MAC: Mines and Communities

In Global Electricity Slump, Coal Is the Big Loser

Published by MAC on 2020-05-01
Source: Bloomberg

It appears that coal is the great loser in terms of the energy mix,  as the world seeks to deal with the outbreak of COVID-19.

This brings hope for a more climat-friendly recovery.

In Global Electricity Slump, Coal Is the Big Loser

When generators cut power, coal plants are typically the first ones to go.

By Will Wade, Chris Martin, and Mathew Carr

27 April 2020

As silent factories and deserted offices hobble demand for electricity worldwide, the biggest loser is coal.

In the U.S., coal’s share of power generation has dropped more than 5 percentage points since February on the nation’s biggest grid while output from natural gas plants and wind farms held steady. In Europe, it’s down 2 points. Even in China and India, where coal still dominates, it’s losing market share during the pandemic.

It comes down to cost. Coal power is more expensive than gas and renewables in many places and, hence, is the first fuel priced out of the market when demand falls. Its plunging use amid the lockdowns is a boon for efforts to fight climate change, hastening a shift that was already underway to weed out the dirtiest fossil fuel.

“It’s accelerating coal’s demise,” said Hannah Newstadt, a power market analyst for Genscape Inc.​

In the U.S., coal is now supplying just 14% of power on the grid serving 65 million people from Illinois to New Jersey. That’s down from almost 20% in February, according to a Bloomberg analysis of data from the grid operator, PJM Interconnection LLC. It’s the only major fuel to slump.

Coal miners are already feeling the pain. While output has been sliding for years, the decline has been exacerbated since states began shutting down wide swaths of their economies.

Production at mines has plunged 21% in the past three weeks. On Thursday, Arch Coal Inc., the second-biggest U.S. miner, reported its biggest quarterly loss since 2016, suspended its 2020 forecast and said it initiated a “voluntary separation” program to slash staff by 30%.

While many utilities are still contractually obligated to buy the fuel, many shipments are just piling up on the ground at power plants, unused.

“U.S. coal production is in free-fall,” Mark Levin, an analyst with Benchmark Co., wrote in a research note Tuesday.

Pandemic Power Shift

In Europe, coal’s share of power generation has dipped to 12%, from 14% a year ago, according to data from Wartsila Oyj, the Finnish energy technology company.

The decline is particularly sharp in Germany, where electricity from hard coal and lignite, sometimes called brown coal, plunged to 18% of net generation in the first two weeks April. One year ago, they accounted for 35%.

They just can’t compete with gas. During the last week of March, the short-run marginal cost of coal-fired generation was 31.80 euros ($34.33) to 33.50 euros per megawatt-hour, according to BloombergNEF analyst Jahn Olsen. Gas plant costs topped out at 25.30 euros per megawatt-hour. Part of the reason coal is so much more expensive in Europe is generators need to buy about double the carbon-dioxide permits to burn it compared to gas.

​In India, coal’s share of the power mix slipped to 65% from 71% in the month since Prime Minister Narendra Modi announced lockdowns to contain the outbreak. The country's coal imports for power plants in March fell 28% from a year earlier. The share from from renewables, nuclear and hydropower rose. And in China, thermal power output, which is mostly from coal, slumped 8.2% in the first quarter while solar and wind gained.


Coal had struggled to compete for years. But it’s gotten even tougher as gas prices have plunged about 35% since early November. When it comes to renewables, power producers don’t want to cut wind and solar when demand ebbs because they have no fuel costs. And nuclear plants are like massive locomotives that can’t suddenly speed up or slow down.

So when output has to change, coal typically draws the short straw.

“It’s going to be the first one they turn off,” Bloomberg Intelligence analyst Kit Konolige said.

Crucial Cost

Coal plants aren’t the only ones getting squeezed. In regions with little or no coal power -- including New York, New England and California -- gas plants are bearing the brunt of lockdowns. And in Europe, Electricite de France and Vattenfall are shutting down reactors this summer because of low demand and slumping prices.

But coal is getting hit hardest.

“You have coal looking very much like the energy market’s loser,” Carlos Perez Linkenheil, a senior analyst at Berlin-based Energy Brainpool, said in an interview.

Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has committed $500 million to launch Beyond Carbon, a campaign aimed at closing the remaining coal-powered plants in the U.S. by 2030 and slowing the construction of new gas plants.

— With assistance by Jasmine Ng, and Brian Parkin

Coal Demand Set for Biggest Annual Drop Since World War II

By Jeremy Hodges and Ronan Martin

30 April 2020

Global coal demand is heading for its biggest annual drop since World War II as economic activity plunges due to coronavirus lockdowns.

Burning coal to make electricity in several European countries has become unprofitable and socially untenable -- crowded out by cheap natural gas and the proliferation of renewable energy as well as powerful environmental movements. The pandemic has only hastened its demise.

Global coal demand will fall by 8%, the International Energy Agency said in a report gauging the impact of the virus across the energy business. The amount of the fuel burned for power will fall 10%.

Renewables Are the Only Winners in Historic Decline in Energy Demand

The world’s biggest coal consumer, China, will see demand fall by 5% despite a gradual revival of its industries since lockdowns were eased.

In Europe, where policies to quit coal altogether are taking effect, demand is set to slump by 20%, while the U.S. will see a 25% fall, the IEA said.

In the past two weeks, Austria and Sweden announced that they have shut their last coal-fired power plants. They’ve now joined Albania, Belgium, Estonia, Latvia, Lithuania and Norway as countries without coal in their electricity mix.

The U.K. hasn’t used coal for 20 days, a modern record, as it looks to leave the fuel behind by 2025. Germany aims to quit coal by 2038, although market forces unleashed by the coronavirus could speed up that process.

“This is a historic shock to the entire energy world,” Fatih Birol, the IEA’s executive director, said. “Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas.”
(Updates with Birol statement in the eighth paragraph)



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