of total generation, but recent events have us expecting a moderation in coal generation declines for a period of 2-3 years.
In particular, high natural gas prices will likely create economic headroom for coal declines to moderate. Additionally, grid reliability and the speed of the renewable transition is being hyper-politicized. Regulators may be wary of retiring baseload resources.
The reality however, is most U.S. coal plants are pushing 50 years old, making upgrades and maintenance uneconomic. That economic reality, the absence of newbuild capacity and continued emissions and climate targets will pressure the remaining coal stack with time.
Just ten states totaled 60% of the reduction in coal generation in the U.S. over the last decade.
Those same ten states still represent some of the largest coal generating areas.
Virtually every U.S. state has seen coal generation drop by 25-75% or more over the last decade.
Two Steps Forward, One Step Back
Despite reduced coal generation in the U.S., global coal generation continues to march up and to the right, led by China.
Lower economic growth, higher interest rates, reduced drilling & mining capital expenditures, China economic restructuring, renewable subsidies and goals. Energy markets are always complex and challenging, but the current cross-currents make the current period energy analysis particularly challenging.
Coal power generation would seem to be on the naughty list - on its last leg. While we expect Inflation Reduction Act induced renewable capacity growth to elbow out fossil fuel generation in the U.S. over the next 5-10 years, coal may not go down without a fight domestically as it continues to grow globally.