Coal producers' struggles will only increase in the years ahead as nearly 9% of coal deliveries last year were made to plants that will be retired by 2032.
U.S. coal producers delivered 65.5 million tons of coal, about 8.7% of the coal mined in 2018, to power plants set to retire between 2019 and 2032, according to an analysis by S&P Global Market Intelligence. The analysis excluded plants that retired before July 4 in 2019. Meanwhile, only one coal-fired power plant has been built in the U.S. since 2014, a 17-MW plant at the University of Alaska's Fairbanks campus.
Despite efforts by President Donald Trump's administration to boost the coal industry, including the recent passage of the Affordable Clean Energy, or ACE, rule, at least eight coal companies have filed for bankruptcy since Trump took office in 2017, and power companies continue to retire coal-fired facilities.
The Powder River Basin delivered about 31.6 million tons of coal to plants retiring by 2032 — 9.8% of the total coal produced in the region in 2018. Three of the eight companies that have filed for bankruptcy since Trump took office, Westmoreland Coal Co., Cloud Peak Energy Inc. and Blackjewel LLC, operate in the region. Other top producers in the region including Peabody Energy Corp. and Arch Coal Inc., both of which now report stronger balance sheets after completing their own bankruptcy reorganizations in recent years.
Smaller producing regions also face a shrinking customer base. Southern Wyoming delivered 63.6% of its 2018 production to retiring plants and the Four Corners region delivered 53.8% of its production to retiring plants.
Producers face losing a significant portion of their customer base soon, as about 3.9 million tons of coal were delivered to plants set to retire in 2019. The coming years will see retirements affect still larger portions of producers' 2018 customer base, as about 6.0 million tons were delivered to plants retiring in 2020, about 7.1 million tons to plants retiring in 2022 and about 6.5 million tons to plants retiring in 2023.
Planned plant retirements could be booked even earlier in later integrated resource plans, according to Robert Godby, director for the energy economics and public policies center at the University of Wyoming.
"Once they announce an earlier retirement that's not set in stone," Godby said. "A future IRP could accelerate that plan, and certainly the way the market is going being as dynamic as it has been this could be an issue."
Several plants already scheduled to retire may see their retirement dates move up. Tri-State Generation and Transmission Association Inc. recently announced their 100-MW Nucla power plant in Colorado will retire early at the end of 2022 as the organization pursues cheaper, cleaner sources of power. PacifiCorp is considering early retirement of its Naughton and Jim Bridger plants in Wyoming following pressure from environmental groups. American Electric Power Co. Inc. announced this month it would retire its 1,300-MW Rockport unit 1, one of the largest power plant units with plans to retire, by the end of 2028.
Several coal producers delivered all or nearly all of the coal produced in 2018 to plants set to retire by 2032. Among these is Westmoreland Coal Co., which filed for Chapter 11 bankruptcy protection in October 2018 and delivered 90.8% of its reported coal deliveries in 2018 to retiring plants. Westmoreland Coal subsidiary Westmoreland Mining Holdings LLC delivered an amount of coal equivalent to 117.4% of its coal produced in 2018 to retiring plants.
Moody's reported on July 10 that coal's share of total U.S. power generation is set to shrink to about 11% by 2030, largely due to natural gas and to a lesser extent renewables. Coal made up about 27% of total U.S. power generation in 2018, according to the report.
"The industry is probably shrinking even a bit faster than what most people thought it would do and gas prices continue to languish even lower than most analysts thought," said Joe Aldina, director of coal market research for S&P Global Platts. "Gas has been bearish for the market beyond what people expected."
