Easy words and hard promises
During the U.S. election campaign, Donald Trump was adamant that he will bring coal mining jobs back. Even after winning the election, Trump repeated that, among his first actions as president, would be to “free up” and “fire up” shale gas and “clean coal,” promising “millions” of jobs by beginning his assault on Barack Obama’s Clean Power Plan.
Not everyone is convinced that he, or for that matter, anyone, can deliver on many of these promises. The U.S. coal industry is having a hard time competing against cheap natural gas, and as time goes on, both will find it hard competing against renewables, whose costs keep on falling by forces that are beyond the control of the U.S. president.
The Cost of Making Coal Competitive with Gas
To make coal prices competitive again in U.S. markets, Trump will have to deal with coal’s main competitor—natural gas. The recent shale gas revolution, jump-started by the development of fracking technology, led to massive shifts in production from coal to natural gas over the last decade. In fact, even as the coal industry lost 10,000 mining jobs since 2006, natural gas extraction generated around 50,000 jobs during that same period.
This trend isn’t going away. Natural gas actually overtook coal as the largest source of electric power in April 2015 at around 31 percent to coal’s 30 percent. In fact, the Energy Information Administration (EIA) projects that natural gas will consistently surpass coal in U.S. electricity generation by the end of this year. Energy analysts and credit rating agencies agree that this shift is the result of historically low gas prices and is the primary driver for the decline in coal jobs over the past 5 years.
Renewable’s Trump coal for workers
As for bringing back millions of coal mining jobs, that is highly unlikely, even if all environmental regulations were gutted. Coal mining jobs in the U.S. have been on a downward trend for at least four decades, mostly due to automation. Despite recent state level moves, adding the cost of carbon makes coal a non-starter and few investors are likely to want to put billions into building new coal-fired plants against a background of increasing concerns about climate change.
Moreover, the solar and wind industries now hire far more people, pay better and pose less risk to safety than the Coal sectors. In Republican-leaning states like Texas and Iowa, far more workers are employed in wind than in coal or oil, and few local politicians would want to mess with what seems to be working.
Against this background, the EIA, reports that U.S. coal production declined by more than 10 percent in 2015. The fall in production was significant in all three major coal-producing regions: the Appalachian, the Interior, and the Western, primarily in response to a 13 percent decrease in coal consumption in the power sector. The culprit? Increased competition from gas-fired and renewable electricity generation, at a time when total generation is virtually flat.
The declining trend has continued into 2016 with coal production falling 20 percent between January and late October 2016 compared to 2015. Employment at U.S. coal mines fell 12 percent to about 66,000 employees in 2015, the lowest level since EIA began collecting employment data in 1978.
Coal miners in America would certainly be better off looking for greener pastures sooner rather than later. True, coal, like oil, is not going away anytime soon. But the use of the former has already peaked, and the latter is likely to follow a similar fate.
Global policy momentum and rapid technological change are combining to create significant risks for the US Coal industry. Investors are increasingly concerned that the current business strategies of many companies may not be financially sustainable given these ongoing trends. Even if the incoming administration ends, what it claims is a “War on Coal”, sadly, coal mining jobs are going away.
- Trump’s Rhetoric Aside, US Coal Is Truly Dying – The Electricity Journal – Volume 30, Issue 1, January–February 2017, Pages 71–72