When it comes to carbon emissions coal is king, even though it’s been over 10 years since coal abdicated its throne as the primary source of electricity in the United States. In 2020, coal accounted for under 1/4th of electricity generation—less than the combined total of renewables and nuclear generation—yet is responsible for the majority of carbon emissions.
Carbon emissions from the U.S. electric sector have been on a downward trajectory for more than a decade. The reason behind this trajectory is straightforward. The U.S. electric sector has been burning less coal every single year. So much so that carbon emissions from coal in the U.S. electricity sector are more than 50% lower today than just a decade ago. This is a result of the declining economics of coal power plants due to low natural gas prices, increasing numbers of low-cost renewable plants, and more stringent environmental regulations.
Despite this trajectory, coal still remains the largest fuel source of carbon emissions on the U.S. electricity grid, accounting for 60% of CO2 emissions. While some clean energy advocates may have moved on to fight natural gas as a source of carbon emissions, understanding the carbon intensity of the U.S. electricity grid remains a question for the future of coal.
In 2019, more than 705 million tons of coal was mined in the United States. While this may sound like a large number, consider that this is the lowest level of annual production since 1978, when a coal miners’ strike stalled most of the country’s coal production. As the year comes to a close, it appears that 2020 will mark another record year of decreased coal production. Using the first six months of this year as a proxy, due to a lag in reporting, coal production is down over 25% compared with 2019.
Coal production is geographically concentrated in the United States with Wyoming accounting for nearly 40% of production and West Virginia following in second place. Arch Resources is one of the largest coal producers in the Powder River Basin in Wyoming. The company forecasts it will produce 55 million tons this year, down from nearly 75 million tons in 2019. Moreover, Arch Resources says it is, “pursuing a plan that could reduce production levels by an additional 50% over the course of the next two to three years.” The company states this reduction is a pivot away from producing coal for electric markets, and towards steel and coking markets that are more lucrative. In other words, the United States’ second largest coal producer is signaling a continued precipitous decline in demand for coal in the electricity sector.
America’s biggest coal producer, Peabody Energy, owns the North Antelope Rochelle Coal Mine, the largest coal mine in the world, in the Powder River Basin. It too is a declining business,, as the company indicated in its 3rdquarter earnings filing. “The outlook for the North Antelope Rochelle Mine has been negatively impacted by the accelerated decline of coal-fired electricity generation in the U.S., driven by the reduced utilization of plants and plant retirements, sustained low natural gas pricing, and the increased use of renewable energy sources. These factors have led to the expectation of reduced future sales volumes.”
The economic stress on Peabody Energy has been so great, that in the same filing the company warned that it may be headed towards its second bankruptcy in five years.
There is no question the last decade has been tough on coal in the U.S. electricity sector. While special interest advocates, rightly or wrongly, argue for different preferred technologies and policies within the U.S. electric sector to help reduce carbon emissions, we can turn to what coal producers themselves are saying about the future of thermal coal in the United States. And, what they are saying, is that coal generation is likely to keep declining, thereby continuing to significantly reduce U.S. electricity sector carbon emissions.