Among the ways Donald Trump vows to “make America great again” is reviving the US coal industry. That’s a stretch considering the plight coal faces today in the US. 

The combined value of the top four US coal companies fell from $33 billion in 2011 to $150 million in 2015. Coal’s declining role in the US power supply saw it go from 50% in 2006 to 42% in 2011, to 30% in 2016. US coal production dropped 19% in 2016 alone. In 2015, between 11 gigawatts (GW) and 14 GW of US coal capacity went off line.

The US coal industry took some comfort in the fact that 2017 first quarter data marked a sharp improvement over the disastrous year of 2016, with a 14.5% increase in weekly production and a 58% increase in exports.  But this is just a blip in the industry’s decline since 2006.  All the long-term US and global indicators suggest US coal will continue its decline.

Renewables eat into coal’s energy market share

Forty-nine percent of the US coal market slump is attributable to natural gas and 18% to the growth of the renewables market.  Moreover, the renewables market now represents the largest share of new US electrical capacity installations, with 68% of new power capacity added in 2015 attributable to renewable energy sources.  This latter trend can only increase, with renewables having reached a point where they are among the least expensive sources of supply.

Another 26% coal’s decline is related to lower than expected electricity demand and another 3- 5% to environmental regulations.  Yet in Trump’s view, regulations have been a key killer of the coal industry. Trump has got it all wrong.

As if that’s not bad enough, the least expensive, least costly and easiest to mine US coal sources have been fully exploited, making a return to the good old cheap coal days unlikely.

For many US utilities, investments in coal-fired plants no longer make economic sense.  The same is true for railroad companies hauling coal.  The US railroad firm CSX announced it will no longer be buying new locomotives to haul coal.

Opening public lands to coal

Nevertheless, Trump thinks he has come up with the rabbit out of the hat solution for the coal industry.  Specifically, he wants to make federal lands available to the fossil fuel sector.  This is a major policy thrust since 28% of the land mass in the US, 643 million acres, is federally owned and 40% of coal mined in the US is extracted from federal lands. 

Within these public lands is the Powder River Basin, in southeast Montana and northeast Wyoming, one of the most productive coal mining regions in the US.

Conscious of environmental implications, the Obama administration had imposed a moratorium on new coal leases on public lands and adopted a ruling to eventually raise the royalties for existing coal mines on these lands.  In the interim, a three-year study on the industry’s environmental impacts was initiated.

But given the decline in domestic demand for coal, the Obama administration ban on coal on federal lands seemed, for some, to be a restriction on coal exports.

US coal industry depends on exports

With respect to foreign markets, the US coal industry is dependent on exports to China and India.  This spells more bad news for the US coal industry, considering China’s war on coal, solar coming in cheaper than coal in India and India’s targets for renewables.  To make matters worse, there is a lot of competition from other global suppliers of coal to Asian markets.

China’s war on coal

In effect, half of the US coal industry’s revenue decline in the last 5 years is associated with the reduction of US coal exports to China.

China, the world’s largest energy consumer, represents half of the world’s coal demand and nearly half of global coal production.  With nearly 100% of its new electrical generation capacity associated with renewables, China saw its coal consumption slump for a third year in a row in 2016 with a 7.9% decline in 2016, a 3.7% decline in 2015 and 2.9% in 2014. This slump will continue given China’s commitment to invest a whopping $361 billion in renewables between 2016 and 2020.

The order of magnitude of China’s war on coal entails a 10% decline in the percentage of the nation’s electricity sourced from coal in just 4 years, from accounting for 80% of 2011 total electricity consumed to 70% in 2015.  By 2025, coal is expected to represent just 55% of China’s electricity mix.

Concurrently, China is cancelling coal power plants, both planned and already under construction.  In January 2017, China announced it had suspended plants totalling 120 Gigawatts of production.  This is part of a continuing trend.  China announced the suspension of 30 coal plants in 2016, representing 17 GW.

China is also cutting its domestic supply of coal with a commitment to close 1000 coal mines in 2016 and not open any new ones in the subsequent three years.

Beijing is equally impressive in its war on coal, having planned to cut 30% of its coal consumption in 2017 and having already pledged to completely ban all coal use by 2020.  The city had previously announced it would close its four major coal-fired plants in 2016.

US coal exports to India wane

As for India, a combination of cost declines for renewables and new government policies is shifting the electrical power landscape of the world’s other large coal consumer.

At an auction in May 2017, the state-run Solar Energy Corporation of India obtained a record low tariff of 2.44 Rupees (Rs) per kilowatt-hour (kWh) for Rajasthan’s Bhadla solar park, a 10,000-hectare facility on the edge of the Thar desert. This places solar energy at a considerably lower price than coal-fired plants.  India’s largest power company, NTCP, sells electricity from its coal facilities at Rs3.20 per kWh.

At the policy level, India has targets for 100 GW of solar and 75 GW of wind installed capacities by 2022.  But these goals may be too modest.  In June 2017, Prime Minister Narendra Modi announced that its 40% renewables target for 2030 may be surpassed by 2027.  This could mean no new coal plants being built in India until after 2022.

Recent data indicates that India is on track to meet its policy objectives.  Between March 2014 and March 2017, India increased its solar capacity from 2.6 GW to 10 GW.

The impact on the country’s coal sector is already being felt.  In June 2017, Coal India, the world’s largest coal producer – representing 82% of the country’s coal – announced the closure of 37 mines.  Around the same period, the Indian states of Gujarat, Odisha and Uttar Pradesh cancelled thermal energy plants.

This is quite the energy transition as 60% of the country’s current electrical production stems from coal sources.

In parallel, the India experienced a 21.7% decline in coal imports in January 2017.

The decline of the global coal sector

Collectively, the impact of the decline of coal consumption in the US and China is a projected stagnation of global coal demand for the next 5 years. 

Globally, a record breaking 64 GW of coal plant retirements occurred over 2015 and 2016.  Global coal production fell the equivalent of 231 million tons of oil in 2016 alone.

US coal industry job numbers confirm domestic and export market trends.  The industry went from 800,000 jobs in in the 1920s, to 130,000 in 2011 to a little over 70,000 today.

Yet, Richard Reavey, chief lobbyist for Cloud Peak Energy, a US coal enterprise with major investments in the Powder River Basin, described the Obama ban on new coal mining on public lands as a policy to restrict access to satisfying market demand.

Fittingly, the Trump administration repealed the moratorium on new coal leases on federal lands and froze the raising of royalties on these lands.

The 2017 spike in industry numbers may give the Trump administration the illusion (among many) that he is succeeding in reviving the US coal industry.  But the long-term trends will continue to paint a different picture.