Yuan-Sheng Yu, senior analyst with Lux Research, explains why coal is no longer an economically viable source of energy in the U.S.
The economics of mining coal for energy consumption are no longer viable, Yu says. A major reason is the rise of cheap natural gas over the past few decades. The massive shutdowns of coal operations aren’t an overnight phenomenon, he says, but have accelerated over the last five years. And no new coal projects are in the pipeline.
Shale production methods are the reason why natural gas extraction has become so cheap and plentiful over the prior decade. Meanwhile, the economics of coal have changed little during that time. What’s more, natural gas is a more efficient means of energy, and while it, too, is a fossil fuel, it generates fewer CO2 emissions and air pollution than does coal.
The slow death of coal isn’t just happening in the U.S. Europe is “blazing the trail” in minimizing, if not eliminating, the use of coal for power generation. As a result, U.S. coal exports have dropped significantly in the last couple of years.
Don’t count coal out completely, though, Yu points out that China, India and parts of Southeast Asia are still relying on it to meet the goal of full electrification in their developing societies. For now, that effort is taking precedence over concerns about environmental impact.
Another factor dampening coal’s prospects is the COVID-19 pandemic, which has temporarily reduced the need for electricity across the board. Expect the growth in demand to remain relatively low as countries shift to the use of electric vehicles and more efficient energy generation. “Coal didn’t shift the direction the energy industry was going,” Yu says. “All it did was reinforce the trend we were all aware of.”
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