In a historic first, renewable energy may have generated more electricity than coal in the entire U.S. for the month of April.
Coal has long been the backbone of the U.S. electric grid. In the 2000s, coal accounted for more than half of electricity generation. But while King Coal was not dethroned overnight, its demise has been years in the making.
According to the EIA's latest Short-Term Energy Outlook, coal-fired power plants only accounted for 20 percent of total U.S. electricity generation in April, while renewables made up 24 percent. It's the first time on record that renewable energy generated more than coal on a monthly basis. The trend is expected to continue in May, with coal accounting for 21 percent and renewables capturing 22 percent. Natural gas is the largest source of electricity in the U.S. at this point, taking home 35 percent in April and expected to account for 36 percent in May.
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Coal-fired generation ebbs and flows depending on prices and seasonal demand, so it will rebound here and there in the months ahead. Coal tends to suffer the most during soft periods of demand in spring and fall, while seeing higher demand in summer and winter. But the trend is clear: Coal is in terminal decline.
As renewable energy continues to scale up and coal-fired power plants continue to shut down, renewables will top coal on a monthly basis more frequently. As the Institute for Energy Economics and Financial Analysis (IEEFA) notes, the same thing occurred when natural gas overtook coal, which only occurred a few years ago. Gas surpassed coal on a monthly basis for the first time in April 2015, not coincidentally after the end of winter demand. Coal rebounded somewhat from there, but in the years ahead their fortunes diverged sharply, with the most pronounced gulf between the two fuels occurring in 2018. Last year, on an annual basis, natural gas' share stood at 35 percent while coal fell to 27 percent. Related: A New Mega Cartel Is Emerging In Oil Markets
While coal is already falling far behind natural gas, it is now in danger of slipping below renewable energy. IEEFA also notes that renewables and coal have already crossed paths in a more fundamental way in Texas. Renewables beat out coal on a quarterly basis in the first three months of this year for Texas' ERCOT grid, the first time that has occurred on a quarterly basis. Notably, Texas has a more competitive unregulated electricity market than other parts of the country, so renewables are winning where generation sources compete more ruthlessly on price.
Moreover, there are two other aspects that make the quarterly feat all the more impressive. The first quarter did not encompass the low-demand periods of spring and fall. Also, coal actually generated less in the first quarter than it did in the same period in 2018, even though demand was larger. "In other words, in the highly competitive Texas power generation sector, coal is winning a smaller chunk of a bigger market," IEEFA analyst Dennis Wamsted wrote.
Looking forward, coal plants are shutting down while renewables are adding capacity. In Texas alone, about 12 GW of solar and wind projects are in the pipeline, having signed interconnection agreements and secured financing. That doesn't mean all of that will be built, but much of it will. At the same time, the shale gas industry continues to set records in terms of production, keeping prices low, leaving little scope for coal to rebound.
Just this week, the largest coal plant in New Jersey is going offline for good, after years of only intermittent use. The site may even be used to support solar or wind projects, while at least one developer is interested in using the site to connect offshore wind projects to the grid. A sign of the times. Related: The Beginning Of The End For British Shale Gas
The export market has been the saving grace for coal, but there too storm clouds are brewing. France plans on shutting down its coal plants by 2022, and also decided to keep nuclear plants running longer than expected. Japan, one of the few growth markets in the OECD, is also cancelling proposed coal plant projects and brining idled nuclear plants back online.
Meanwhile, the global market for LNG is suffering from a glut after a wave of new LNG projects come online this year. In Europe, the LNG glut and high gas inventories are squeezing coal, while a tightening carbon market is increasing costs for coal plants.
Fewer coal plants and a depressed export market means that coal mines will suffer. The EIA said that U.S. coal production fell by 19 million short tons in 2018, a 2 percent decline.
But that was a "good" year. The losses will grow worse this year and next after roughly 7 GW of coal-fired power plants go offline. That will help push coal production down by another 9 percent in 2019 and 6 percent in 2020.
By Nick Cunningham of Oilprice.com
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Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. More