Competition from cheap natural gas accounts for nearly half the decline in domestic U.S. coal consumption in recent years, according to an analysis from Columbia University researchers.
Lower demand for electricity and growing use of renewable energy such as solar power also took a bite out of coal’s market share, the study said.
Tougher federal environmental regulations also played a role in coal’s decline, but those rules were a significantly smaller factor than reductions in the cost of natural gas and renewable energy, the report said. That finding counters arguments that a regulatory “war on coal” was the main reason for the industry’s problems.
The researchers said that while President Doanld Trump has promised to “bring about a renaissance in U.S. coal production and employment, our analysis suggests that’s unlikely to occur.”
Sign Up and Save
Get six months of free digital access to the Lexington Herald-Leader
The best the industry can hope for is a modest recovery, researchers estimated.
The report, called “Can Coal Make a Comeback?”, was released late last month by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.
The nation’s coal industry lost jobs through the 1980s and 1990s, leveling off at total employment of just under 100,000 in 2000. An upswing began after that, driven by increased domestic electricity demand and a seemingly insatiable appetite for coal in China to fuel its rapid economic growth.
Demand in China boosted global coal prices, which made coal exports from Appalachia competitive, where mining costs are higher than in other coal basins.
By 2011, U.S. coal exports topped 100 million tons — up from 40 million in 2002 — and employment had climbed back to 133,000, the report said.
Then the bottom dropped out with stunning speed.
Between 2011 and 2016, domestic demand and exports slumped and employment plunged to 70,000, the report said.
The slide hit Kentucky hard, especially in the eastern coalfield where there were not a lot of other high-paying jobs.
The state’s coal production dropped from 109 million tons in 2011 to 42.9 million in 2016. In Eastern Kentucky, production went from 68 million tons in 2011 to 16.7 million in 2016, according to the Energy and Environment Cabinet.
Jobs plummeted from an annual average of 18,069 statewide in 2011 — 13,679 of those in Eastern Kentucky — to 6,587 statewide in 2016 and 3,844 in the state’s eastern coalfield.
The job loss in Kentucky from late 2011 to late 2016 was the worst in the nation, the Columbia report said.
The decline has forced many families to move away for work and hurt businesses and tax revenue for local government services and schools.
The researchers said there is no single thing to blame for the coal-company bankruptcies and layoffs of the last few years, but rather a mix of factors.
One is electricity demand, which fell off during the recession and hasn’t recovered, the report said.
The country consumed less electricity in 2016 than in 2007, even though the economy, adjusted for inflation, was 12 percent larger, according to the report.
Increased efficiency in buildings and appliances also has held down power consumption.
Another factor was a surge in natural gas production driven by hydraulic fracturing and horizontal drilling, which unlocked access to vast new reserves.
Production went up 37 percent between 2007 and 2016, causing a big drop in price and making gas a strong competitor to coal for power-plant customers.
The report also looked at the impact of renewable energy, calling it the third blow to U.S. coal.
The cost of wind generation, which benefits from tax credits, went down 36 percent between 2008 and 2016, while the cost of solar generation went down 85 percent in that time, the report said.
As a result, there was a three-fold increase in wind generation and a 40-fold increase in solar.
The Columbia researchers said it is difficult to parse out how much each of those factors hurt coal.
However, the report said they came up with a “rough estimate” by analyzing the difference in the electricity generation and consumption rates for 2016 and the rates that federal analysts had projected for 2016 before the recession and the rise of natural gas and renewables.
The estimate was that decreased electricity demand accounted for 25 percent of the lower-than-expected coal-fired electricity production.
Researchers estimated natural gas was responsible for 48.9 percent of the decline in coal production; renewable energy for 17.8 percent; and nuclear power for 7.7 percent.
Federal environmental rules contributed to the decline of coal production because they sped up decisions by utilities to retire old plants — and helped drive the switch to gas or renewables — but the rules were a less significant factor than others, the report said.
The Obama Administration put forth 10 rules that related directly to mining or coal-fired electricity generation, but only four took effect before 2016, the report said.
The government generally estimated the rules would have a relatively small impact on coal production. The coal industry estimated higher costs, but evidence suggested the federal estimates were more likely to be correct, the study said.
The study said utilities retired 238 coal boiler units at U.S. power plants between 2012 and 2015. Using information on how much coal they had burned, the researchers estimated those closures were responsible for a 3.9 percent reduction in 2016 coal production relative to 2011 levels.
The report said the effect of those retirements was modest compared to an overall production drop of 33 percent in that time.
“Much more important was the reduction in overall electricity demand and the reduction in generating hours by operating coal plants because of increasingly competitive natural gas and renewable options,” the report said.
The report said changes in the global coal market – especially a downturn in demand in China -- played a bigger role in the hurting the U.S. coal industry than many people understand.
China’s total primary energy demand fell from average annual growth of 9 percent from 2002 through 2012 to less than 3 percent in 2013 and 2014 and 1 percent in 2015, the report said.
The report said if Trump succeeds in his aggressive effort to roll back the coal-related environmental regulations from the Obama Administration, it could help turn around the decline in domestic coal consumption. But that would rely on an increase in natural gas prices, and coal still wouldn’t fully recover, the report estimated.
“In the best-case scenario for U.S. coal consumption under President Trump, in which natural gas prices more than double from current levels, demand would plateau at 19 percent below 2007 levels,” the report said.
If gas prices stay steady at current levels, the report projected coal consumption in the U.S. will continue down, especially if the cost of renewable energy falls faster than expected.
The report estimated the best-case scenario for the coal industry would be a recovery to 2013 production levels, with employment nationally between 70,000 and 90,000 in 2020 and 64,000 and 94,000 in 2025 and 2030.
That would be well below the number of jobs the country had earlier and “a far cry from what’s needed to provide America’s coal communities the future they have earned and deserve,” the report said.
The report said there are many measures the federal government could take to help hard-hit coal communities, such as providing tax credits for businesses, grants to development efforts and money to expand high-speed internet service.
“But this all requires a clear-eyed assessment of the outlook for the coal industry and a commitment to put sustainable solutions ahead of politically expedient talking points,” the report said.