Why America Needs to Move Beyond Coal: Five Economic Indicators

1. While coal prices become more volatile, natural gas prices appear more stable (and the cost of renewable energy is dropping fast).

2. The delivered price of coal increased three times faster than inflation over the past five years.

3. States dependent on coal had the highest electricity price increase in the past five years.

4. U.S. Coal mining productivity has declined 20% since 2000.

5. Rising international demand and recognition of environmental costs will continue to drive coal prices upward.

Coal still plays a dominant role in the U.S. energy mix, accounting for almost 45% of American electricity production. But the economics of coal continue to change, making the resource look far less attractive today than it once was.

Researchers, journalists and activist groups have been sounding the alarm about “Peak Coal” in recent years. A 2010 paper in the journal Energy concluded that the global coal industry had reached the limit to what it could technically and economically exploit. Another 2009 analysis from Clean Energy Action based on US Geological Survey data suggested showed that available coal reserves were not as abundant as widely thought:

Depending on the resolution of geologic, economic, legal and transportation constraints facing future coal mine expansion, the planning horizon for moving beyond coal could be as short as 20-30 years.

The U.S. Energy Information Administration has repeatedly published data on coal “reserves” as though they include an assessment of economic recoverability when in actuality they did not. As a result, the often touted “200 year supply of U.S. coal” is not based on a realistic assessment of how much coal will actually be accessible.

Actually, recent data, some released by the EIA, does tell us a lot about where the industry is heading. It would be nearly impossible to say whether the industry has hit Peak Coal based upon the available figures – but they do show how much the economic landscape for coal has changed.

1. While coal becomes more volatile, natural gas prices steady

Shale gas has some pretty serious environmental factors that need to be dealt with. But a combination of natural gas and renewable energy is far better than coal. With renewable energy prices dropping fast and natural gas prices depressed, we have a unique opportunity to a dent in coal’s share of the energy mix.

2. The delivered price of coal increased three times faster than inflation over the past five years
Over the past five years, U.S. inflation has increased around 15%. During that same period, the delivered price of coal to utilities has gone up 54%, according to the EIA. In the last decade, the delivered cost of coal has increased 96%, with U.S. inflation around 30% over that time period. Since the beginning of 2011, the delivered price of coal has increased 3.1 percent.

3. States dependent on coal had the highest electricity price increase in the past five years
The retail price of electricity in the US increased 22% over the past five years from 8.1¢ in 2005 to 9.9¢ in 2010. But the two most coal-dependent regions – East South Central (TN, KY, MS, AL) and East North Central (MI, OH, IN, IL, WI) – saw their rates increase 34% and 32% respectively.

4. U.S. Coal mining productivity has declined 20% since 2000
Improved technologies boosted coal mining operations from the late 70’s until the year 2000. But since then productivity has declined substantially. Across the broad, the EIA figures show decreasing productivity – with the country’s largest coal reserve, the Powder River Basin, declining by 7.2% between 2008 and 2009.

5. Rising international demand and recognition of environmental costs will continue to drive coal prices upward
Along with declining productivity and rising delivery costs, other pressures may accelerate the rising cost of coal. Exports are a major factor: Between 2009 and 2010, exports to China increased from 386,950 short tons to 4,071,837 short tons. With exports to China only increasing, prices will continue to rise. (In fact, five Chinese power providers are facing financial troubles because of price increases.)

Recognition of the local and global environmental impact of coal will also be a factor. A recent study from the New York Academy of Sciences estimated that the cost of coal-fired electricity in the U.S. could be as high as 28 cents/kWh, assuming the environmental and health costs are factored in. While we’re far away from actually pricing externalities for coal in the U.S., investors see the writing on the wall – the number of coal plants once expected to be built has dropped off substantially. Since a May 2007 report from the National Energy Technology Laboratory declared a “resurgence” in coal, 153 proposed plants have been cancelled or postponed. There are also 190 existing coal generators set to close over the coming years, as they’re too old and dirty to warrant investment in scrubbers.

What does it mean?
None of these indicators prove that we’ve hit Peak Coal. Nor can we project where prices will go. But with declining productivity rates, increasingly volatile prices, higher transport costs, surging international demand, and construction of plants getting harder, the economics of certainly don’t point to a bright future for coal.

(Thanks to Frank Zaski for pointing us to some of the resources linked to in this piece.)

[Joe Romm:  Of course, we need to get off of coal as soon as possible to avert  catastrophic climate change — but you knew that already!]

Below are earlier comments from the Facebook commenting system:


How many Republicans does it take to change a light bulb bill?

More Republicans than they had.

July 12 at 9:10pm

crazy tempura

I’m surprised they didn’t come up with 3000 Republican votes like they did in Wisconsin.

July 12 at 9:22pm

Peter Dublin

How many politicians or bureaucrats should it take to change a light bulb?
How many citizens should be allowed to choose?

July 15 at 5:09pm

Terry Tremwel

Ten Republicans demonstrated that they have both a spine and a brain. Five Democrats are not worth saving in 2012. If our representatives don’t respect science and don’t protect our children, then they are truly suffering from Anti-Science Syndrome.

July 12 at 9:37pm

Bob Geiger

Who are the representatives who crossed party lines on this?

July 12 at 10:03pm

John McCormick

Bob, The dim-bulb Dems who voted for this crap are:

Costello, Jerry [D] IL

Peterson, Collin [D] MN

Boren, Dan [D] OK

Matheson, Jim [D] UT

Rahall, Nick [D] WV

July 13 at 11:20am

James Hwang

The GOP’s endgame on all environmental issues. It’s scary.​ch?v=I5JREixLau4

July 12 at 10:09pm

Sara Volk

At last, a tiny spark of sanity in the house of representatives.

July 13 at 2:59am

Eric Drungo

Another Democratic Revolution! 2012!

July 13 at 5:05am


The Facts about Light Bulbs and Mercury.
Google the headline if the link doesn’t work.

July 13 at 6:16am

Steve Sterley

Yet more Republican idiocy.

July 13 at 9:07am

Dan Parkes

I thank that we should go back to usin them there whale oil lamps. I liked it better that way. We need values. This change is tiresome. I liked the good ol days. Whale blubber lamps, god, family values, no change, lower taxes, family values, oil…….

July 13 at 9:25am

Mac McNally

Who are you, and what have you done with the lunatics who have been bickering over the debt ceiling? I would say I am encouraged about this, but I am afraid it is only a moment of clarity for an otherwise flawed system.

July 13 at 10:46am

Rhea Cherrith


July 13 at 4:16pm

Peter Dublin

Still, there are the individual states too…
Updates on the 7 US state repeal bills​.
(legislated Texas June 17th) and the Canadian Government’s 2014 delay plans.

July 15 at 5:09pm

Comments are closed.