Save for later Print Download Share LinkedIn Twitter January 2019 Sarah Miller Despite President Donald Trump's best efforts, 2018 was a lousy year for the US coal industry -- and 2019 looks like being even worse. While coal prices have been reasonably strong over the last year thanks to a blip in exports, domestic demand fell to 39-year lows and coal-fired power plant closures were at or near record highs. Forecasts for the coming year are even worse. Once a fuel is on the wrong side of the energy-cost equation, there's almost nothing a free-market-oriented government can do to save it. And once an industry begins to shrink, Wall Street isn't likely to step into the breach and help out. It's a cautionary tale that oil companies would do well to keep in mind. Trump loves coal. He says so. Frequently. Nor is he all talk. His words of support for coal have been accompanied by plenty of action, starting with pulling the US out of the Paris Agreement on climate change. It takes four years to withdraw, though, and in the meantime, his officials keep attending the annual summits and lower-level gatherings provided for under the accord, including staging an event to promote "clean coal" and natural gas at each of the last two annual conferences. The most recent of these performances, in December in Katowice, Poland, was greeted with moans by some and laughter by others. Back home, Trump withdrew the Obama administration's Clean Power Plan, which had never taken effect anyhow due to court challenges, and has proposed a coal-friendlier alternative that may well never make it past the courts either -- and wouldn't change much if it did, given the relatively high cost of coal-fired power at any coal price that will keep mines in profitable operation. Trump is now trying to weaken carbon-emission requirements for new coal-fired power plants and get industry to propose more innovative coal-fired generation schemes, an almost certainly pointless gesture given that no new coal-fired plants have been proposed in the US for years, and wind and solar costs continue to plummet, while coal generation costs evidently go up with coal prices. Despite these Trumpian best efforts, estimates are that power plant operators in 2018 have roughly equaled the 2015 record for coal capacity closures, of 14.7 gigawatts. The Energy Information Administration (EIA) suggests closures may turn out to be around 14 GW. The last available estimate from the Institute for Energy Economics and Financial Analysis, made in October, was that some 15.4 GW of old coal-fired capacity at 22 sites would be retired over the year. Closures are hardly surprising, given that coal burning for power generation plunged to a 39-year low in 2018, according to the EIA. A recent surge in gas prices above $4 per million Btu shows little sign of slowing the trend. On the contrary, the EIA is projecting an 8% fall in power-sector coal consumption in 2019, double the 4% decline seen in 2018. After rising by over 12% this year, coal exports are forecast by the EIA to shed most of those gains in 2019. It's all about economics. Gas has generated the cheapest electricity in the US for most of the time since the 2008 recession, and coal has been steadily losing market share as a result. The uncertainty now is not over when or whether coal will come back. Forget coal. The uncertainty is about when wind and solar will become cheaper than US gas. Like many other spots in the world, the US is starting to see solar, wind and utility-scale battery developers undercut gas-fired generators in auctions for long-term power supply. Power purchase agreements for solar power to be delivered for up to 25 years at under $25 per megawatt hour have been reported in Texas, Arizona and Nevada. Energy Intelligence pegs the current cost of power from a new combined-cycle gas turbine power plant in the US at $41/MWh. The same Energy Intelligence calculations show solar costs at $63.50, but the 2018 power auctions in which solar shone involved high-quality locations and presumably reflected expectations that solar costs will continue to fall. What's more, offers of solar power increasingly are being linked with battery backup -- still at startlingly low prices. Gas-fired generation will have a hard enough time keeping up. It's simply not a marketplace in which coal can successfully compete. Governments around the world have been relatively successful in using subsidies and mandated purchasing to push renewables onto their grids. However, consumers, a.k.a. voters, aren't likely to accept a similar premium for fossil fuel-fired electricity. Trump has actually suggested a subsidized purchase mandate to save some coal-fired and nuclear plants, but the unpopular effort appears to have stalled, at least for now. Not much of anyone in the power sector is buying the argument that the coal and nuclear capacity is needed for security of supply reasons. Solar Staying Power Trump has also approached the issue by making moves that, whatever their stated intention, have had the effect of making solar more expensive. He started the year slapping 30% tariffs on solar photovoltaic (PV) panels, regardless of where they come from. While the expressed goal was to encourage building of solar PV equipment in the US rather than China or other countries where Chinese companies operate, the dominant expectation was that the result would mainly be to push up solar costs and discourage solar construction, especially given that the tariffs were imposed for only four years at declining rates, providing the domestic industry with little time in which to bounce back. That should be good for coal and gas, it seemed. Instead, once the new rules were published and uncertainty declined, utility-scale PV orders jumped back from a 2017 slump, with a record-high 8.5 GW of new projects announced in the first half of 2018. The solar boom is still on, at utility-scale as well as on the rooftops of homes and businesses, again despite Trump's best efforts to the contrary. Most mainstream forecasts don't see the oil industry facing a similarly dismal outlook for a few years, if not decades. However, with equity markets stumbling worldwide and whiffs of global recession in the air, and given the strong historic links between recession and falling oil consumption, it's quite possible that oil demand might not automatically recover from a slump. What with falling prices for renewables and electric vehicles, gas-fired power and oil-fueled cars and trucks could emerge from a recession on the wrong side of that all-powerful energy-cost equation (WEO Nov.20'18). It's not a fun place to be. Just ask anybody in the coal business. Sarah Miller is a former editor of Petroleum Intelligence Weekly, World Gas Intelligence and Energy Compass.