One-Two Punches Have Knocked Coal Cold
Just this week, the coal industry got official word of what it already knew: Peabody Energy, the worldâ€™s biggest coal company, would declare bankruptcy, while coal production pales to its historical averages.
If you work in the coal industry or govern a state that is dependent on the tax revenues generated by coal operators, that is bad news. Actually, itâ€™s depressing — not just emotionally but also economically. Southern West Virginia is poverty-and-drug-stricken as its residents have been thrown out of work and have little hope of finding a new job, at least in the coal sector.
But if you work in the natural gas sector or in the wind and solar industries, things are looking pretty good. True, natural gas prices are low, which has dampened some spirits in that industry. But overall, the natural gas industry has taken off, not just because its fuel is used to fire up electric generators — equaling that of the coal sector — but also because natural gas liquids have created a boom in parts of the manufacturing and chemical sectors.
At the same time, Environmental Leader reported yesterday that wind and solar are getting the preponderance of investment in new electric generation. Yes, they are subsidized but their prices are dropping precipitously while their technologies are getting better and better. All that is making those fuels look pretty good.
Add in the regulatory fervor to cut greenhouse gas emissions and you have the re-makings of an electric fuel portfolio — and the dethroning of the once-powerful coal sector, which has seen its share of the electric generation portfolio fall from 50 percent in 2007 to 34 percent today. Coal is expected to hit 30 percent in the coming years while natural gas — once its junior partner — will pass it by.
â€śU.S. coal production so far this year is running more than 30 percent below the comparable period in 2015, reflecting an historic shift in both the coal industry and the electric power sector it serves,â€ť says Seth Feaster is an Institute for Energy Economics and Financial Analysis energy-data analyst. â€śOn top of all that, U.S. coal exports fell 23 percent in 2015, the third consecutive year of declines.â€ť
The issue is particularly acute in the railroad industry: CSX was on CNBC this morning saying that its coal volumes have â€śplummetedâ€ť since 2015 and are down by nearly 60 percent since its peak in 2008.Â
The manifestation of this is that coal companies are going bankrupt and people are losing jobs. According to the Wall Street Journal, 27 coal mining companies with their core operations in Central Appalachia have filed for bankruptcy since 2012. That includes not just Peabody but alsoÂ Alpha Natural Resources, James River Coal and Patriot Coal.
The downturn has resulted in more than 9,700 lost jobs since 2009, the paper adds. West Virginia, for example, employed more than 100,000 coal miners in the 1950s. Today, that number is less than 20,000.
“This was a difficult decision, but it is the right path forward for Peabody,â€ť said Chief Executive Glenn Kellow, in a statement, regarding Peabodyâ€™s much anticipated restructuring. â€śWe begin today to build a highly successful global leader for tomorrow.â€ť
While all this is devastating to coal, it has been beneficial to competing fuels and newer technologies. And by extension, corporate America is a recipient of the range options now available to it. Not only are companies looking to create their own distributed networks that both generate and distribute power but they are also able to buy renewable credits and even invest directly in renewable power stations.
Odds are that this trend will continue, and even accelerate. That means coal developers will need to reinvent themselves to remain relevant while the regions that have long-depended on their fuel need to diversify, and quickly.Â
Ken Silverstein is editor-in-chief of Business Sector Media, publisher of Environmental Leader and Energy Manager Today.
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