Coal earnings to plunge 50% this year — report

Source: By Miranda Willson, E&E News reporter • Posted: Wednesday, June 3, 2020

A new report shows falling demand for thermal coal used for electricity. CSIRO/Wikipedia (coal); PxHere (coal plant)

Coal industry earnings in North America could fall by more than 50% this year as coronavirus lockdowns slash electricity demand, according to one financial research company.

Moody’s Investors Service said in a report released Sunday that coal production is set to fall by more than 25% in 2020 and the pandemic’s impact to coal miners may be more severe than what the U.S. government forecasts.

Declines will be steepest in 2020 but could continue for years, said Benjamin Nelson, lead global coal analyst at Moody’s and the report’s lead author.

“We think that it’s going to be a long-term trend,” Nelson said.

Although the pandemic is accelerating coal’s decline, production and use of the fossil fuel has been trending down for years in North America due to the falling costs of renewable energy and natural gas and growing concerns about coal’s climate change impacts. So far this year, electricity companies have said they will shut down 13 coal-fired power plants and convert two other plants to natural gas (Climatewire, May 27).

The U.S. Energy Information Administration said in a report last week that it expects coal production to fall by about 24% this year. Amid the pandemic, major coal companies have also laid off workers (Greenwire, May 22).

But contrary to the EIA’s findings, the Moody’s report does not expect coal to rebound significantly in 2021. While an increase in the cost of natural gas could have given coal a chance to bounce back, the company predicts natural gas prices will stay low.

Moody’s also anticipates that more coal plants “than people realize” will close early this decade, curbing demand for the fuel, Nelson said.

The report reflects how coal has struggled to compete with clean energy technologies even before COVID-19, Mary Anne Hitt of the Sierra Club said in a statement.

“The coronavirus pandemic underscores the longstanding problems with coal, which also hold true for all fossil fuel power generation. It’s expensive, it’s bad for our health, and it’s the driver behind climate change,” said Hitt, director of the environmental group’s Beyond Coal campaign.

Michelle Bloodworth, president and CEO of the pro-coal advocacy group America’s Power, said the Moody’s report overlooks the advantages of coal-fueled power plants, including the security they provide during extreme weather events, as well as the importance of diverse resources in the U.S. electricity system. She also questioned whether the cost of natural gas will remain low.

“So, electricity from gas-fired power plants is less expensive at the moment than electricity from many coal-fired power plants … but that fact does not mean coal is dead,” Bloodworth said in an email.

Ashley Burke, spokeswoman for the National Mining Association, said the predicted drop in coal demand should be concerning for anyone who cares about “reliable and affordable” electricity.

“What policymakers should not do is let the current conditions in electricity markets produce sweeping consequences for the long-term health of an essential industry,” Burke said in an email.