The first year of a Joe Biden administration is likely to be marked by a rebound in the burning of coal and a record increase in carbon dioxide emissions in the US, providing a sharp — if fleeting — contrast to the president-elect’s agenda for cleaning up the power sector.
About 546m short tons of coal will be fed to power plants in 2021, up 23 per cent on this year and the most since the second year of Donald Trump’s presidency, according to new forecasts from the US Energy Information Administration.
Greater demand for coal and oil would push up US emissions by 287m metric tonnes, the fastest annual rise in records dating to the 1970s, the agency said this week.
The prediction reflects the vagaries of commodities markets and anticipated recovery from the severe coronavirus downturn, not energy policy. In the near term, coal is set to gain an advantage because of higher prices for natural gas, a rival fuel to power grids.
The price of US gas for delivery next year has climbed as supplies decline from cutbacks in drilling. The EIA estimated that coal would cost generators $2.04 per million British thermal units in 2021, compared with $3.52 for gas.
“The higher gas prices along with a nice, cold winter and, hopefully, continued reopening of economic activity across the country should increase demand for coal in the short term,” said Travis Deti, executive director of the Wyoming Mining Association, a trade group in the top US coal-producing state.
The uptick for US coal is likely to prove shortlived and the industry remains in deep distress, as utilities and independent power groups opt for gas, solar and wind energy.
Coal, the dirtiest fossil fuel, was under regulatory attack when Mr Biden served in the Obama administration. Almost 100 gigawatts of coal-fired generating capacity has been retired in the past decade and more closures are planned, according to S&P Global Platts.
Peabody Energy, the world’s largest private sector coal miner, this week warned it could go bankrupt as revenue slumped. The miner Arch Resources has laid out plans to reduce production in Wyoming’s Powder River Basin by half over the next two to three years.
However, Peabody’s chief financial officer, Mark Spurbeck, told analysts that in 2021 he expected US thermal coal demand would benefit from a recovering economy and higher gas prices, “offsetting the impact of additional [coal] plant retirements”.
Mr Trump campaigned in 2016 on a pledge to revive coal, but he was thwarted by cheap gas, falling renewables costs and state, utility and corporate commitments to cleaner power sources.
Mr Biden has pledged to remove carbon from the power sector by 2035 and to spend $2tn over four years on projects such as large-scale solar and offshore wind farms. Fatih Birol, executive director of the International Energy Agency, told the Financial Times that renewables could overtake coal in global electricity generation as soon as 2022 if Mr Biden delivered on his promises.
Under Mr Biden’s proposal for a clean electricity standard, “coal-fired power plants would be hit harder and more quickly than other fossil fuels”, said Benjamin Nelson, a credit analyst at Moody’s.
“It’s certainly concerning,” said Mr Deti of Wyoming. “Mr Biden made his plans regarding fossil fuels crystal clear on the campaign trail, and we fully expect him to act on those.”
The EIA forecast that green energy sources would also gain ground in 2021. Renewables are set to grow to 22 per cent and coal would take 25 per cent of the mix, up from about a fifth each this year, the agency said, while gas’s share is likely to decline from 39 per cent to a third.
Coal historically accounted for more than half of US power generation.
Dennis Wamsted, an analyst at the Institute for Energy Economics and Financial Analysis, said any rebound in 2021 would be an aberration.
“The trend is downward, and really what we are arguing about right now is how fast that trend is going to take place,” he said.