King Coal is About to Lose its Crown

Jul 26 · 5 min read

[Note: This was supposed to run on the Swell Investing blog this month. But the site shut down. Ah, well. This is still good stuff.]

Take your pick: “Canary in a coal mine” or “Coal is king”?

Say we go with Adage №1: “The coal industry just found its own canary in a mine.” If we go with the latter: “King coal is about to lose its crown.”

Think of it as a “Choose your own intro.” Either one works and, besides, you get the jist: Coal is in big trouble.

This past April, for the first time ever, clean, renewable energy provided more electricity to Americans than coal. And it wasn’t even close.

Hydroelectric power, wind, solar, biomass and geothermal sources formed like Voltron to churn out nearly 68.5 million megawatt-hours of electricity, compared to the 60 million coal produced in the same month, according to a U.S. Energy Information Administration (EIA) report released last month. At 23 percent, renewables have never doled out so much power. Coal’s 20 percent is its lowest in decades.

Amazing, considering that just last year, coal made up 27 percent of U.S. electricity compared to renewables’ 17.1 percent.

Natural gas and its dangerous side effects are still top dog in the energy game. And experts say renewable energy’s current №2 spot will be short-lived. Many coal-producing plants shut down for annual maintenance in April. Temperatures are more moderate, meaning there’s less demand for heating and air conditioning. Changes in the seasons generate more wind. By now, ACs hum nationwide and upcoming EIA reports should see coal regain its second-fiddle stature.

The next 30 years, however, don’t look so good. As solar, wind and battery technology continues to improve, coupled with their continuing drop in costs, forecasters expect renewables to not only catch up with coal’s footprint within a decade, but also meet global benchmarks for emission cuts by energy providers under the Paris climate agreement. By 2040, 57 percent of passenger vehicle sales and more than 30 percent of the global vehicle fleet will be electric, according to a BloombergNEF report.

By 2050, almost half of global energy production will come just from wind and solar power, according to BloombergNEF. Kind of like when K-Ci and JoJo started their own group and left those other guys behind.

Other renewables (hydro, nuclear, biomass) will provide another 21 percent, leaving coal with a scant 12 percent, though it will continue to have a foothold in India and other emerging markets such as the Philippines, Cambodia, Thailand and Vietnam.

But the writing’s never been clearer: Coal’s days are numbered.

Part of that reason is capacity. According to a Federal Energy Regulation Commission (FERC) report, coal in the United States has an available installed generating capacity of 257.38 gigawatts.

Okay, let’s break that down.

First, a gigawatt is a unit of power equivalent to 1 billion watts. According to the U.S. Department of Energy, you’d need one of the following ridiculous gatherings of things to generate that kind of output:

  • 100 million LED lights
  • 431 wind turbines
  • 1.3 million horses (wear boots)
  • 9090 Nissan Leafs

“Installed generating capacity” is the maximum amount an electricity generator can produce. So those 257.38 gigawatts are the most that coal-fired U.S. power plants can generate.

Renewables? 257.53 gigawatts.

Surprising no one, wind and solar were the overachievers. According to the FERC report, 19 wind facilities and 125 solar facilities have come online since the beginning of the year, adding an additional 1.547 and 1.568 gigawatts of capacity, respectively.

And as renewable energy becomes more readily available, companies are moving into the sector, investing more than $57 billion into wind and solar projects as well as grid technologies like battery storage. Last month, Starbucks partnered with utility companies in North Carolina, Texas and Oklahoma to provide clean energy to more than 3,000 of its coffeehouses.

Moves like this have forced utilities to break open their piggy banks if they hope to stay competitive in the energy market. Utility-level solar power generation should increase by 10 and 17 percent in 2019 and 2020, according to the EIA. Wind power should see similar growth of 12 and 14 percent during that period.

East Coast utility Consolidated Edison spent $2.1 billion to buy its way into the renewables game, acquiring various wind and solar products. They’re now the second largest producer of solar energy in America.

Minnesota-based Xcel Energy followed suit. Once an energy producer that generated 46 percent of its power via coal, the $30 billion utility is getting off that narcotic. It’s already shuttered a quarter of its coal-fired power plants, slashing its carbon emissions by 38 percent.

The utility plans to build 12 new wind farms across seven states by 2024, resulting in renewables making up more than half of its energy portfolio.

When asked by CNN Business why Xcel was making the switch, CEO Ben Fowke said,”It’s a product of what our customers and regulators want.”

Which brings us to the regulators. Mount up.

According to the Washington, D.C.-based Solar Energy Industries Association, 38 states have a renewable energy standard or goal in place, most notably California’s “Hold My Beer”-style SB 100, which sets a target of 100 percent carbon-free electricity by 2045. And while Congress is floating a bill that would set a 50-percent clean energy standard by 2035, there’s still a matter of the guy who has to sign it into law.

Problem is, the President still thinks he can save the coal industry.

Last month, the Environmental Protection Agency gutted the Obama administration’s 2015 Clean Power Plan, setting aside state-by-state restrictions on carbon dioxide emissions and giving coal plants the ability to self-regulate and reduce as they see fit.

In other words: Wolf, meet hen house. Remember, no snacking! (Wink.)

But it may be a matter of too little, too late. Remember that 27 percent of total electricity generation last year? That was coal’s lowest production since 1979.

And coal plants are already showing signs of Dodo-itis. Blackjewel, one of the nation’s largest coal-mining operations, filed for Chapter 11 bankruptcy in West Virginia earlier this month. Days later, the company closed two Wyoming-based mines, some of the largest in the country, laying off more than 600 workers.

Another West Virginia-based company, Revelation Energy LLC, also filed for bankruptcy in July, shutting down mines in West Virginia and Kentucky. Both companies owe millions of dollars in debt.

Coal is on a downward spiral. Cheap, renewable energy is gaining market share and catching up. Utilities and municipalities are pushing for more of it. Even the President has had to walk back some of his more awkward statements about climate change. Like the time he called it a hoax.

But Gaurav Sharma, a United Kingdom-based oil and gas analyst, might have put it best in a recent Forbes piece:

Despite Trump’s rhetoric, the industry is in a long-term secular decline driven by a combination of low-cost natural gas, and a trend toward more renewable energy…Perhaps, even the President realizes that promising is easy; but changing the market dynamic clearly isn’t.

Today’s lesson? You can’t beat the market.

Glenn Jeffers

Written by

Award-winning journalist and editorial consultant with 20 years of experience covering a multitude of topics. My mac ’n’ cheese is better than your mom’s.

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