Amid efforts to reduce greenhouse gas emissions from the U.S. power grid, natural gas-fired generation will replace most of the thermal-coal electric-generation capacity that’s heading toward retirement, according to a new report from Moody’s Investors Service.
Moody’s found that U.S. utilities’ demand for thermal coal should lessen significantly in the next decade. With the known upcoming closures of coal-fired power plants, as well as likely closures of plants that are 50 years old, the United States could see coal making up only 11% of the total energy generation by 2030.
"We expect that new natural gas-fired generation, and to a much lesser extent renewable energy, will replace most of the thermal-coal electric-generation capacity heading into retirement," said Moody’s Benjamin Nelson, VP Senior Credit Officer. "The destruction of that demand will be too significant for the coal industry to replace just through greater participation in other markets, such as industrial or home-heating uses, or by increased exports, whose profitability over the cycle depends on relatively high prices because of the high costs of delivering some US-produced coal to distant growth markets.”
In April, renewable sources of fuel overtook coal in U.S. power generation for the first time, according to the Energy Information Administration.
Abundant and cheap natural gas supply, thanks to innovations in horizontal drilling and hydraulic fracturing, has seen gas cut into coal’s share of U.S. electric generation in recent years.
Some coal producers are attempting to adapt to the new paradigm. Coal producer Alliance Resource Partners LP said in June it had purchased interests in the Permian Basin for $145 million.
Analysts expect the Powder River Basin in Wyoming and Montana to experience the toughest losses as thermal coal declines.