King Coal is Dead. Long Live the King?
Not Really. Coal is Still Done For…..Just not fast enough.
In light of the sudden scramble back to coal by countries like Germany and China, I’ve adapted another of the occasional columns my colleague Milo McBride and I have been writing for Climate & Capital Media. Suffice it to say, with apologies to Mark Twain, reports of coal’s death spiral have NOT been greatly exaggerated…
Coal was once King. No longer.
The fuel that ruled since the industrial revolution has been dethroned in the developed world, the former heart of its realm. Remaining strongholds, mostly in the developing world, are now crumbling.
That reality may be hard to see at this particular moment, when coal prices, and even coal use, is spiking amidst a worsening energy crisis in Asia and Europe. In the first half of the year, for example, coal consumption surged in Germany as its economy revved up from covid and growth in renewable energy sources slowed. China is doing everything it can to boost coal production as winter sets in with energy stockpiles at the lowest levels in decades.
Yet the short-term rush doesn’t change the truth of the matter: Getting coal out of the global energy system, not someday but as soon as possible, is absolutely essential to meeting international climate goals. It’s happening, but not fast enough.
Why is it happening? The alternatives have become increasingly cost-competitive, for the most part even cheaper than existing coal-fired generation. This is true in spite of ongoing subsidies for fossil fuels, including coal, to the tune of $3.3 trillion in G20 countries since the Paris Agreement was sealed in 2015.
And why is it happening too slowly? Profound challenges, of course, remain. Coal is deeply entrenched in the economy and politics in many parts of the world, including China and India. So the trajectory is not one of rapid decline: Global demand for coal is expected to “plateau” through 2025 before shrinking by 8% globally in 2030. But political sway and societal pull will not be enough to keep coal burning forever.
Just as coal once lost out in transportation (when was the last time you rode a train with a steam locomotive?), its place in global electricity production is inexorably slipping. The questions are now simply: When will coal’s long run as a fuel-staple end? And, what will become of communities that depend on it?
Coal wasn’t expected to face this reckoning so soon. As recently as a decade ago, the industry and even some coal skeptics talked of an expansive future in emerging markets and a long, slow decline in the U.S. and Europe. While on the campaign trail in 2008, even soon-to-be elected President Barack Obama touted “clean coal” as a path to energy independence for the U.S.
“We figured out how to put a man on the moon in 10 years. You can’t tell me we can’t figure out how to burn coal that we mine right here in the United States of America and make it work,” Obama said at the time.
The focus shifted, though, with a boom in the unconventional drilling method of drilling for oil and gas known as “fracking.” Large supplies of inexpensive gas convinced utilities to switch from coal whenever possible. Then came an onslaught from solar power, which turns out to be cheaper even than gas in many cases. Now energy storage technologies are piling on, addressing the problem of wind and solar being unable to produce energy on demand.
That combination of renewables and storage — whether stockpiling energy via pumped hydro or accumulating in chemical form in batteries — is the death knell for coal.
The European Union is now halfway to retiring all of its coal plants by 2030. Despite four years of love from the Trump administration, U.S. coal capacity slated for retirement by 2030 has doubled in the past year. One-third of coal-fired plants operating in the U.S. are on track to be closed by then, causing the share of power generation from coal to fall to 11% from 25% in recent years.
That’s not anywhere near fast enough to meet current climate goals, but it’s far faster than almost anyone expected even five years ago. These trends are likely to pick up more speed with the EU’s ambitious climate plans and the Biden administration’s whole-of-government approach to reducing carbon emissions.
Some players in developing Asian nations are also moving away from coal. After several Japanese banks signaled an end to coal financing, Maybank –– Malaysia’s largest financial institution –– announced it will stop funding coal entirely. China took the biggest step recently when it announced it would stop building coal generation plants overseas. As part of Beijing’s “Belt-and-Road” global infrastructure initiative, China has financed around 71% of the world’s new coal projects, including at least 240 new plants from Tanzania to Turkey.
Two giant economies –– China itself, and India –– remain dependent on coal. China produces almost two-thirds of its electricity burning coal, India close to three-quarters. Unlike in the West, their energy demand is growing rapidly as they industrialize their economies.
India’s home minister and second-most-powerful politician, Amit Shah (sounding a bit like President Obama on the 2008 campaign trail) earlier this year boasted government had allotted $55 billion to expand the industry to give coal a “second life” using yet-to-be-proven technologies that turn it to gas, liquid or other chemicals.
Yet the explosion of renewables has made these less expensive than coal in many places. A recent report from Energy Innovation concludes that “even the most economic coal plants face threats to their viability.”
That’s the first blow in a one-two punch. The last argument left standing for coal is that it’s needed when sources of renewable energy pause –– i.e. the wind isn’t blowing or the sun isn’t shining.
That’s what we’re hearing now, and in the immediate crunch there’s some truth to it. But the emergence of ways to effectively store power will negate the need for coal-fired backup. Increasingly, utility-scale lithium-ion batteries, whose prices plummeted by half in just the past two years, are moving into that gap. Other storage technologies on the horizon include futuristic battery possibilities like hydrogen’s seasonal storage.
In both Germany and the U.S., efforts are currently underway to retrofit decommissioned coal mines for pumped hydro. A recent analysis in Forbes posits that one project in the U.S. will be as powerful as two nuclear reactors or “at least 8.2 million lithium-ion battery cells covering more than 60 acres.”
These technologies will likely deal the knockout blow to coal economics. India, for example, could wind up with one-third of the world’s battery storage capacity by 2040, according to the International Energy Agency.
Coal won’t survive an onslaught of renewables of that order, as the country’s home minister well understands. Mr. Shah’s proposal to throw money at newfangled coal applications is not really a reflection of their economic potential — after all, none of these methods has proven to work at scale. It’s more a recognition that coal’s demise will leave millions of Indians and thousands of communities without a source of income.
And that remains the last, biggest obstacle to coal being transformed into a wing of the energy museum: the political and social costs. These are as varied and manifold as the countries where coal is produced and used, from the long-struggling West Virginia miners to migrant workers in India whose train tickets are subsidized by revenues the railways draw from coal freight.
Astounding progress has been made in showing coal the door — with technical solutions ushering it to the threshold and, more recently, Western investors starting to bid it adieu. To more quickly send coal on its way and fill the hole left behind by its departure, the challenge now is moving quickly to assure fallout will be justly apportioned.