Coal is making a comeback. Supplies are so scarce that Pa.’s and N.J.’s electric grid operator is worried.
Coal enjoys a renaissance in the super-heated post-lockdown economy. Will it last? 'In the long run, the writing is on the wall for coal plants.'
Coal, a pariah fuel for climate activists, has made a quiet comeback this year in the post-lockdown economic resurgence. Coal stockpiles at power plants are getting so low that the regional electric grid operator, PJM Interconnection, has taken steps to prevent a system collapse this winter similar to Texas earlier this year.
PJM, based near Valley Forge, this month imposed new rules on power plants in 13 states and the District of Columbia to make sure electricity generators do not run short of fuel during a cold snap. The rules would allow some coal generators to curtail operations to build up emergency reserves, increasing power prices already on the rise.
Demand for coal has jumped in response to rising natural gas prices, even though coal emits more toxic and greenhouse gases per kilowatt hour generated than rival fuels. Coal-fired power plants have struggled to replenish stockpiles because the energy sector is facing the same kind of supply chain challenges that have slowed deliveries of many goods and commodities.
“Our top priority at PJM is ensuring a reliable electric grid,” said Michael Bryson, PJM’s senior vice president of operations. “We are especially concerned about coal supply chain issues and inventory levels heading into the winter.”
The resurgence of coal power, even amid a worldwide push to promote clean energy and decarbonize electricity production, demonstrates that fossil fuels still remain very much in the energy mix, coal advocates say.
Policymakers need to recognize coal as “part of an all-the-above energy strategy for the foreseeable future because the coal fleet supports grid reliability and resilience, helps keep electricity prices affordable, provides fuel security, and serves as an insurance policy when other electricity sources are not available or are too expensive,” said Michelle Bloodworth, chief executive of America’s Power, a trade group for the coal industry.
But climate activists say coal generation is merely the short-term beneficiary of rising natural gas prices, which have elevated coal’s place in the hierarchy of fuel choices facing grid operators, which select generators based largely on price. Now is the time to accelerate the adoption of renewable energy, they say.
“My sense is, this is a blip,” said Joseph Otis Minott, executive director of the Clean Air Council. “In the long run, the writing is on the wall for coal plants.”
Indeed, coal’s share of the nation’s power-generation mix has fallen steadily in the last 10 years, from 44% in 2011 to 20% last year, according to the U.S. Energy Information Administration.
Coal’s role was diminished by natural gas after production of inexpensive fracked gas soared in the last decade. Though natural gas is also a fossil fuel whose production and combustion emit greenhouse gases, it was relatively easy for power generators to get permits to build new efficient gas-fired power plants because they emit far fewer toxic emissions than coal plants. Nationwide, electricity generated from natural gas-increased from 23% in 2011 to 39% last year.
Coal has also lost share to renewable energy, primarily wind and solar, which have increased from 4% to 12% of the U.S. electricity generation mix in 2020, and are continuing to grow at a fast clip. Of 230 gigawatts of proposed new power generation awaiting approval to connect to the grid, 90% of it is renewable energy, said Jeffrey Shields, a PJM spokesperson.
But with rising energy prices this year, coal power has become more competitive in the short term. Federal energy officials estimate that coal power plants will generate about 170 billion kilowatt hours more electricity this year, a 22% increase from 2020. Coal’s share of the nation’s power mix is expected to increase from 20% last year to 24% this year.
Coal stockpiles, which in October stood at 86 million tons, are down 35% from a year ago, when 133 million tons were available going into winter, according to the Energy Information Administration. Current inventories are 18% below the lowest level in the past five years, and are projected to get as low as 61 million tons a year from now, and not recover in 2022.
Coal producers including Pennsylvania’s Consol Energy Inc., whose share prices have soared this year, telegraphed the growing demand months ago to investors.
“Inventories are, I would say, near critical levels for many of the domestic utilities that we do serve,” Robert Braithwaite, vice president of marketing for Consol, told analysts in a conference call in August. “When I say critical levels, I’m saying sub-10 days of inventory on the ground.”
Coal-fired power plants are running more frequently at a time when they normally would be stockpiling fuel for the winter, said Bryson of PJM.
Replenishing stockpiles is more complicated than calling a broker and ordering a barge delivery. In the current topsy-turvy economy, energy markets are encountering the same supply-chain disruptions that have upended manufactured goods ranging from furniture to new vehicles. The energy industry is dealing with shortages of transportation and labor, including truck drivers, railroad personnel, and coal miners.
American producers of coal, natural gas, oil, and propane are also facing increased demand for energy overseas, particularly in China and India. China’s still-expanding coal fleet of 1,080 gigawatts is as large as the entire U.S. electricity generation capacity combined, including gas, nuclear, renewables, and coal. China’s coal-power capacity is five times bigger than America’s coal fleet.
“It makes it very difficult for our generators to build their supplies in the way they’ve been comfortable building them in the past,” said Bryson.
There is still plenty of coal in the ground. But coal producers say they are not incentivized by policy makers to invest in reliability. Bloodworth blamed “the lack of price signals that value fuel assurance and provide longer-term certainty for the coal industry necessary to ensure the entire supply chain can remain healthy and able to provide the reliable and resilient electricity when it is needed most.”
PJM said it attempted to address incentives with its temporary rules requiring coal generators to keep larger stockpiles on hand this winter.
Reliability in the grid has been a concern for many years, Bryson said. After the infamous polar vortex in 2014, where heating demand soared, power plants failed, and electricity prices spiked dramatically, PJM enacted new rules aimed at assuring that power generators honored their commitments to produce during extreme weather events. It adopted “capacity performance” rules to pay power producers to winterize their plants and fuel supplies, and also enacted severe penalties on producers that failed to perform as promised.
Bryson said the latest rules for coal generators were developed after a severe winter storm knocked out more than 4 million Texas households in February. PJM planners began to model more extreme weather conditions.
“I know what demand is supposed to be like, but what if the weather is colder? And it’s colder for a longer period of time and the generators are out at a higher rate, or we have natural gas issues?”
Under the old rules, PJM would move a power unit to what it calls “maximum emergency” status if its fuel supply dipped below 32 hours. That meant the plant could only operate during an emergency until it replenished fuel supplies.
With the new rules, which are in effect through April, the power grid can restrict a power producer from operating if its fuel stockpiles shrink below 10 days. A unit could remain offline until it built up a 21-day inventory of coal.
Bloodworth, the spokesperson for coal generators, said the PJM policy changes are a “good temporary solution” to ensure that power plants can readily support grid reliability and resilience. But she said the industry is urging PJM to adopt a long-term fix to compensate coal generators to keep sufficient stockpiles on hand to get through an emergency.
Bryson agrees that it’s too soon to write off fossil fuels if the nation is moving toward a “net-zero” carbon emission target by 2050.
“There’s an argument to be made that resources like coal and gas need to be around for transition as we get to higher and higher penetration of renewables,” said the PJM executive. “It’s premature to get rid of them before we have enough renewables on the system to be able to serve the load. So from that perspective, it means this situation may be there for a couple years.”