US coal mine closures and COP 26

In 2008 US coal production peaked at just shy of 1.2 billion short tons – 90% of this or about 1.0 billion metric tonnes was thermal coal used in US power plants. This made the US the second largest global producer of thermal coal, well behind China but comfortably ahead of India, Australia and Indonesia.

As the figure below (1) shows, things have changed dramatically in the last decade and a bit. Cheap natural gas, a growing renewables sector, flat domestic power demand, power plant closures and an increasing level of regulatory and public opposition to coal have all contributed to US thermal coal production collapsing to about 485 million metric tonnes in 2020, behind Indonesia and essentially level with Australia.

This 50% decline has occurred across all US coal mining regions including the massive Powder River Basin (PRB) mines in Wyoming and Montana which have supplied over 40% of US thermal coal since the mines started to ramp up in the mid 1980’s (2). At their peak, the largest PRB mines, North Antelope Rochelle and Black Thunder, were among the highest volume coal mines in the world both producing over 100 million tonnes/year. This is far larger than any of the Australian coal mines and significantly larger than the proposed Andani mines whose planned output is somewhere between 27 million and 60 million tonnes/year, depending on whose reporting one uses (3)

While Adani moves slowly ahead with its start up, Arch Coal has announced that Black Thunder mine is closing (4). For those who have followed the development of the PRB this is earth shattering news and for climate activists cause for great celebration. Wherever one sits on the climate spectrum it is clear evidence of the decline in coal fired power – at least in the US. Black Thunder, like most of the other PRB mines, supplied power plants predominantly across the US midwest. These power plants began to shut about a decade ago, a trend that has been accelerating in favour of generation from gas, wind and solar. Arch, which will focus on metallurgical coal produced at its mines elsewhere in the US, has signaled that it is exiting thermal coal production.

The Powder River Basin coalfields straddle Wyoming and Montana – the Black Thunder mine (pictured above) is in the southern PRB in Campbell County Wyoming

The decline in US thermal coal will have helped the US position at the COP26 climate summit in Glasgow last month. President Biden would have been able to credibly claim that the US has taken more coal out of circulation in the last decade than any other country and that some of his largest mines are shutting for good. The fact that Black Thunder’s coal reserves are actually owned by the US federal government will help this narrative, suggesting more closures might be imminent.

Despite the promising trend, green advocates will have been disappointed that the US opted not to endorse COP 26 coal “phase out” language, settling instead for a coal “phase down”(5). Perhaps this was a nod to the influence of West Virginia Senator Joe Manchin, whose vote is needed for the upcoming Build Back Better legislation. It may also signal that the administration wants to keep carbon capture and storage as a possible option or that metallurgical coal is still needed for steel production. Whatever the reason for the apparent US reticence to publicly reject coal in Glasgow, market forces have seemingly spoken – US thermal coal is in terminal decline.

What has replaced coal for US power generation? As shown in the figure below (6), gas has back filled two thirds of lost coal generation and renewables the other third. To meet the Biden administration’s goal of zero carbon electricity by 2035, renewables will need to be ramped up from a current 21% share of power generation to something closer to 80%, assuming nuclear retains its current 20% share. This task is actually harder than it appears as a sizable portion of current US renewable generation comes for large scale hydro which is unlikely to see any dramatic gains in the next decade or so. Wind and Solar – currently at about 10% – will need to grow around sevenfold for the US power sector to be carbon free.

Australia, which was seen by many in Glasgow as something of a climate laggard, is actually on a similar domestic power sector trajectory as the US. As shown below Australia has a public closure schedule (7) for about 60% of its coal power plant capacity, with key industry players (8) suggesting this schedule is likely to be brought forward and extended. Coal mining in Australia has one major difference with the US – only about 20% of Australian production goes to domestic power stations. The balance is exported, including a major portion of global seaborne metallurgical coal which is likely to be required for longer than thermal coal used exclusively to produce electricity.

Similarities between the US and Australian domestic coal consumption can also be seen in the recent past. The last decade has seen both nations achieve meaningful reductions in power sector CO2 emissions. In the US emissions are down by about 30% (from 2,258 million tonnes in 2010 to 1,606 million tonnes in 2019) with Australia lagging a bit behind, down perhaps 20% over the roughly the same period (200 million tonnes in 2010 to 164 million tonnes in 2020).

So when will the US and Australia get to zero carbon electricity? There are plenty of models giving a range of dates and the low cost of new wind and solar means getting to something like a 50% reduction could be relatively rapid. From there things could get more complicated as grid reliability comes into sharper focus. At this point the US will have several factors in its favour – firstly it gets 20% of its power from zero carbon nuclear, secondly it has a large, high efficiency gas fleet and thirdly it’s grid pays for capacity, an arrangement that compensates both power storage and emergency capacity. As renewables are increased baseload power as well as insurance against unsuitable generating conditions will become critically important. Australia has no nuclear and a relatively small gas fleet so is in effect seeking to transition directly from coal to virtually 100% renewables. Battery backup systems will need to be a much larger part of the Australian decarbonisation plan.

A comparison of power sector decarbonisation developments in the US and Australia is worth keeping tabs on. To drive continued progress, federal and state governments in both nations will need to deal with regulatory authorities as well as owners of generation assets. This interaction won’t be easy with lots of vested interests and if power prices increase or grid reliability deteriorates there will be plenty of finger pointing. None of this will matter too much to the Black Thunder coal miners who will soon be needing to find new jobs – if they are smart it will be in a different industry. Many of their Australian brethren will be able to stay on the job for a while longer – their future will be tied to Asian steel mills not midwestern power plants.